We’ve featured many posts on terrible realtor behaviour on this site, noting examples of lack of knowledge related to the product they sell, or how they often grossly misrepresent development potential during a land deal. Fortunately for realtors, this type of performance seems to fall into a grey area of interpretation where accountability is low and much time can pass before the consequence of flawed investment advice becomes apparent. Analysis of some truly wretched acts perpetrated by my own colleagues, ‘the builders’ is far simpler. No player in the industry has opportunity or penchant to misbehave as poorly as a builder under financial trouble, or, just as often, a builder with the most hideous ethical practices that they’d make the realtors look like a group of angels.
In order of outrageously bad builder behaviour, we begin with just typical nasty mistreatment of subcontractors and eventually rise to the threshold of truly unconscionable fraud, theft, dishonesty and all round off the charts reprehensibility. Sort of like the 12 days of Christmas, but written by the grinch who scammed a contractor out of his Christmas gift, the cheque!
Bogus non-payment - a builder hires a contractor to do some work. The work is overall satisfactory and complete, but there is one item that could not be finished due to some legitimate reason or some part of it was damaged (likely by another contractor unrelated to the original installer). The builder then refuses to pay any of the invoice and instead claims the ‘whole job’ is unacceptable. Both sides know this is just a shameless delay tactic to have the trades finance the builders work. The builder will refuse to settle at say 90% payment of the invoice, and instead decides he should take the entire body of work for free, and then ‘find someone else’ to fix the minor deficiency and that is ‘compensation’ to him for the hardship of having to make a repair on his own.
Avoidance tactics - when it comes time to pay, the builder won’t answer the phone, can’t be reached etc. The contractor needs a private investigator to try and locate the builder to collect money. This embarrassing part is the builder stoops this low in an era of cell phones were everyone is in constant contact with each other (if they choose to be). The builder is either too ashamed of his inability to pay, but more likely is just highly inconsiderate of the counterparts need to be compensated for work done (or never intends to pay),
Payment delays until the lien window runs out - this is basically where the builder refuses to pay or makes excuses until so many days have gone by that the contractor either forgets or runs out of time to get to the courthouse to file a lien against the property. All kinds of ridiculous excuses are given to the contractor attempting to pick up a cheque, like my dog ate it, come back next week and get it, I will pay you when I get paid, waiting for the bank to forward funds, ran out of cheques, waiting for a cheque to clear, etc. All of these ploys become very transparent to the contractor as bogus as he desperately wants to collect, but cannot. Does the contractor have the ability to delay his rent, mortgage, or car payment? No, but the builder does not care about the personal toll the unpaid contractor will suffer due to his late payment.
Manipulate the non-english speaking/writing contractor - many builders will seek out a contractor that has limited English language skills. The less capable the contractor is to be able to get a lawyer or file a civil claim, or a lien, the more likely the builder can rip off the contractor and simply never pay. This is definitely one of the dirtier strategies we’ve observed and transcends international boundaries, yet returns to Calgary to roost. Special praise is warranted for those builders who prefer to rip off contractors from within their own minority community as some sort of legacy of how the social hierarchy worked back ‘in the old country’.
Absurd requests of contractors whom already have been screwed by the builder - imagine refusing to pay your contractor, and then disputing the invoice in every possible ridiculous manner. And then, when the next job comes up, call that same contractor you’ve scammed or are scamming currently, and ask him to come back and start another project for you, all without paying for previous work. This is crazy but it happens all the time. The weasel builder will beg and plead for more work to be done by the same person he is in the process of ripping off. And he actually expects more ‘credit’ will be extended by the subcontractor who will now risk being scammed twice by the same builder. Bizarre yet happens all the time!
Now we get into an entirely uglier tier of fraud and outright criminality.
Lien removal scam - the builder will contact each of the contractors who’ve placed a lien on the property and ask them to remove it, in exchange, they can now sell the property with a cleaner title and everyone will ‘get paid’. Of course, this is just a scam. Once the lien is taken off, the builder will never be heard from again. The trades now have little to no recourse but to accept they got conned a second time by the builder and now lack recourse.
Starting a project with no funds to finish it - this is where the builder is going to try and scam every contractor into basically financing his project for him, unwittingly. He does not have any money to pay the contractors, so he will order a bunch of work to be done and just refuse to pay upon completion. This way the builder can try and get a job finished and sold and that way the contractors will have essentially ‘loaned’ him the money to build. The builder suggests that the contractors ‘can afford to wait a little’ to be paid, because contractors should ‘invest in their business just as he does’. I like the creative ‘no money down’ real estate deal as much as anyone but this surely is a premeditated scam not a form of investment genius.
Forced 50% off discount sales - often times larger work will need a significant deposit. The builder will provide some or all of the deposit, but he has no intention of paying the remainder once work is done. This is a great deal for the builder if he can force the contractor into a 1/2 price sale or accept a reduced payment later. Regardless of what happens it was a scam from the outset of the deal.
Abuse long term relationships - the builder will contract out some work to be done with no intention to pay to a long term supplier. The supplier may extend a little more grace period based on prior good payment performance. Once that goodwill expires and it is too late to file a lien, the builder will abandon that contractor and for future work hire a competitor. This way the last invoice from that supplier will be ‘free’ and they can extort better payment terms from a hungry competitor. This works well in a down market when the desire of the supplier to conquest a client from a competitor exceeds their wariness about working for someone new that has a spotty payment record or a history of scamming the competition.
And finally, this is the most egregious act of hideous fraud I have encountered thus far
Ordering new work after declaring bankruptcy - In the hall of fame for shameful acts, this one is really elevated among its peers. This is a scam where the builder is already bankrupt, but not everyone knows it yet. He continues to order work after the bankruptcy filing, and by this point he has no intention or ability to pay ever, and has made it really hard for anyone to collect for work done after the bankruptcy. Unfortunately this does not appear to be treated with any seriousness by the police as a criminal matter and more than likely the builder can perpetuate this scam for a long time.
Basically all of these schemes are similar in terms of the builder trying to steal from his subcontractors or avoid/evade payment long enough that the contractors legal right to collect is exhausted or he gives up and writes off the loss. The threshold of how dirty these frauds are does grow significantly from relatively innocent disputes about payment right up to total disregard by the builder for the person, likely a small business or individual that he is scamming. I don’t know if any contractors have not been ripped off at least a few times during their career. Getting defrauded by a builder is like a right of passage for a contractor/small business owner in Calgary. Unfortunately, the building industry attracts a very bad element and some of these individuals are absolutely reckless in the way they operate, which leads to them intentionally and maliciously scam their trades as a business practice. Perhaps there needs to be a list of known scumbag builders that nobody should ever work for? So there you have it, a pre Christmas list of scams perpetuated by evil grinch like builders upon the innocent (note - there are lots of good builders too!).
There is a significant minority of builders who are actually grinches in disguise. They intend from day one to ruin their subcontractors Christmas. Others just lose control of the business or are crushed by the market (or government policies and fees) and become unwilling grinches, but nevertheless are still scammers! Merry Christmas to all!