Why
do so many construction contractors use lame contracts?
Builders
who know better continue to use agreements that don’t comply with the law. That’s
no way to run a business. And I think the day of reckoning is not too far off.
If not renewed, the
30% solar tax credit expires on December 31, 2016. Solar leases will be out. Solar
loans will be in. Right now, the major residential photovoltaic leasing companies
are ramping up loan programs to replace their lease deals. A solar contractor I
know predicted what’s going to happen when installations start under these new loan
programs. I’ll let him explain.
“I have yet to see a fully
legal contract from another solar contractor. Not too long ago, I reviewed contracts
offered by two major solar finance companies. Both contracts had obvious errors
– mistakes in the notices and disclosures required by state law. A home improvement
contract that doesn’t comply with state law can be void. A homeowner not completely
satisfied can sue to recover the full contract price. But that’s just the beginning.
“Deep-pocket lenders are
the real targets. Courts are going to rule that installing contractors were acting
as agents for their finance companies. That makes finance companies liable for these
refunds. It’s just a matter of time until class action attorneys and state attorneys
general discover all these bogus solar contracts. They’ll claim widespread abuse
in the solar home improvement business. Reputations and political careers are going
to be built pummeling solar contractors and their finance companies. It’s going
to be ugly. And when the installing contractors go broke, the finance companies
will be sucked in to make up the difference. That’s going to be a wake-up call for
heavy-hitters in the solar home improvement finance industry.
“I saw the same thing happen in auto finance. Class action attorneys go after the deep pockets. The settlement
in Coleman v GMAC is typical. GMAC settled for just over $10,000,000.
- $9,000,000 plus an extra $600,000 for expenses went to plaintiff’s counsel.
- $1,600,000 went to consumer education programs.
- $0 went to the borrowers.
“In another case, the only
mistake was a technical violation. A clerk changed a legal notice from bold to italic
because she thought it would be more effective. That one cost over $8 million!
“Starting next year, solar
finance companies will be risking similar treatment if their independent installers
continue using these lame contracts.
- The class action attorneys and attorneys general will go after the Deep Pockets, not the individual contractors.
- The Deep Pockets will then go after the contractors who did not have compliant contracts.
- The Deep Pockets will demand the originating contractor reimburse losses or buy back noncompliant contracts. Most contractors will go bankrupt if they have to make three years of refunds on defective contracts.
- Class action attorneys look for three things: (a) A contract defect. (b) Three people who are dissatisfied. (c) A Deep Pocket.
“My solar company is committed
to keeping it clean. We don’t want to be a target. Too many others are inviting
trouble. My advice: Either learn to comply with the law or be ready to pay the price.”
Well
said. And I agree 100%. Protect yourself. It’s easy. Construction Contract Writer will draft agreements that are perfectly legal, no matter the state and no matter
the type of work. The trial version is free.
