I Just Don’t Get It

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.

1. The class action attorneys and attorneys general will go after the Deep Pockets, not the individual contractors.
2. The Deep Pockets will then go after the contractors who did not have compliant contracts.
3. 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.
4. 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.