Article

Construction fraud checklist for hurricane recovery

Five dos and don’ts to consider when recovering from a disaster

Oct 14, 2024 · Authored by Anthony Ollmann, Derek W. Royster, James S. Miller, Heath Whitaker, Carly Dishong

With the Southeast dealing with the aftereffects of Hurricane Helene and Hurricane Milton, individuals and businesses are starting to pick up the pieces and begin recovery efforts.  As such, Baker Tilly has created a dos and don’ts checklist to help you as you go through the recovery process.

Do

1. Contact your insurance company first before hiring any contractors for repairs

Understand your claim approval process, coverages, deductibles, payment procedures, etc. Ensure that you are involved in any insurance claims and be cautious of anyone filing an insurance claim on your behalf.

2. Verify a contractor’s identity

Whether a person states they are a construction worker, with a charity organization or from the government or local utility service, asking for identification may be a simple way to ward off any fraudsters. If they are a contractor, ask for their contractor’s license number. Most states require this, even for a simple handyman business.

3. Obtain a written contract defining scope work, cost, estimated completion and payment terms

This includes documenting any changes later agreed to. No matter how agreeable the contractor sounds or how urgent the work may be. Ensure that there are no blank spaces in the contract where terms can be added later without your knowledge.

4. Be present for the work

If the work will last for two days or less, try to be present the entire time. If work lasts longer, simply plan to check in at regular intervals. Ask questions and take photos as documentation.

5. Inspect the work before final payment

Ensure the work is complete based on your original agreement (no matter how large or small), the correct materials were used and everything functions properly. If it’s work you can’t see, such as on a roof or in a crawl space, don’t be afraid to ask the contractor for photos of the completed work. Ask questions about anything that looks off.

Don't

1. Hire the first person who knocks on your door

Even if the situation is urgent, rushing to hire a contractor without research could make things worse. Ask for copies of their contractor’s license and insurance certificates for general liability and worker’s compensation. All legitimate contractors know this is common practice and will comply. Check online reviews and references such as the Better Business Bureau or your state contractor’s licensing board.

2. Overpay for work up front

Never pay in full before work starts. For homeowners, there are legal maximum amounts in each state for down payments, usually around 10%-20%. Also, ensure that you get a receipt or other documentation for your payments. After the initial down payment, don’t pay for work that has not been performed (including added work/materials). Legitimate contractors will be able to fund their own work until it’s been put in place.

3. Fall for any high-pressure tactics

Sign today to get the best price or a price that sound too good to be true – these might be a scam. Anyone pressuring you to decide before you have time to think, isn’t worth doing business with.

4. Skip a permit

Local jurisdictions dictate when a permit is needed for work, but typically any work involving changes to structure (removing/replacing walls or foundations), electrical systems or plumbing systems will require a permit. Don’t feel pressured to obtain the permit in your name. A reputable contractor should obtain the permit for you. Skipping this step could cost you more money later.

5. Fall for a loan scam

Many reputable contractors offer payment options or financing for work they perform but an unscrupulous contractor may trick you into a situation where you end up with an unpaid loan against your property. Always shop around for any loan to get the best terms. Never sign a document that you don’t understand, has blank spaces or doesn’t precisely outline the terms of financing just like a bank would. Never sign a document with a contractor that involves transferring a deed to your property.

These are just a few important dos and don’ts to keep in mind. If you need help at any point during this process, don’t hesitate to contact one of our construction risk management or disaster recovery specialists below.