The owners of small businesses who make up the majority of licensed home remodelers in Maryland refer to the unlicensed contractors who cart their businesses across state lines to avoid state licensing proceedures as gypsies, jacklegs and, often, much worse.
Industry analysts estimate that there unlicensed remodeling contractors working in Maryland outnumber those with licenses, and they are not just single handymen going door to door. Many have large operations, advertise on a regular basis and make lots of money. And that has the licensed remodelers angry.
"A licensed contractor has to charge twice what an unlicensed contractor can charge just to break even," said Robert Mead, executive director for the Maryland Improvement Contractors Association, an association that represents the interests of 300 small business home remodelers in Maryland.
"An unlicensed contractor came up to me at a Christmas party once and said, 'There used to be a time when I didn't know how to pronounce Bergdorf Goodman. Now I buy all my clothes there. But if I got licensed in the state of Maryland, paid my licensing fees, paid my taxes, paid workman's compensation and insurance on my employes, I couldn't afford to shop at Bergdorf Goodman.' That's the problem," said Mead.
Even setting aside the question of whether unlicensed remodelers are the sole source of the home improvement industry's bad reputation, consumer advocates in Maryland agree with the licensed contractors that something should be done to protect people against bad workmanship and unfinished home remodeling jobs. While there has been pressure on the state legislature the past few years to tighten up Maryland's home improvement laws, confusion over specific regulations has prevented new legislation from getting through both houses.
In an effort to get legislation that would have a better chance of passage, Delegate Frederick C. Rummage (D-Prince George's), chairman of the Economic Matters Committee handling such legislation, asked Gov. Harry Hughes to appoint a study committee to hammer out the details and make recommendations that could be worked into an appropriate bill.
"I'm tired of fooling around with their perennial bills, and not knowing if they want a guarantee fund or a bond or what," said Rummage. "We have a lot of unlicensed contractors, and they can really milk the public. On the other hand, we don't want to force small businessmen out of the industry by requiring bonds they can't afford. That's why I called for an in-depth review."
Hughes, who agrees with Rummage, is expected to appoint the study committee in the next few weeks, with representatives from the remodeling industry, their suppliers, consumer advocates and staff from the state licensing division. Rummage said the committee will report to the governor every few months on its progress and have final recommendations ready by the end of the year.
But there is no guarantee that coming to agreement on the issues of guarantees, bonds and competency exams will be any easier around a table than it was in the hallways of the state capital.
Consumer advocates have fought to have the state set up a guarantee fund, a pool of money collected through contract licensing fees that would be paid out to complete or correct remodeling jobs left unfinished by other contractors.
Maryland already requires licensed contractors to have a $5,000 performance bond, but consumer advocates say $5,000 isn't enough money to cover the costs of finishing many of the problem jobs they get complaints about, and the bonding requirement works as a barrier to small, newly formed and minority contractors.
"It's very difficult for a consumer to get payment from a surety company without going to court," said Barbara Gregg, director of the Office of Consumer Affairs in Montgomery County. "The $5,000 performance bond just doesn't do what was hoped it would do. We support the idea of the guarantee fund."
John Corbley, Maryland secretary for Licensing and Regulation, said the amount of money the contractors would have to pay into the guarantee fund could fluctuate, according to how many claims were being made against home remodelers.
But Mead, who represents many small contractors, said that his members do not like the idea of the guarantee fund standing alone.
"To simply introduce a guarantee fund, we don't think it will work," said Mead, explaining that contractors are wary of having to pay into a guarantee fund when there are weak competency and financial requirements for the contractors in the system.
Mead said that only 5 percent of the people who take the state's licensing exam, a competency test, fail. "You just just don't have to know a damn thing about room additions to be licensed to build a room addition in Maryland," he added.
Mead said that his group would support the guarantee fund only if it were supported by continuation of the bond requirement and accompanied by stronger competency standards and possibly other insurance requirements for contractors.
The study committee also will look into stepping up enforcement of the improvement laws already on the books. Corbley admitted that the state needs to crack down on unlicensed contractors and look into ways to prosecute violators. Under the current system, a state investigator must turn over a case to the local state's attorney for prosecution, and Corbley said that many of the violations fall through the cracks.
"The state's attorneys are busy with murders and rapes--real crimes," said Corbley. "In the order of priority, these don't even fit the scale." While the number of fines being levied against unlicensed contractors is up in Maryland, Mead argued that the punishment of a typical first offender is so mild that there is no incentive for contractors to go through the process of getting licensed until they are caught.
Other issues the committee will study include deciding which trades and professions will come under the state's improvement laws and whether the Maryland Home Improvement Commission should be given the authority to adjudicate disputes between angry homeowners and remodelers.