David Heagy thought he'd done everything right.
Before signing a $54,000 contract with a Fairfax County contractor, Thomas Kelly, to build an addition to Heagy's three-bedroom house in Vienna, Heagy checked Kelly's references, called the contractor's suppliers and wrote a restrictive contract that spaced out the payments.
But Kelly still ran off with $8,000 of Heagy's money and left the Heagy family with a partly finished addition that has cost them thousands more to complete.
It could have been a complete disaster. But because of a state fund that reimburses homeowners victimized by dishonest contractors, Heagy found out this week that he will get back $3,600. He hopes to get $6,400 more from the fund in the future.
"That'll leave us short some," Heagy said. "But it's better than nothing."
The recovery fund, known officially as the Virginia Contractors Transaction Recovery Fund, was set up in 1980 as a way to cope with homeowners' complaints against their contractors.
The fund is financed through license and registration fees paid by the state's 60,000 contractors. In the fiscal year that ended June 30, the fund paid a total of $512,449 to 77 claimants. The previous fiscal year, the fund paid $613,368 to 108 claimants.
It's one of few such funds in the nation based on the idea that contractors should pay for the abuses of their peers.
Maryland is one of a handful of other states with a similar system, the Maryland Home Improvement Guarantee Fund.
The District of Columbia has no such fund, but contractors are required to buy a $5,000 bond to cover some of their work. A recovery fund has been proposed in the District.
Officials of the Maryland and the Virginia funds emphasize that only a few of the tens of thousands of contractors do shoddy work or abscond with homeowners' deposits. But those few can cause problems for the entire industry.
"The bad ones can be very bad," said Susan Scovill, senior complaints administrator for the Virginia Department of Commerce, who oversees the recovery fund. "But there are plenty of good ones."
The Maryland Home Improvement Commission Guarantee Fund, created in 1985, can reimburse homeowners for shoddy work or those victimized by dishonest home remodelers. The system replaced the requirement whereby home remodelers were required to be bonded.
In the last year alone, the commission has received more than 4,000 complaints against licensed and unlicensed home remodelers, said Charles Kelly, acting executive director of the Maryland State Home Improvement Commission, who is not related to contractor Kelly.
Homeowners have complained about such things as leaky roofs, ill-fitting doors, poorly installed plumbing and cracked driveways. Plus, there are a stream of complaints about home remodelers who have disappeared with a homeowner's deposit check or walked away in the middle of a job.
Home remodelers pay $100 into the fund when they first receive a license, and are reassessed additional amounts when the balance of the fund falls too low.
In the period from last July through March, the fund paid out $644,483.
"If you use a licensed contractor, it'll protect you against dishonesty and poor workmanship," Charles Kelly said.
That's a big "if." Although there are more than 13,000 licensed home improvement contractors in Maryland, Kelly estimated that at least three times as many unlicensed home remodelers are plying their trade as well.
Unlicensed remodelers haven't passed the required tests and may not carry the proper insurance. And homeowners who don't use a licensed contractor are out of luck. "They're only protected if they use a licensed contractor," Kelly said.
While the Maryland fund protects against dishonest contractors, as well as poor workmanship, the Virginia fund is more restrictive. It will reimburse homeowners only if they have been victimized by the "improper and dishonest conduct" of a contractor.
"It's designed to assist in at least some of the worst cases," said Scovill, who supervises the administrator of the fund.
In Heagy's case, contractor Thomas Kelly agreed in 1988 to build an addition that would include an artist's studio for Heagy's wife, Sharon; a new garage; and an expansion of the existing garage. After carefully researching Kelly's track record, the Heagys signed a contract for $54,000, and Kelly started the work.
As is often the case, things proceeded smoothly for a while. Then Heagy said he gave Kelly checks totaling $8,000 to buy windows and doors for the addition.
But Kelly failed to return to work, leaving the partly finished addition with no floors, siding or insulation. It also, of course, lacked the doors and windows.
The Heagys reported his absence to the Fairfax County police, and Kelly was arrested shortly thereafter in January 1989.
He pleaded guilty to obtaining money under false pretenses in Fairfax County General District Court, according to court records, and was ordered to pay restitution to the Heagys. He did pay for a time, but then disappeared two months later, and the Heagys have been unable to locate him.
After Kelly failed to appear at a court hearing last August, the Heagys applied to the Virginia fund. As their experience shows, the road to reimbursement can be long and arduous.
Because the Virginia fund reimburses homeowners only for "improper or dishonest conduct" by a licensed contractor, the Heagys first had to be awarded a judgment against Kelley.
Then they had to try to collect from Kelly themselves and provide evidence that all legally available actions had been taken to obtain and sell Kelly's assets. And the claim, under state law, was limited to $10,000, less than half of what they say they lost.
It took nine months for their application to wind its way through the process, and their claim was initially denied when they were declared ineligible because Kelly had been not licensed to do the type of work that he had performed for the Heagys.
But after the Heagys appealed the ruling, the board granted them $3,600 and left the door open for them to return with an additional claim.
Heagy said he is preparing a fact sheet for other homeowners contemplating renovation projects, some of whom may someday find themselves in the same position.
Looking back on his experience, he said he would have checked more of Kelly's references and he would have visited Kelly at his workplace "so we could actually see what his assets are."
Aside from that, Heagy acknowledged, there wasn't much more he could have done.
Here is some advice from remodeling licensing officials on how to hire a remodeler:
Get several estimates. But be wary of an estimate that is significantly below the others. The contractor may be underestimating the work involved.
Ask to see the contractor's license. In Virginia, stricter licensing requirements go into effect in January. In the District, a contractor only needs a license if he ac cepts $300 or more in advance of doing a job.
Check references and check with the local Better Business Bureau to see if there are any outstanding complaints against the contractor. In Maryland, the Home Improvement Commission at (301) 333-6309 can tell you if a home remodeler is licensed and if there are any outstanding complaints against him. In Virginia, call (804) 367-8500 or (800) 552-3016. In the District, call 727-7080.
Be wary of excessive deposit requirements. In Maryland, home remodelers are allowed to take only one-third of the total value of the project in advance. There are no deposit limits in Virginia or in the District.
Get every contract provision in writing, including starting and completion dates, a full description of the work to be done and the materials to be supplied. Make sure any changes to the contract also are in writing.
-- Jacqueline L. Salmon