Protecting yourself against losing money on home renovations

Protecting yourself against losing money on home renovations

Among the suggestions are paying progressively, doing extensive research and itemising the quotation.

File photo of home renovation
File photo of a home being renovated. 

SINGAPORE: In constructing her dream home, Ms Yan did not hold back. She paid S$1 million to build a terrace house with premium materials. She even gave the contractor 10 per cent in advance to earn some goodwill as the works started near Chinese New Year. Six years on, the freelance loan specialist is still grappling with defects.

Soon after she moved in with her brother, sister-in-law and mother, who is in her 80s, Ms Yan, 48, started noticing “bubbles” on a wall attached to the bathroom. Within three years, the contractor came more than 10 times to fix the problem - he scraped off the paint and repainted the surface - but nothing he did helped.

Ms Yan did her own research and found that the waterproofing had not been done right. The contractor then painted a waterproof layer. However, when the problem returned, she could not contact him.

“I already paid in full by then, so there was no response from him. He totally ignored me, although I had a certificate of warranty and it was still within the warranty period,” she said.

The bubbles were not just aesthetically unpleasing - the waterproofing situation started proving more dangerous.

bubbles
Close-up of "bubbles" caused by a waterproofing problem. (Photo: Yan)

“My mother started telling me that she could feel some kind of electric current while showering. It was scary because there is a powerpoint on that wall,” Ms Yan said.

Unsure of how to solve the problem, she bought her mother rubber slippers and a rubber mat that would help to insulate against electricity.

"It was so stressful. I kept worrying about my mother's safety," she said.

Eventually, the contractor moved the electric cable to another wall, and the problem went away, but only after she sent a letter to the company through the Consumers Association of Singapore (CASE). However, the bubbles are back, and Ms Yan's headache remains. 

Ms Yan’s situation, however, is not unique. Based on complaints it has received against renovation contractors, CASE sounded an alarm on the increasingly large amounts that consumers are spending on renovating or furnishing their homes. 

In general, consumers who pay larger amounts are Professionals, Managers, Executives and Businessmen (PMEBs), CASE executive director Mr Loy York Jiun told Channel NewsAsia.

The figure is a concern given that many consumers pay a large deposit, or even pay in full upfront to the renovation contractor, and then subsequently run into disputes due to multiple delays or unsatisfactory renovation works, or encounter renovation contractors that cease operations and become uncontactable after collecting payment, a spokesperson said.

The renovation contractor industry has been in CASE’s top ten ranking list of industries with the highest number of complaints for the past decade, she added.

Last year, the renovation contractor industry was ranked fourth, with a total of 1,269 complaints lodged with CASE. The top nature of complaint for the industry is failure to honour, meaning that contractual obligations and promises were not fulfilled, followed by unsatisfactory services. From January to July this year, there were 719 complaints.

CASE table on renovation packages
(Table: CASE)

About 60 per cent of filed cases were resolved through CASE, Mr Loy said. About 23 per cent of consumers decided to pursue their dispute through the Small Claims Tribunals while the rest decided to seek legal advice or other means of resolution.

DEFECTS A COMMON ISSUE IN INDUSTRY WITH LOW BARRIERS TO ENTRY

Lawyer Adrian Wee, who has represented both contractors and clients in court cases over renovation issues, said that one of most common areas of dispute is defects. Typically, the main contractors will have several subcontractors for different tasks like electrical works, tiling and painting.  

“It is possible for a defect to occur in the overall job even when there is no defect with the individual work done by subcontractors. For example, problems may arise from the sequence of works or or the way the place has been designed,” he said. 

When that happens, the main contractor cannot ask the subcontractor to fix the defect for free, because the subcontractor did not do anything wrong, he added. 

Vice President of the Singapore Renovation Contractors and Material Suppliers Association (RCMA) Dean Lim said since the entry barriers to the industry are low, anyone can just register and start a renovation company. With more players in the industry, competition intensifies and some companies undercut others just to keep the business afloat, he said.

"Without a reasonable profit, these companies who undercut prices without a strong financial background will sooner or later run into debts and be unable to find good subcontractors to complete the jobs - or worse, wind down and go missing in action,” he said. 

He added that renovation contractors are able to market themselves on social media, spending much less than before, when advertising was typically done through newspapers or television.

This further eases the barrier of setting up a renovation business, and more small interior design firms or freelancers are entering the market, he said.

HOW SHOULD CONSUMERS PROTECT THEMSELVES?

Mr Wee stressed that homeowners should not accept the cheapest quote without knowing why the contractor is able to offer his services at such a low cost.

A contractor who is in financial trouble is more likely to take other projects at a low price because all he wants is for you to put down a deposit to solve his cash flow problems

He said that for a typical HDB flat, contractors' profits are not that high. For example, in a S$50,000 project, they may earn S$7,000 in profit.

Mr Wee advised homeowners to negotiate as low a deposit as possible, and to itemise the quotation and keep good records. 

They need to do their own research instead of entrusting all aspects of their renovation to a contractor, he added.

"If you don't do your homework, you wont have the expertise to scrutinise. You have to acquire enough knowledge, so that you are not taken advantage of," he said.

CASE's Mr Loy said that homeowners should ensure that the contractor is registered with HDB. He also said they should consider engaging an accredited contractor from CaseTrust, so they can be assured of the availability of dispute resolution measures if anything goes wrong. 

He added that payment for services should be rendered progressively as the renovation continues, and that full payment should not be made upfront.

Homeowners can also seek out educational talks and exhibitions by CASE to find out how to select a responsible and reputable renovation contractor for the job, knowing their consumer rights under the Lemon Law for defective furniture or household appliances and how to protect their deposits and prepayments when engaging a renovation contractor or buying furniture.

Mr Lim added that homeowners should pick renovation contractors who offer a deposit performance bond, an initiative introduced by CASE and RCMA.

This bond is used to safeguard deposit payments against non-performance of contract, closure, winding up and liquidation, among other situations.

bond
Example of a deposit performance bond that provides insurance for homeowners for renovation works. (Photo: RCMA)

In order to be able to produce such bonds, a company will be required to go through a proper financial audit by the 3rd party insurance company. The directors of these companies will also be required to be personal guarantors for all the bonds, he said.

"This means that if the company winds down, the directors will be required to sell all theirs assets to compensate the home owners and not take away their deposits and wind down the company and continue a lavish lifestyle," he said.

To enhance the quality of this industry, it is important to enforce rules and regulations to tighten this it, especially because the renovation amount is usually large, Mr Lim said.

"We hope to see more to be done to enforce all renovators to go through strict audit and assessment in order to achieve CaseTrust recognition," he said. 

Source: CNA/ja

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