Home Building or Repairs: How to Fight Construction Fraud or an Unfair Lien

Residential construction fraud can include contractors not finishing paid-for work; fraudulent invoicing for work not done; manipulative bidding; malicious liens; or false statements about their credentials, or about whether (or how much) work is required.

For an example of the first problem, we begin with a current set of allegations in metro Philadelphia.

A Criminal Complaint More Than 90 Pages Long

Deed holders of Montgomery County, Pennsylvania started reporting a rash of incomplete construction jobs. The construction managers at Catenacci Construction LLC allegedly took money for home improvement work they didn’t finish. This was reported dozens of times, Philadelphia-area media reported.

The complaints involve a local, family-run business, owned by the Catenacci couple. The Catenacci couple now faces charges of home improvement fraud, theft, conspiracy, and related allegations. The criminal complaint against the couple claims there was:

• Work left undone, despite escalating charges for the work, and the payments made by the homeowners.

• Construction materials left outside.

• Parts of roofing or siding taken off, letting water infiltrate the homes. 

The Plymouth Township code enforcement office says there are code violations.

Police said the customers of Catenacci Construction who used credit cards were able to get some relief. But some resorted to other companies to get work done, and paid double for the same projects.

Utah Creates Task Force to Confront Harmful Contractors

State officials have received thousands of complaints related to residential construction fraud in the last several years. Now, a new state task force is on it.

State insurance officials say roofers sometimes go through neighborhoods after damaging storms or other disasters with offers of free inspections. And some misrepresent the repairs needed, or even create further damage.

Plumbers sometimes recommend restoration after water damage, urging the deed holders to sign agreements up front. Then they line up repair work that won’t be covered by insurance. Utah’s Division of Consumer Protection says it’s not unusual for customers to experience six-figure losses.

The state’s professional licensing division is getting more than two thousand complaints a year at this point.

Utah lawmakers and industry spokespersons say construction fraud:

• Erodes the foundation of trust essential for a stable housing market.

• Makes it harder for younger generations to buy homes at all.

Utah’s new task force, says the governor’s office, will empower people to hire good companies, particularly when investing in older and more affordable homes. The task force is made up of industry groups, law enforcement officials, the Utah Attorney General’s Office, prosecutors, officials from both the professional licensing and consumer protection agencies, and legislators. The new task force can:

• Pursue those who break Utah fraud laws, with a specialized construction fraud prosecutor taking the lead.

• Train local prosecutors to successfully address reports of construction fraud.

• Carry out education on best practices in construction agreements, and offer compliance training for industry actors.

• Create consumer guides.

• Draft new rules for state regulators.

And speaking of new rules, Utah’s Department of Commerce recently issued its new Utah Residential Construction Agreement. The model contract will help deed holders and contractors set forth expectations, lay out the details, and prevent fraud. The agreement can be used as a fill-in-the-blanks document, or as a model for parties to check their own contracts.

Filing Abusive Liens? Holding Contractors Accountable

Construction liens (“mechanics’ liens”) are tools for contractors and subcontractors who need to enforce their rights to be paid as laid out by a contract. A lien clouds a property’s title. As long as it’s in the records, a deed holder is held back from financing or selling the home.

When correctly filed in a home’s county, a construction lien can prompt a deed holder to resolve a legitimate bill for completed work. But it’s not unheard of for liens to be improperly recorded against homeowners’ titles. All the software and AI-generated tools out there that simplify lien filings make it that much easier for today’s contractors to slap liens on titles.  

Liens can have defects. They can be filed after the contractor’s rights have timed out. They can even be deliberately hostile, containing purposeful misrepresentations.

The deed holder has a contractual right to request a removal of a lien. If the party filing a defective lien won’t release it, that contractor could have liability.

Here’s how this matter played out in a Florida case…

Fighting “Slander of Title” by a Construction Firm

A Florida Appeals court issued its decision in Witters Contracting Co. v. West in 2020.The Wests hired Witters Contracting Company to build their new home. Nine months into the build, the company demanded $30,000, and at the same time threatened to file a $100K construction lien. Then the company’s attorney also sent a demand letter, asking the Wests to send approximately $60K for itemized work.

The very next week, the company recorded a lien. The instrument declared that the Wests owed $75K.

The West couple then sued the company for fraud. They also alleged slander of title.

Yes, a construction lien can do serious damage to a deed holder, in much the same way slander can hurt someone’s reputation. So, a state law could allow deed holders a strong tool for fighting back. As summed up by lawyers at the Bassford Remele law firm:

That counterpunch is called the “slander of title” claim [which] allows for the recovery of attorney’s fees and other damages for the responding party.

The lawyers explain slander of title as “false statements” intended to “harm a property owner’s reputation or interfere with their ability to sell or transfer property.” The statements could include falsities about the home’s history, improper liens, or other impacts to the property’s marketability. So, a slander of title claim is used by deed holders to tell a court that the lien wrongly threatens the use or a transaction, or even a refinancing application, involving the deed holder’s property.

The Witters company fought the case. But to demonstrate that they haven’t filed a slanderous lien, a contractor must demonstrate a good-faith basis for recording the lien. Also, the deed holder’s debt, as set forth in the lien, should be based on a valid accounting. The Witters company failed to show the required good faith and accurate billing.

The trial court found that the Witters lien constituted “malicious conduct” constituting a slander of title, and contained deliberate exaggerations that rose to the level of fraud.

The Wests were awarded $180K+, including punitive damages. The appeals court affirmed.