When Phoenix-based Riviera Pools declared bankruptcy in fall 2008, president and CEO Ron Ostlund vowed to complete the 50 or so projects his company had not yet finished.
It didn’t happen.
Left to pick up the pieces were an assortment of angry homeowners, unpaid subcontractors, and an industry already reeling from a toxic mix of hard-to-secure credit coupled with a devastating slowdown in new construction.
“It’s important for the industry to help these [homeowners],” says Mike Geremia, president/CEO of Geremia Pools in Sacramento, Calif., a Pool & Spa News Top Builder. “And I worry right now because a lot of builders are just hanging on by their fingertips.”
Some industry insiders wonder if the current economy could incite a rash of abandoned pools, irate homeowners and more black eyes for the industry.
But experts aren’t yet ready to label abandoned pools a problem, since so few projects are being started in the first place. Still, in this economy certainties are fleeting, and abandonment issues could arise at any time. That is why it’s important for builders taking over these sites to know how to handle such projects — from common trouble spots to limiting their legal liability.
In California, the Contractors State License Board has received an increase in complaints from subcontractors claiming they weren’t paid for their work, according to agency spokeswoman Pamela Mares.
However, the CSLB reports no significant spike in the number of abandoned pool projects over the last six months.
“Honestly, I would have expected to see more abandoned pools at this point,” says Cecil Fraser, CEO of Swan Pools in Lake Forest, Calif., a Pool & Spa News Top Builder. “I just don’t think we’ve gotten there yet.”
In Florida, where new building has slowed to a near standstill, the problem is virtually nonexistent.
By late April, the Florida Department of Business and Professional Regulation had yet to receive a single complaint of abandonment by a licensed pool contractor since the fiscal year began the previous summer.
“There’s nothing there to abandon,” says one Florida builder. “I don’t think there’s anyone out here with 40 holes in the ground anymore. It’s just not possible, unless it’s from a year and a half ago.”
The state of affairs in Arizona, by contrast, is less clear. More than half-a-dozen Phoenix-area builders went out of business in and around 2005, when more than 23,700 pool permits were issued, according to Ryder Permit Service in Carefree, Ariz. Traditionally, Phoenix is a revolving door in good times and bad.
“We had sort of an industry cleansing before [the current recession] hit,” says Mark Ragel, president of Patio Pools & Spas in Tucson, Ariz., a Pool & Spa News Top Builder.
Ragel, whose firm has been called upon to finish some 20-25 projects since then, says a number of builders are surviving on the backs of their subcontractors, many of whom are owed tens of thousands of dollars.
Problem is, with each new job, the builder is able to knock off a percentage of his debt to the sub.
“So the subs don’t really have a choice,” he says. “They have to keep taking the jobs. And they’re enabling the hemorrhaging to continue.
“I’m just wondering who is on the edge right now,” he adds, “because I see what’s going on out there.”
Picking up where another builder left off can be tricky, which is why it’s a good idea to know what to look for before stepping onto an abandoned site.
In fall 2007, at the behest of the CSLB, Bruce Dunn inspected each and every job site vacated by Hallmark Pools, a large California building firm that had gone belly-up. Some were just a few stages short of completion, while others needed almost total overhauls.
So Dunn, CEO of Mission Pools, a Pool & Spa News Top Builder based in Escondido, Calif., developed a list documenting each project and describing what exactly would be required to complete the job.
This type of I-dotting and T-crossing is crucial, experts say.
First, many builders make the mistake of using a standard pool contract for a takeover job, says attorney Guy Bluff, managing partner at Bluff & Associates in Phoenix. This assumes the nature of all work that’s been completed is known.
“You’ve got to make clear who bears what risk,” he explains. “Basically, you want to absolve yourself of responsibility for any unknown conditions.”
On takeover jobs at California Pools and Spas, officials first advise the homeowner to seek a release from the prior builder’s contract. This assumes, of course, that the builder is still in business, or at least can be located.
In fact, the firm will not start work without an assurance from the customer that there is no prior obligation to the previous builder, says Gary Minor, vice president of business development at the West Covina, Calif.-based Pool & Spa News Top Builder.
“At minimum, that letter keeps us clear of liability,” he says. “But without the letter, as a builder you can take over and you’re not indemnified in the contract. It’s insurance more than anything else.”
In more extreme cases it can be difficult to tell whether even a single phase was completed properly. What to do, then, if the homeowner requests a warranty?
“We tell the homeowner that the only way we can guarantee the work is to start from scratch,” Minor says. “Depending on the size of the pool, this could add anywhere from $5,000 to $20,000 to the overall bill. It’s not something they usually go for.”
In any case, documentation is key. Before work can begin, builders are advised to photograph or otherwise record the condition of the site. Take pictures of the shell, the plumbing, the electrical grid, and any other construction areas related to the pool.
For its part, California Pools and Spas offers free consultation to homeowners whose projects have been abandoned, Minor says. And the first move usually entails an attempt to settle with the previous builder.
After all, “it’s the industry that takes a hit anytime guys leave a project unfinished,” he says.
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