Vermont Legislature SmartTranscripts:

[Rep. Martin LaLonde (Chair)]: House Judiciary Committee this Thursday afternoon, March thirty first, getting back to S-one 183, the Home and Land Improvement Fraud. And we're gonna hear from Andrew Brewer next, if you can join us. Andrew, thank you for

[Andrew Brewer]: being here. Yeah. Well, you, Mr. Chair and committee members. For the record, Andrew Brewer, lobbyist with Downs, Franklin and Martin. But today, here on behalf of the Vermont Builders and Remodelers Association, aka the homebuilders. It's I still refer to them. I can be pretty brief. It's it's Jason Webster. You wanna hear for you you wanna hear from him in a minute with Huntington Homes. He's on the screen. So I'll just kind of tee him up and frame the issue a little bit. So first of all, we wanna start by saying that the Senate made a meaningful improvement to S-one hundred eighty three from when it was introduced by adding knowing intent to defraud. And you heard Ledge Counsel and you heard Matt say it's saying, that's an important part of it. It was the right move and we appreciate that. The question for builders on the ground is whether that standard is clear enough to consistently separate fraud from a project dispute. And to understand that, and I think Jason's gonna parrot some of what I'm about to say, it's important to step back and have a look at how construction is actually regulated in Vermont. So some of you may know, some of you may not know. Vermont is one of the handful of states that does not have a statewide residential building code for one and two family owner occupied homes. So if you're building a single family home or a duplex and all you own is a hammer, you're good to go as long as you can convince somebody to pay you to build their home for them. What we do have is RBIS, Residential Building Energy Standards. But that's a code without a system around it. We think it was like it's half a code. It's kind of off here on the side. It has to do It's a set of energy rules standing alone. It doesn't have inspectors. It doesn't have enforcement or licensing to kind of anchor it in the real world. But they're there and all homes are supposed to be built to the Arby's building code. So in most cases, there's no inspector signing off on the work. There's no statewide standard being enforced in real time. There's no licensing body overseeing contractors. So what that means when something goes wrong on a project, there's often no clear objective record of what happened or who's at fault. So disputes tend to come down to one party's version of events versus another's question about scope, timing, payment, quality. Yes.

[Rep. Kenneth Goslant (Clerk)]: You're super so I'm I'm gonna separate it you're dealing with the builders, but it's you're not gonna have builders that aren't aren't watched. You're not gonna have plumbing that's not watched. You're not gonna have electricians that's not watched on a whole complete house, are you?

[Andrew Brewer]: Is that going on? No. If you if you hire a plumber and electrician HVAC, yes, they are licensed. The guy who builds your house, though, the guy who pours the foundation, builds the sticks, puts the roof on,

[Rep. Kenneth Goslant (Clerk)]: no. So that's part we're focused on. But and then it'll come down to the homeowner why they hired the the bill the builder. But it seems like on at some point, I mean, he's a pre manufactured or whatever common, they're top quality, I know, but that is it in most cases they are caught out, the the builders that aren't following the proper guidelines?

[Andrew Brewer]: No. You mean are they called out? Is that your question?

[Rep. Kenneth Goslant (Clerk)]: Yeah. Aren't they called? No.

[Rep. Martin LaLonde (Chair)]: No. Yes.

[Andrew Brewer]: Again, we have There is no underlying residential code. There's literally nobody looking inspection. And with the RB's that we do have, the Arby's code is written by the Department of Public Service, and that's it. They exist in statute, but there is no agency right now that has jurisdiction over Arby's. None. So I don't mean to say there's just not enough inspectors. I mean, there's no inspectors, nothing. But builders are required to take on all the risk and liability of signing off on these certificates. It's called an RB certificate that has to get filed with the municipality and with the state. And Jason will talk a little bit about the tension between knowing what the law is and what you're supposed to do to commit to building to Arby's and what the home builder wants. And a lot of times those are two different things. So you've got builders saying, don't wanna pay for that mechanical air exchange system that's gonna cost me $15.20000. And at that point, the builder's supposed to say, What? I'm sorry, but that's the law, so I'm not building your house. It's a

[Rep. Kenneth Goslant (Clerk)]: tough position to be in.

[Andrew Brewer]: We can come back to that. Depending on how these things are interpreted in the field, it could be looked at as a project that went sideways or intentional fraud. And I think that's the rub of what they're concerned about. When is something that could a case be made that, well, you intended to defraud me on that. And that's the gap this bill is trying to kind of operate in. So this isn't about bad actors. Everybody wants bad actors held accountable, including the home builders. The concern is whether without that underlying system of building code, the line between fraud and a failed project is not clear. So we appreciate the intent to defraud as a good step moving forward. We wonder if it's not quite the full solution. Is there an opportunity here to strengthen language maybe by clarifying that good faith disputes are not criminal conduct? I heard Matt say that, and I heard Legis Council say that that's what it was supposed to be. I wonder if we may consider some language to say that explicitly. Or providing guardrails that help distinguish intent from performance issues. That's the basics of it. Okay. And I will leave it up to Jason.

[Rep. Martin LaLonde (Chair)]: Any other questions for Andrew? Well, to Jason, thank you for being available, Jason. Just identify yourself for the record and and proceed.

[Jason Webster]: Of course, Jason Webster. For the record, Jason Webster, owner, Huntington Homes. We are a building contractor located right here in Vermont. Yeah. Andrew Andrew Andrew just said it. What what the what builders what I am concerned with, I am not you know, I'm kinda punching above my weight when I, you know, move into and talk about legal concepts and courts and all that kind of stuff. It's not that's not inside my wheelhouse, but what is inside my wheelhouse and what I'm hoping that this legislation addresses is exactly what Andrew said is that there is no underlying building code. There is no standard of construction, right, in the state of Vermont. And so I want to make sure, you know, that the Dolphins aren't getting caught in the net here while we're looking for specific fraud issues instead of, as Andrew said, you know, failure to perform issues. What, you know, when Andrew kind of, you know, when we talk about the builders are, we're kind of in, you know, when we like look at like a roofing job or anything, right? When we're hired to do a roofing job, there is no, we don't have a building code standard as to what a roof means, right? So how it ends up being kind of an expectation between us and the client as to what that job is going to be. And how do you, how does this piece of legislation work to make sure that it's not catching a contractor for a failure to perform an expectation that the client had versus, you know, something that's more glaringly of an, you know, knowing to defraud, you know, taking somebody's deposit and then never showing up again. Andrew, my biggest concern on the whole thing as Andrew touched on is the RBs, the residential building, you know, the energy code in Vermont. We are whether we contractually agree to it or not with a client, As Andrew said, the statute and the rules kind of sit up here that we are bound by that says we must build to it. And then that's it. The Department of Public Service did a study of that rule in actual technical application of that rule, how many houses were actually being built to that code all the way back in 2015. And they found that in 2015, which was a much less stringent energy code, that nearly 50% of all construction in Vermont wasn't meeting the technical requirement of the energy code. Fast forward to today, we're under a much more stringent energy code that again, technically sitting up here in a piece of legislation we're required to build to. We knew in 50% of us weren't building to it. I think it's safe to assume that today maybe 10% of contractors are building to this. I wanna make sure that 90% of contractors aren't all of a sudden criminals, right? We're criminals because we're not building to this code. So really that, I mean, that's really the base of it, right? The most, is it unfortunate that there have been a couple cases of, you know, contractors fraudulently taking deposits and then with no intention to do the work? Like, that, you know, do those happen and is that unfortunate? Yes, right. But I would say that without the scaffolding or the structure of a building code, I'd say that 99% of the disagreements that happen between clients and their contractors come down to expectations, not intent. I don't want when something goes sideways like that, what I am really hoping doesn't happen is that, you know, a client at that point when they go to sue their contractor, their attorney is going to be grabbing at every single arrow they can to go after the contractor to see what part sticks. And what worries me about this legislation is it's another arrow that the contractor is going to have to defend themselves against when they had no intent, you know, they weren't intending to defraud them from the beginning.

[Rep. Martin LaLonde (Chair)]: So I'm sure some of us will have questions, but just a couple of things. I guess, first of all, on that last issue, like the homeowners' plaintiffs, they're not the ones who would be able to bring a criminal complaint on. That's the state's attorneys or the attorney general's office. There's no additional errors for their quiver from this bill. I guess a question, so then those, the 90%, are they, or are you generally promising that I will build to this code or is that not being promised?

[Jason Webster]: Well, doesn't I mean, so again, the fundamental issue in Vermont where all of these things trickle down from, the fundamental issue is that we do not have a building agency adopting, administering, requiring certifying, inspecting to any sort of code. So that's the fundamental issue, you know, that sits on top. This kind of like standalone sidebar energy code sits over here, which in the rest of The U. S. An energy code sits as a component of the building code. It doesn't just sit out there on its own. It's, you know, here's the building code, energy code is a component that sits inside there. Vermont has no, you know, we just adopted the energy piece only thinking it was gonna work and it hasn't. Technically that energy code is applicable to every single construction project in the state, be it a renovation or new construction, technically contract or not, right? You don't even, if you're doing a renovation on, there's a threshold for how many square feet it has to be and whatever. But if doing a major renovation on a house, whether you have a contract with your contractor or not, that contractor is required to build to the energy code. And we know that that's not happening, right? The Department of Public Service knows that that's not happening. Every time they amend the code, they leave that hot potato alone. They never touch it. And what I just wanna make sure is that this legislation, doesn't all of a sudden turn 90% of contractors into criminals.

[Rep. Martin LaLonde (Chair)]: Right. Yeah, no, I think I get that now. If you're required to build to the code, it's a violation or not building to that code considered fraud? It seems certainly it's not, but we can get some other testimony on that as well. And if we need some clarifying language, we can certainly do that. But I understand what the concept is. Mean, the folks have other questions for Jason? Go ahead.

[Rep. Kenneth Goslant (Clerk)]: Of your stuff is built in house, right? I mean, you're not doing any building on-site. Correct?

[Jason Webster]: We do the majority of what we build is in our factory. Correct. So so

[Rep. Kenneth Goslant (Clerk)]: like your standards and all that stuff, you're setting your own standards. Nobody that's even watching anything that you're doing or anything like that.

[Jason Webster]: If the so if so we build we we build our factory in Vermont. Yep. And then we ship modules all the way across New England. You better believe the rest of New England has building codes, right? Massachusetts for sure has a building code. Even Live Free or Die New Hampshire has a building code. And if when we build product to ship to those states, there is a, we to apply for how we're gonna build that structure to comply with local building codes. And then while we're building that structure, there is an inspection company that comes in and inspects what we do to make sure that we're actually building what we said we were going to. And then when that product gets shipped to another state, there is a local building inspector that picks up from there that absolutely inspects our work and takes over from there and administers an adopted building code. In Vermont, there is nobody, There's no code and there is nobody looking at what we're doing.

[Rep. Kenneth Goslant (Clerk)]: So I'm just trying to get a little bit off topic because I know quite a bit about you guys, but, and I think it's top quality by the way, straight it out. But when you build that your product is actually going out of state, the walls are already closed. I mean, the sheet rock's already on. I mean, it's Correct. I don't wanna use the word modular because I don't think that's what you

[Jason Webster]: No, guys I mean it is, I use the word. And because we're building closed assemblies, that's why there has to be in plant inspections of the plumbing and the electrical and the structural work before we close it up. But in Vermont, that becau- there is no code. So there is nobody that that's doing that for work that stays here in Vermont.

[Rep. Kenneth Goslant (Clerk)]: But your Vermont inspectors for electrical and plumbing are still coming in there before you close those walls up, right? No. Even if it's going out of state?

[Jason Webster]: No, that's a, it would be the, it's a hired inspector for this that's been approved by the state that the product is being delivered to. The only time we will have Vermont plumbing or electrical inspectors, which we do have in Vermont, the only time we will have plumbing or electrical inspectors in Vermont coming in to look at our work before we close-up the wall cavities is if that product is multifamily, right? If beyond single family or non owner occupied duplexes.

[Rep. Kenneth Goslant (Clerk)]: Okay. All right. That makes sense. All right. That's good for now. Because we're really focusing on the Vermont stuff. So, Okay, thank you. Any other questions for Jason?

[Rep. Martin LaLonde (Chair)]: All right, Nazzini, thank you so much again for being here. And we'll certainly ask of our other witnesses to kind of weigh in on that issue that you raised make sure that we're good with that or if we need to adjust the language.

[Jason Webster]: Thank you for your time and your work on this.

[Rep. Martin LaLonde (Chair)]: Yeah. Thank you. So, Todd, if you can join us.

[Rep. Kenneth Goslant (Clerk)]: You've

[Rep. Martin LaLonde (Chair)]: gotten a little scruffy since you came here.

[Todd DeLuz]: Just getting worn out, Todd. Chair.

[Rep. Kenneth Goslant (Clerk)]: Good afternoon. For the

[Todd DeLuz]: record, Todd DeLuz, assistant attorney general. Thank you for having me here. Not a lot for us to add onto s one eighty three. As it came out of the senate, we're comfortable with the bill. It is essentially and I think this I apologize. I didn't have a chance to watch the walk through, but I think you all understand the genesis of the bill is largely responding to a couple of superior court decisions around the constitutionality of the post 2015 amendments to this law, and this is kind of a a legal correction to those. And I haven't the state's attorneys have a better handle on when, if there is an appeal going forward from one of those cases, but this would seem to take care of the issue more directly. From our perspective, these remain really hard cases to prosecute. I think, again, states and attorneys are in a better position to to talk about that. But what we tend to do with home improvement space is more on the mediation side. We have a position at our consumer assistance project program, excuse me, that is a mediator that responds to these concerns from homeowners and from contractors. He's actually both a paralegal and a former contractor, and he helps kind of work through in a on an informal level when these disputes arise. But beyond that, we don't have a lot to say about that.

[Rep. Martin LaLonde (Chair)]: I a have question for you, but I'll let Ken ask you a question.

[Rep. Kenneth Goslant (Clerk)]: How many cases do actually make to you guys? How many home improvement fraud cases? No. They're all basically done at the lower level?

[Todd DeLuz]: Well, I wouldn't say lower. They're done at the county level. Local level.

[Rep. Kenneth Goslant (Clerk)]: So I get all this. I totally whether it's not just building, whether it's the blacktop people or whether you know, the ones that you constantly hear about all the time. And I think something needs to be done, but I wonder if it's so much overreach that it's impossible to do. Like, okay. So we firm up the bill a little bit. Right? I just wonder what we're gonna achieve. Because you're always gonna have the devious ones out there. You know what I mean? It's just worth it.

[Todd DeLuz]: For what it's worth, I found state's attorney Martha just testimony in the Senate very useful and helpful in terms of understanding what it's like, what they choose to prosecute and the vast majority that they simply aren't able to. Because as I think the previous witness said, a lot of them end up being contractor disputes. They're not. So under the current under this proposed language and the current state of the law in several counties, you basically have to have evidence that the contractor, when you sat down to sign the contract, the amendment, or as we've suggested in this, the change order knew and intended not to do the work or knew they weren't going to be able to do the work. And that's going to be really hard to prove when you can't get that individual on the stand to testify they're protected by the Fifth Amendment. So it's a challenging set of cases. I do think there are successful prosecutions that the state's attorneys bring. But it doesn't respond to a lot of the challenges I think you're flagging. And there may be other solutions that are non criminal in this space, but I think where those fit in terms of broadening regulation is a bigger policy question.

[Rep. Kenneth Goslant (Clerk)]: Thanks. So here's an issue that Jason

[Rep. Martin LaLonde (Chair)]: Webster raised and wanna get your input on this. So there's a building, an energy code that is required. And if the builders don't build to that energy code, is that gonna lead to a criminal charge? I mean, if they going into this know that they're not going to be able to build to a housing code or energy code.

[Todd DeLuz]: So I think that'd be a tough case to bring, because I think you're talking about the intent, right, a criminal level of intent of the party in question and probably an expectation on some level of the homeowner. And I think I don't read this bill or the laws that exist now as suggesting it incorporates anything beyond the four corners of what the contract anticipates. Now, the contract may say it's got to meet all the building standards, but I think you're looking largely at an administrative penalty. And it's tricky when you bring administrative violations into the criminal context and use those as evidence of intent.

[Rep. Martin LaLonde (Chair)]: And there's not, I guess, any administrative penalty from what I'm hearing. But that's, yeah, in here.

[Jason Webster]: That I don't.

[Rep. Martin LaLonde (Chair)]: Okay. So actually that leads me to have another question for Jason instead of you and Andrew. But any other questions for Todd? So I guess, Jason, my question for you is, I mean, in these contracts, if you sign a contract, does a contract saying that we will build this to the energy code requirements or to the housing code requirements? Then that's a little bit of a different animal if the builders are entering a contract that says that and they know that they are not going to be doing that, that could be problematic under this bill.

[Jason Webster]: Yeah, I mean, I think there's two answers to that. One is that I think it depends on the contractor, right? It would depend on the contractor and their contracts as to whether or not how detailed they are, right? And how detailed they are if they because there is no code or, you know, building code to reference, they're not gonna reference a code because there is none to reference. So a contract may be specific enough, you know, to line item out the specifications of the build. This is what we're gonna do for roofing. This is for framing. This is for installation and that sort of stuff. So I guess it on answer number one is it depends. Depends on your contractor. Depends on your contractor's contracts. Answer number two is that now there is another poorly administrated program in Vermont, and that is the contractor registry. And so that is a place that is contractors that are performing, think it's over $10,000 you know, a project that's over $10,000 the registry requires that the contractor be a registered contractor, right? That doesn't mean licensed. It doesn't mean certified. It means that they're just registered. And then there are template contracts that are available from OPR to use. I don't know the answer as to whether or not reference to the energy code is in those template contracts. I know there has been a push to get them as part of the contract as part of that template, but I'm not sure if they're there or not. But zooming back out of that, it again, it's another thing like the energy code, which was created and sits on a shelf. The OPR registry was kind of created and sits on a shelf too. It's technically required. Most people don't do it. You know, most people aren't there. Most subcontractors to date are still not pinging me saying, hey, bud, by the way, our work here is over $10,000 I need to have a contract for that. Okay. Basically what it comes down to is that construction in Vermont, because we don't have agency overseeing us, we don't fit in the nice tidy little box that I think you might think that we fit in.

[Rep. Martin LaLonde (Chair)]: Yeah. No. I'm not thinking that. I'm just thinking what are the promises that are knowingly going to be broken? And it just doesn't sound like that's the case unless in a contract somebody specifically saying, yeah, we are going to do this energy code to this energy code, knowing that they're not gonna be able to do that. Mean, but if the energy code is out there and you're not making promises about that or housing code or anything, then it's not a problem. Well,

[Jason Webster]: of the things that Andrew touched on, which a very real problem is that even if, so I'm gonna say, let's say Huntington Homes specifically, right? I don't wanna perjure myself, but I'm gonna, you know, our contracts do reference that we're gonna build to the energy code. I then, the energy code isn't free, right? There are things that cost, it costs the client money to meet that code, right? And so I now am in a battle with my client with no support behind me of a code official thing. No, no, no, we have to do this where I have to go to the client. I'm just gonna use the two big examples. You know, there's the ventilation standard, right? Where we have to put in a $6.8000 ventilation system that I'm trying to build, you know, I have to do it if I'm gonna meet code, I'm trying to ask my client to pay for it. It's their house, it's not mine. I'm just hired to put it together for them. If they decide they don't wanna pay for it, it's an impossible situation that it's put me in because I have a contract that says I need to build their code and I have a client saying I'm not paying for code.

[Rep. Martin LaLonde (Chair)]: Which also doesn't seem to be really covered by this. But yeah, I'm gonna have to puzzle this a little bit more and we'll hear from a couple more witnesses on Thursday, including the state's attorney and maybe they can weigh in. And Andrew, if you have suggested language that would make this clear. Because we're not trying to force through criminal law our home builders to follow a code that's not being enforced otherwise. Otherwise. That's not at all the intent of this. It is very much when one of those very few bad apples going in, make promises they know they have no intent to keep, or they just absolutely know that they're not gonna be doing it. Whether they can or not, they just know they're not injured. Jason, I

[Unidentified Committee Member]: have a quick question that you just sparked. Would you, in that case that you just described, in those circumstances, would you modify the contract?

[Jason Webster]: Well, in my case, I don't I never give my client the option. Right? It's either you either get it and I you either pay for it or I don't build your project. Right? So in my in my case, I never present them the option of those costs to meet the code. But I think I'm a unicorn in that. I think most other builders, you know, we, most other builders, when you get to the eleventh hour of our project, it is running over budget because that's just what happens. And they're looking at their budget and they're looking at what still needs to be installed and they're looking at courts countertop versus HRV, most clients are going to take the courts countertop and ditch the HRV.

[Unidentified Committee Member]: Interesting, thanks.

[Rep. Martin LaLonde (Chair)]: So did this come up in the Senate? And what was did they consider what to do about this?

[Andrew Brewer]: We have to the find it Senate. I don't think I'll be blunt, we didn't do as good a job in statement, Jason. I think we didn't, it wasn't fully fleshed out. It seems very innocuous. It seems like a pretty simple what we're trying to do is get no intent in there, but when you start to think about it, what we're sparing you is the full story of Arby's. I don't know if you really want to get into it. Yes, we're sparing you the full story of the Arby's and the latest disaster of a rollout that it was, and the reasons why compliance is so low. It's really not builders just saying, I don't care, this is code, I don't wanna follow it. They can't follow it in many cases. And that's the crux of what Jason's talking about, where somebody might say, I will build your house to Arby's, but then somewhere down the road, there's a million and one things I could change in the field where they're not actually able to meet the technical definition of what's in the Arby's. And I understand upfront they didn't knowingly intend to not build it, but if somebody could spin a story and now you're in a lawsuit.

[Rep. Martin LaLonde (Chair)]: Well, because the state's attorneys or attorney general who are bringing very, very You

[Andrew Brewer]: don't bring it on the of cases. They're bringing, you know I mean,

[Rep. Martin LaLonde (Chair)]: they're not really facing the lawsuit. It's a whole different animal of, you know, they are, you

[Rep. Kenneth Goslant (Clerk)]: know,

[Rep. Martin LaLonde (Chair)]: state's attorneys ever gonna bring something because somebody didn't quite make the code. It's a hard standard. It's gotta be beyond a reasonable doubt. I mean, these are gonna be really, really tough cases to bring to begin with. And it's gonna have to be pretty egregious behavior and good evidence. Just the fact that somebody said, Yeah, we're gonna do this for code, they think they can, they can't.

[Andrew Brewer]: And I think, Jason, I both understand. I think we generally do understand the intent of the Belt and actually do agree that it does actually make the bar a little higher for a lawsuit to be brought up. Right,

[Rep. Martin LaLonde (Chair)]: look for a sort of criminal prosecution to be brought. Yeah, definitely. I can't promise anything about rejects the contracts. That's a whole different animal. Alright. So we have a couple more witnesses on this on Thursday. Thank you again, Jason, for being available on your testimony. You, Andrew. We're going to take a recess until 03:30, and I'm gonna try to get a couple witnesses in to kind of post loop on the chloride salt bill.

[Andrew Brewer]: Stick around with that, Jason.