EDITORIAL
Time To Rein In Contractors
Tuesday, June 8, 2004
In the infancy of the financial development of the Cayman Islands, many
investors commented that conducting business here was akin to doing business
in the Wild West of America.
Although investments were not conducted here at the end of a six-shooter
three decades ago, rules were often very fluid, pertaining to some, but not
necessarily all of the local business people. Back then, those with political
and/or financial power were like Marshal Wyatt Earp of the Old West, sometimes
good guys, but sometimes on the shady side of the law.
Cayman’s metaphorical Wild West investment environment has largely been
tamed, but there remains one segment of it that can still be quite dangerous
to the unwary investor, and that is in the construction industry.
Investors wishing to build or remodel homes have to be very careful to
choose the right people with whom to do business, and they often find it
impossible to seek redress for deals gone sour, which happens fairly
frequently.
Over the years, other segments of the Cayman Islands investment community
have cleaned up their act, civilizing business here and making the country
safe for investors.
External forces like the OECD and the United States Government applied
pressures that forced much of Cayman’s financial industry to adopt strict
regulations that not only help prevent ill-gotten funds to enter the country,
but that also protect investors.
Other investment vehicles have become less risky with the formation of
private organizations like the Cayman Islands Real Estate Brokers Association
(CIREBA), which sets good practice standards for members and requires
professional certifications of agents in effort to promote honest and
knowledgeable investment service.
Yet the problems with some contractors continue.
The Cayman Contractors Association has tried to bring consumer security
into the industry, but with the ease of starting a construction business and
the lack of government licensing, cowboy contractors still roam the country,
and investors, from both here and abroad, are too often sold snake oil instead
of genuine products.
Part of the problem undoubtedly lies with the homeowners themselves, who in
trying to get the best price on a project that they can, choose the lowest
bidder, and then learn the hard way that they get what they pay for.
Homeowners who choose the wrong builder often make large down payments, and
then the poker game really begins, as the contractor bluffs with unmet
starting dates, citing such excuses as delays on the delivery of materials,
illnesses or injuries. Contractors will sometimes press the homeowner for more
and more funds ahead of schedule, until the day they pull an ace from their
sleeve when the money runs out by disappearing into the sunset.
But another part of the trouble also lies in the fact that just about
anyone can start a contracting business, whether they have the skills and
knowledge to do so or not, because there are no government accreditation
requirements for contractors, except for the statutory business licence.
Further complicating matters is the fact that even competent contractors
are not held to ethical business standards, and should they own a business
that ends up six-feet-under, they are allowed to resurrect themselves under a
new name immediately, leaving creditors to fight ghosts of entities that are
on Boot Hill.
It is time for a shootout between government and rogue contractors in order
to win the Wild West of construction. Cayman needs stringent licensing
requirements for contractors, and a bonding system that will keep them
diligently honest.
And it is time to also consider not allowing a director or owner of a
contracting company to set up shop under a new name until creditors of
previous business concerns are relieved of their losses. Only then will it be
safe for home owning investors to come out into the light of a well-marshalled
community.
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