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A building problem: Utah law loosens licensing requirements for general contractors

By Brittany Glas, KSL TV | Posted - Nov 13th, 2019 @ 8:00am



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SALT LAKE CITY — From leaking roofs and windows, to massive cracks in the foundation, the KSL Investigators have received dozens of tips about construction defects across our state.

One contractor believes Utah consumers have every reason to worry about one of their largest investments — especially after recent changes to Utah law made it much easier to become a general contractor in Utah.

Construction ‘doctor’

Sean Gores has seen his fair share of construction defects. He owns Gores Construction, a company that specialized in fixing water intrusion problems across the Intermountain West.

“We’re pretty much considered the doctors of the construction industry. When things are broken, we come out and fix it,” said Gores.

He says Utah is a hotbed for business.

“It’s probably, out of all the states I work on, it’s the worst state I’ve seen for construction,” he said.

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He should know. Gores has been fixing damage in multiple states for more than twenty years.

“Contractors just go out there and build it as quickly as they can, and there’s a lot of things that are missed,” said Gores. And in some cases, he says, “they’re not qualified to do the work. They’re not being trained to do the work.”

Bill Perry, Jr., who owns Perry Homes, says there are other factors at play, including the state’s housing shortage and an affordability crisis.

“Those affordability problems are exacerbated primarily by the fact that there’s not enough labor,” said Perry.

The goal of fixing that labor problem is partly why Utah lawmakers relaxed licensing requirements for general contractors during this year’s legislative session.

Utah contractor licensing

Rep. Mike Schultz, R-Hooper, sponsored H.B. 187, which modified professional licensing amendments. The bill, which the Utah Legislature passed unanimously and became law July 1, eliminated the trade exam for general contractors.

“All the trade exam was, I believe, was a way to kind of keep people out of the industry and make it hard because it was a hard test,” Schultz said, adding his work on construction and development-related legislation has always been about supporting a free market.

“I don’t think government should be in the business of picking winners and losers. I think that ought to be the consumer,” Schultz added.

The bill also requires the completion of a 25-hour course and exam, along with a five-hour business and law course and its corresponding exam. In 2017, Schultz also sponsored H.B. 313 which modified the Utah Construction Trades Licensing Act. In doing so, each applicant for specialty subcontractor licensing only had to complete the 25-hour course and exam requirement.

Utah specialty contractors are no longer required to prove any paid experience in the profession for licensing. They used to be required to prove two years.

“A lot of people wanted to see how eliminating the exams for the subcontractors went for a couple years before we did the general contractors and so I agreed to wait. I wanted to do them both at the same time,” Schultz said.

In order to become a licensed general contractor in Utah, you must now work two years full-time in construction. Under the old licensing requirements, general contractors were required to prove four years of full-time construction work experience.

General contractors must also clock six hours of continuing education every two years.

Loosening licensing requirements

The construction industry is one of several professions that have seen changes or reductions in licensing over the past few years, as the legislature works to cut through what they consider “red tape to employment.”

“They were all under this, under this political philosophy of the need of consumers to get these services as quickly as possible, while still protecting the public where necessary,” said Mark Steinagel, the director at the Utah Division of Occupational and Professional Licensing, or DOPL. “Keep the stuff that actually protects and get rid of the stuff that is just a barrier to entry.”

DOPL does not make any licensing decisions. The division simply enforces the law, as decided by Utah lawmakers.

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The governor celebrated Utah’s “massive decrease” in its ranking of occupational license burden in a press release last April. The release said the state dropped from 13th to 50th nationwide.

“Our Utah State Legislature has taken a proactive role in reducing regulatory burdens that do little to protect the public. I am proud of Utah’s collective efforts to identify changes that address the growing needs of our workforce to support our state’s continued economic success,” Governor Herbert said in the release.

The response to the contractor changes has been overwhelming.

Since the trade exam was dropped, 818 people have taken the general contractor’s business and law exam (from July 1 – Nov. 6, 2019). Compare that to all 12 months of 2018, where 743 people took the required exam, according to DOPL.

To date, there are now more than 23,300 active contractor licensees in our state.

So, with more people who have less industry experience, is there a better chance Utah consumers could suffer when buying one of life’s costliest purchases? Do these legislative changes benefit homebuyers across the state?

‘Wild, Wild West’

James McBride is a licensed general contractor in Utah. He’s been in the construction business for nearly 30 years in the state.

“I started out just as a laborer, and then I ended up being a superintendent relatively fast, and just moved my way up,” McBride said. “The old school way was you had to have five years’ experience and I believe three of those years had to be as a supervisor and then the other two had to just be hands-on experience in construction.”

McBride says he wouldn’t want to get into the industry now.

“There’s a lot that goes into this business that 30 hours (of classroom instruction) will not cut it. Period,” he said. “What’ll happen is, you’re going to get an influx of people that don’t know what they’re doing that think they can run a construction company.”

When asked if he believes the new legislation will negatively affect consumers, McBride said, “Absolutely – whether it’s intentionally or inadvertently. If you go in to meet a customer and you say you can do a project and half way through, you realize that you can’t do that project, you’re preying on that customer because you intentionally told them that you could take care of a project that you don’t have the experience to.”

“It’s going to be the wild, wild West,” he added.

Gores told us the issue isn’t just about a surge of inexperienced people doing the work that causes concern – it’s about how the state is paving the way to let it happen.

“The system in Utah is not built to protect the consumer, the homeowner,” he said. “To the contrary, it’s built to protect the contractors and developers.”

Construction-related legislation

“I don’t think government should be in the business of picking winners and losers,” said Schultz. “I think that ought to be the consumer.”

Since he was elected in 2015, Schultz has sponsored or co-sponsored 21 bills related to construction or development in Utah.

He has a background in construction and is the owner of Mike Schultz Construction and Castle Creek Homes.

Schultz told us the free market will weed out bad contractors but suggested those looking to hire a contractor use DOPL as a resource.

“If it is a continued problem, obviously, it – with complaints that are filed, then the division can take that license away,” explained Schultz. “There were shoddy people in the construction industry before, and so, and there will continue to be shoddy people in the construction industry after this.”

KSL Investigators checked and discovered that revoking contractor licenses doesn’t happen as often as you might expect.

DOPL told KSL Investigators that of the 1,309 complaints received for contractors statewide from Jan. 1 – Oct. 7 this year, 676 cases resulted in discipline and 128 had their license revoked. However, one-third of those who had their license pulled (43 of the 128) had a “stay” on the revocation, meaning they were still allowed to work.

Complaints aren’t public under Utah law, but DOPL will provide information on discipline.

Schultz has been disciplined by DOPL twice: Once in 2003 for hiring an unlicensed contractor to do work on a home under Mike Schultz Construction, and again in 2010, under Castle Creek Homes, for “aiding unlicensed practice.”

In 2003, Schultz paid a $400 fine, and in 2010 the builder was fined $800, according to DOPL.

Schultz said that before his company makes a hire, they check to make sure those workers are licensed.

He said in both circumstances, the cited contractors had a license when they were hired, and it was a matter of “lapsed licenses.”

Schultz said he didn’t view the fines as “actual disciplinary actions,” and added that he is “pretty proud” of his record with DOPL because he has built thousands of homes and hired hundreds of workers throughout the course of his career.

'Dream home' defects

Bennett and Kassie Thurgood’s nearly $1 million dream home on Hampton Ridge Drive in Ogden came with million-dollar views. But the couple and their family hadn’t even spent 18 months enjoying the views in their brand-new home before the foundation footings and retention wall on the property failed. As the couple told KSL in 2017, the foundation was literally tearing apart and the home was in danger of sliding down the mountain.

Bennett and Kassie Thurgood told KSL in February 2017 that the retention wall of their Ogden property collapsed in April 2016. Concerned for their safety, the family moved out about six months later. (Photo: Steve Breinholt, KSL TV, File)

“(Prior to building) we had the land surveyed, the soil tested, and we relied on the city to inspect it,” Bennett said in February that year.

KSL-TV reached out to the City of Ogden about the property. They provided a statement which said, in part:

“Ogden City required the owner to submit a geotechnical report showing how the foundation of the home would be properly supported… That report concluded that there was a possibility of settlement in excess of normal as the fill settled over time, but there was no indication that significant damage to the home was likely… The building plans provided to Ogden City when the permit was issued did not include any information or details about landscaping or retaining walls associated with the back yard.”

“We did our due diligence and you know, now we’re here,” Kassie added.

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Fearing for their safety, the family moved out in October 2016.

After their insurance claim was denied, the Thurgoods sued the builder and the construction company that built their home: Mike Schultz Construction and Castle Creek Homes.

“Ultimately, that lawsuit was settled and I’m, I can’t talk about the specifics,” Schultz told KSL-TV.

Both the Thurgoods and Castle Creek Homes signed non-disclosure agreements.

Regardless, Schultz maintains that his company was not to blame.

“We didn’t hire that contractor that did the retaining wall,” he said, but “when attorneys get involved, they like to go after everybody.”

“I didn’t want to settle,” Schultz continued. “I was confident in our position and willing to roll the dice at court, but when insurance companies get involved, I don’t – I don’t get to make that decision.”

The Thurgood’s legal complaint alleged hundreds of thousands of dollars in damages.

After significant repairs, the family has moved back into their home.

Construction issues like the Thurgood’s were already happening when state law was stricter about licensing requirements. As more contractors flood the market to feed Utah’s building boom, only time will tell how that impacts construction.

“There’s nothing wrong with competition, but when it’s competition that has no knowledge of what they’re really doing, that’s bad for business and it’s ultimately bad for the consumer,” said McBride.

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