State Contractor Prompt Pay Acts Being Deployed On Rehabs

Reports Coming In That Payment Issues Are Looming On The Rehab And Restoration Sector

There has been a nefarious trend lately of Order Mills, whom receive work from Prime Vendors, stretching out payment dates with all kinds of exotic justifications. Time and again, Order Mills have been the causation of problems. Whether it is stealing in upwards of 65 cents on every dollar for doing nothing or simply stealing Labor’s hard earned money, Order Mills are the root cause of our Industry’s problems. Most recently, Randy Balamut, of RSB Field Services took people down a road that went like this,

Family member has cancer; bank placed hold on account due to fraud of a third party; and the proverbial Second Coming of Christ.

When Balamut realized that the pitchforks were coming, he shifted gears by going after the very people he owed money to. In countless social media postings, it was made clear that if you are owed money and make it publicly known, you will never get paid. And when those threats went unheeded, he simply fired up a new company called Ball Field Services located at the same address as RSB Field Services. Wait, though, it gets even better! Randy Balamut’s address is a UPS Store! I bullshit you not! I mean Balamut is running multiple entities out of a mailbox provided inside of the UPS Office.

If you zoom in on the photo, you will see the B111 identifier for the UPS Store address located at 15029 N. Thompson Peak Pkwy. #B111-532 Scottsdale, AZ 85260. That is one in the same with respect to RSB Field Services as well as Ball Field Services. And precisely how it is that not a single National Association of Mortgage Field Services (NAMFS) member nor their background check providers ever caught the fact that Balamut’s office was simply a mail drop is beyond me.

It comes as no surprise that NAMFS members are, again, part of the problem and not the solution. NAMFS Executive Director, Eric Miller, pockets over ONE HUNDRED AND TWENTY THOUSAND DOLLARS every year as his salary. This is in addition to the junkets NAMFS pays for, on his behalf, to jet set around the US and attend high dollar conferences. Miller’s salary is close to eclipsing EIGHTY PERCENT of all NAMFS member dues. And most recently NAMFS has violated federal law by refusing to provide a copy of the federal non profit tax returns.

Birds of the same feather I suppose. While Balamut’s case presents a classic example of fraud, dozens of other Order Mills are executing a more sinister style of the bait and switch fraud. Timelines for pay are not simply arbitrary creations. They are created by contract and are thus cognizable under many State’s Prompt Pay Act as well as those State’s Mechanic’s Lien statutes. And as opposed to the mortgage field services industry, many of these issues are now appearing in the New Frontier of Private Equity Investors whom are hiring Labor via Order Mills.

How serious are the Prompt Pay Acts? Well, Foreclosurepedia relies upon Levelset for guidance. Many of you may remember them under their old name ZLien. Scott Wolfe and his Team have revolutionized the ability pertaining to enforcement of contractually guaranteed payments. And make no mistake whether you — as we recommend — utilize Levelset’s services or their free forms and information, if you are performing upon contracts over $1,000 your first stop needs to be with them. And in full disclosure, we receive ZERO compensation from Levelset. Levelset is simply the best resource out there, bar none!

We are starting to see a trend, within the Private Equity space, of Order Mills coming in and snatching over half of the money on typical rehabs. And while this is egregious enough, the fact of the matter is that now they are slow walking the money they owe. Foreclosurepedia always has and always will be a Friend of Labor. And no matter whom the offenders are nor how well connected they may be, Foreclosurepedia has always proverbially taken them out at their knee caps. This latest round of fraud, though, is most nefarious. As opposed to the book of inspections or grass cuts, Order Mills have now begun ripping off Labor hired to perform rehab and restoration upon hedge fund assets. The only difference is that in these cases, as opposed to the typical field service technician work, Labor has several weapons they deploy to ensure payment.

Private equity groups invest billions of dollars each year in the purchasing of distressed asset portfolios. And these same groups rely upon an army of extremely skilled professionals to perform rehab and restoration; insurance claims; and tenant occupied maintenance. These groups are not trying to increase regulatory scrutiny upon themselves and the last thing they want are liened properties which they have to report back to their investors about.

Slow payments are currently the top complaint by Labor today. And in a market where it is almost impossible to find skilled contractors whom are licensed in the construction industry, the Order Mills are creating an enormous problem for legitimate investors. Here is what Forbes had to say,

When the recession hit in 2008, 600,000 workers left construction jobs never to return. Today workers avoid construction jobs, perceiving them as dangerous, difficult, and dirty. Millennials of all income backgrounds entering the workforce would prefer to go to a four-year college or take on jobs in retail or transportation. In the US alone, there are 434,000 vacant construction jobs as of April 2019, according to the US Labor Bureau. It’s important to note that this isn’t just an existential threat. Over the past few months, I’ve interviewed several construction managers who say that the shortage is felt on site daily. Contractors have been forced to pay subcontractors higher wages, often waiting for talent to become available – ultimately slowing down jobs across the country. Many attribute the 5.86% construction cost increase in 2018, cited by the Turner Building Cost Index, to this labor shortage.

The tried and true method of financial terrorism, in the form of illegal chargebacks, deployed by National Association of Mortgage Field Services (NAMFS) members to pad their bottom line, is simply not viable in the rehab and tenant occupied spaces hedge funds are in. Clear title is the name of the game — it is the lifeblood of the Industry, in fact. And whether it be that Order Mills are moving from the preservation space into the Wild Wild West of rehabs and tenant occupied spaces or simply that these new Order Mills have no idea how to perform basic accounting is immaterial. And those whom might believe that the fraud Foreclosurepedia is tracking is a mere aberration, the reality is it is calculated and nothing more glamorous than a common shakedown of those whom can least afford it. It isn’t all bad, though,

Safeguard Properties (SGP) is a firm I have long had consternation with. The reality is that its now deceased founder, Robert Klein, pioneered the rehab and restoration of distressed assets. In fact, Klein — whether good or bad — spearheaded the Slavic Village revitalization of Cleveland utilizing never before seen techniques. Bringing a wide array of funding sources, Klein joined at the hip political forces, financial institutions, and leveraged both the City of Cleveland and the State of Ohio to work, in tandem, on the Slavic Village and other projects. Klein also worked, hand-in-hand, with the Cuyahoga County Land Bank.

A dichotomy of tales is what we have. Northsight Management is another Order Mill brought in to push out assets on behalf of Hudson Homes. Depending upon which version of events one wants to hear, Northsight is either the most incompetent or most devious of all. On all contracts there is generally a provision for rewarding projects brought in early and penalizing those brought in late. Northsight would appear to have a calculated scheme wherein no matter how early Labor might be able to bring a project in, the Vendor Managers have incentives to ensure that the projects are not closed out in a timely fashion. Moreover, though, one of the most important aspects of a project, other than the draw process, is the change order. With respect to Northsight, Foreclosurepedia is aware of change orders requiring months to approve. When an average project must be completed in 30 days or less, the stymieing of the change order process not only impacts Labor, but harms the investor whom, in this case, is Hudson Homes. Make no mistake, whatsoever, that the  long-running monetization of fraud schemes is playing — or should we say paying — out daily at Northsight.

It isn’t simply that Northsight’s calculated manner of allowing no access to Labor’s accounting is a recipe for fraud, Northsight purposefully does not verify if their Order Mills are paying Labor. We are currently monitoring five such cases dealing with tens of thousands of dollars owed.

So, what is the solution? Well, I suggest bringing back public hangings in the town square. And since that will not be legalized in the near future, the next best thing is to begin bringing liens and Prompt Pay Act suits. Additionally, when firms are hiring Labor in other states, why not take the time and see if they are even legal to do business in that state. Each State’s Department of Revenue and their Secretaries of State all have a keen interest in firms doing business in their jurisdictions without legal licensing.

It took over a decade, but the preservation industry is, by in large, far better — other than pricing — than it was. The key to bringing change in the New Frontier of rehab and tenant occupied is to ACT NOW! Act now, act loud, and act in concert.

The way that Labor has been addressing their grievances has been to join the International Association of Field Service Technicians (IAFST). The IAFST has successfully negotiated both contracts and payments owed on behalf of Labor since 2016. Time and again, the IAFST, in conjunction with Foreclosurepedia, has been the last line of defense against predatory Order Mills. If you are having problems getting paid and are an IAFST member, we strongly encourage you reaching out to them today!

In closing, know whom you are working for. A simple DUNS check of the firm to verify financial solvency is always a good beginning. Verify their business license in their home state as well as the state(s) they are operating in. Obviously, run their name through Foreclosurepedia’s Search Bar. And finally, do some due diligence of the company and its ownership in social media.

The Kegler Brown law firm has a great piece which breaks down Public and Private Prompt Pay Acts for all 50 states below,

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