Builders and Contractors Exchange
Weekly Bulletin: 31 Jan 2005
The Virginia Construction Fraud Statute
By: David Lannetti
Many contractors are not aware that there is a Construction Fraud Statute in Virginia (Virginia Code § 18.1-200.1). To be found guilty of fraud under the statute, the Commonwealth has to prove that the contractor: (1) obtained an advance of money from another, (2) possessed a fraudulent intent at the time the advance was obtained, (3) made a promise to perform construction or improvements involving real property, (4) failed to perform the promise, and (5) failed to return the advance within fifteen days of a request, sent by certified mail to the contractor's last known address (or the contractor's address as listed in the contract), to do so.
Allegations of such fraud normally occur when a contractor promises to perform construction, obtains a down payment (or full payment) from the owner prior to commencing the construction work, and then never starts the job. However, a finding of construction fraud also can occur after a builder or contractor begins to perform the contract work, provided that there is unfinished work that already was paid for. Additionally, poor quality workmanship can constitute "a failure to perform" within the meaning of the statute. Further, a payment received by a contractor that is, in part, an "advance" for work yet to be performed-and such work never is performed-can qualify as an advance for purposes of the statute. Finally, fraudulent intent in the context of the statute is examined at the time the contractor procured the advance from the owners, and not when the parties entered into the contract.
Construction fraud is punishable as a crime of larceny, and assuming the fraud involves more than $200, a guilty contractor could face up to 20 years in jail and/or a fine of up to $2,500. It is always important to understand your potential liability and to protect yourself accordingly.
Questions?
If you have any questions about this article or any other related matters, please contact:
This article is meant to bring awareness to this topic and is not intended to be used as legal advice.