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Fraudulent construction firms running rampant?

28 Feb 2022

  • Lawyer warns of unlicensed firms duping customers with skewed agreements
By Dinitha Rathnayake There has been an increase in the number of fraudulent, unlicensed construction firms operating in the home building sector, The Morning learns. Many of these construction companies use social media to promote their business while misleading their customers. Speaking to The Morning, University of Colombo Sripalee Campus Rector and Attorney-at-law Dr. Prathiba Mahanamahewa said this is a trending issue at the moment. “I received many complaints related to construction companies, where some of my clients paid the full amount of money for the relevant construction to build their dream homes. However, after receiving the money, these construction companies have not completed their work according to the agreement. This needs to be stopped,” he stated. According to Dr. Mahanamahewa, customers should ideally conduct a background investigation before they sign an agreement with construction companies. Construction companies who are involved in projects worth above Rs. 10 million have to be registered under the Institute for Construction Training and Development (ICTAD), which is presently the Construction Industry Development Authority (CIDA). However, some small-scale companies in the field do not have this registration. “If the company is not registered under the CIDA, it is better to log a complaint with the evidence you have, such as the contract, payment receipts, etc. If not, most of the cases go under civil law, and not in favour of the customer,” he said.  Further, he said that customers could file a case under breach of agreement; however, if the customer has received a bounced cheque from a construction company, it is easy to file a case under criminal law, since it constitutes fraud. Dr. Mahanamahewa also stressed that it is essential to have a monitoring system under the State Ministry of Rural Housing and Construction and Building Materials Industries Promotion. “At least there should be a place to investigate complaints, and establishing a construction ombudsman is essential,” he urged. A customer who had signed an agreement with such a fraudulent company noted that these firms attract customers by offering low prices. “If you can build a house for a low cost, that’s all you can ask for. We fell for the price they offered. These construction companies tend to sign agreements with lawyers as witnesses,” they stated. “Construction work of the first few days was interestingly quick; however, afterwards most of the customers will notice delays in construction.” Since the agreements to be signed with these construction companies are drafted in favour of the company in question, most of the customers are left unable to take further steps against them. Some customers have paid the full amount for construction after procuring loan facilities from banks, while some have paid half the required sum for construction. Most of these construction companies use a third-party, where they hire small/medium contractors to do the job. A CIDA official said that if a customer has the proper documents to prove their case, the authority would be able to intervene and solve the issue.  


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