San Francisco, CA — Homeowners in the Bay Area who lost large sums of money to a contractor building accessory dwelling units (ADUs) have discovered the inadequacy of California’s financial safeguards meant to protect consumers. Numerous families shared that they had prepaid Anchored Tiny Homes, a local contractor, for ADUs that were not completed. Collectively, these families claim they have lost over $5 million.
The situation has revealed a significant gap between the perceived and actual protection the state-required contractor’s bond provides. In California, all contractors must secure a bond meant to offer financial recourse to consumers if a contractor fails to complete work. However, the current bond requirement stands at only $25,000— a figure starkly disproportionate to the financial dealings and commitments of larger building projects common in today’s market.
Many homeowners, like Katie Lucas from San Leandro, expressed feelings of betrayal. Lucas, surveyed the unfinished structure in her backyard, noting, “I feel scammed completely.” Meanwhile, buyer Steve Sonza from Rohnert Park bluntly stated, “They got me,” reflecting the disillusionment felt by many. The problem escalated when the company’s CEO described the business as a “failed, mismanaged growing business,” and revealed plans to file for bankruptcy.
Critics argue that the $25,000 bond is woefully inadequate when spread amongst the hundreds of affected customers. Alan Miller, another affected homeowner, pointed out the absurdity of dividing the small bond among numerous claims, calling the financial protection “a pittance.”
The situation is exacerbated by California’s one-size-fits-all approach to bonding requirements, which does not scale with the scope of a contractor’s projects. Whether a contractor plans to take on hundreds of large projects or a single small job, the bond amount remains static at $25,000. This blanket requirement fails to reflect the financial weight and potential impact of larger builders’ obligations.
The impact of these regulatory shortcomings could result in homeowners receiving as little as $62.50 each, a situation Sonza criticized as “insane.” He added, “Why are we allowing that?” echoing a broader call for legislative reform. Other states like Nevada have adapted their bonding requirements to reflect the financial responsibilities of contractors more accurately, with bonds reaching up to half a million dollars based on projected financial responsibilities.
In light of the scandal, the former COO of Anchored Tiny Homes, Chris Pace, advocated for a proportional increase in bond amounts relative to the size and number of a company’s projects. He likened it to insurance policies that adjust based on the value and risk of the insured item, stating, “If I buy a new car, my insurance goes up. If you add 500 more projects, shouldn’t your bond go up?”
As for legislative responses, California Assemblymember Marc Berman voiced his concern and intention to seek changes to prevent similar scenarios. Berman noted the distressing nature of the victims’ stories and his plan to explore potential legislative solutions.
The Contractors State License Board has also expressed openness to reconsidering bond requirements, which may be addressed in an upcoming meeting planned for October. This potential regulatory change could provide more substantial financial protection for consumers, aligning bond requirements more closely with the realities of modern contracting practices.