What Happens If the Roofing Company I Hired Goes Out of Business?

Are you starting to wonder if your roofer is still in business or if they ever were legit to begin with? Have they stopped answering your calls or suddenly promised a “too good to be true” deal that just feels off?

Unfortunately, you’re not alone. Roofing is one of the most volatile industries in Seattle, and many roofing companies shut down within their first few years. That leaves homeowners stuck with unfinished work, lost money, or even unexpected liens against their property.

RoofSmart has repaired and replaced thousands of roofs in the 15 years that we’ve been in business. We’ve seen many companies start up and go out of business during that time, leaving customers in the process of getting their roof done completely out of luck.

In this article, we’ll walk you through the most common signs that a roofing company is going out of business and what you can do to protect yourself before and after hiring a contractor.

Is it common for roofing companies to go out of business?

Roofing is a tough industry. Most roofing companies go out of business in their first 5 years (and most of those don’t even make it past the third year). 

There are many reasons why so many roofing companies fail, but it’s mainly an issue of lack of experience. New roofers don’t always know how much to charge to realistically stay afloat, and they might not even be experienced at roofing. 

In Washington State, pretty much anyone can legally become a roofing contractor because you are not required to prove that you have any roofing experience. So, theoretically, anyone can choose to start up a roofing company.

What are the warning signs that a roofing company is going out of business?

If you’re concerned that the roofing company you’ve hired might be going out of business, there are some indicators. 

First, you can check out the Washington State Department of Labor and Industries Verify tool that allows you to see the roofing company’s public L&I Records. Here’s what you can check for on this site to see if the roofing company might be going out of business:

• Unpaid Workers' Comp: Each company has its workers’ compensation information displayed on its page. Not having updated information about workers’ comp is a primary red flag because it's a mandatory fee to operate legally. If the info isn’t updated, it could mean that they’re behind on payments or have other issues preventing them from being in good standing. For example, let’s take a look at this roofing company that we believe is going out of business: 

Their status is inconclusive and states that an incomplete premium report was received. This can indicate that there is an issue with payments. Not paying workers’ comp means that their crews are working without insurance. 

• Bond Claims: if there are claims against their bond, that means that they have suppliers are not paying. Or they have customers who have filed complaints due to the roofer’s workmanship. For example, this roofing company has had two fairly recent lawsuits against its bond: 

• Workplace Safety Violations: It's not unusual for a contractor of any size to have fines for workplace safety violations because if you're doing 10 jobs a week, the odds that every single worker is always doing everything by the book, safety-wise, is pretty small. But if a company has hundreds of thousands of dollars in fines, that’s a big hit. It’s especially bad for a smaller roofing company that doesn’t have the margins to pay for such a hefty fine. For example, this roofing company has 5 current fines that total $1,039,908 altogether: 

So if you've got a roofer that owes half a million dollars or more in fines and they're not paying their bills, it’s pretty easy to put the pieces together and see that they’re headed towards going out of business. 

Other red flags that you can look out for include:

• Prices that are too good to be true: A company with pricing that’s way lower than everyone else can be a sign of desperation for cash flow. They’re hoping that they can get any job at all to help them stay afloat. 
• Immediate availability: If you’re talking with a roofer and they tell you they can get you on the schedule immediately for a full repair, this shows you that no one else is booking work with them. It’s a good idea to pause and consider why their schedule is so empty when roofers (especially quality ones) typically have a pretty steady flow of jobs. 

What happens if my roofing company goes out of business after I give them a down payment?

What happens when a roofing company goes out of business? Well, they continue not to pay bills, but they still sell work and collect deposits.

If they're not paying the government, the government has the right to levy their bank account. It doesn't matter if it's customer funds or not. Once it's in the bank account, it's fair game. 

These are the financial risks you might face if you hire a roofer that’s going out of business:

• You lose your deposits: So if they get their accounts seized, and the money you paid them for your roof was in there, you're just going to lose your money (no matter if the work was actually done on your roof or not). 
• You might face property liens: Even if your roofer has done the work and you pay them, there's no guarantee they paid their supplier. And if they didn't pay the supplier, under state law, the supplier can lien you. They can attach a lien to your property for their unpaid bills. Also, if they used a subcontractor or employees and didn't pay them, those employees or subcontractors can put a lien on your home.

In this situation, there's no protection for you. You can make a claim against the bond, but, well, there are more than likely already people ahead of you doing the same thing. That’s why it’s crucial that you hire a roofer who is reliable and not at risk of going out of business. 

How do I avoid working with a company that is going out of business?

If you're seeing signs that your roofing company might be struggling (or worse, on the brink of going under), it's worth asking how long they’ve actually been around. Many of the risks we covered, like lost deposits, property liens, or unfinished projects, happen because the company didn’t have the experience or financial stability to stay in business.

A roofer with a long, proven track record is more likely to have the systems, staffing, and reputation to back up their promises. But is time in business the only thing that matters when choosing a roofing contractor?

Read our article “Does It Matter How Long My Roofer Has Been in Business?” to get a clearer picture of why a roofer’s longevity matters (and what red flags to watch out for).