Changes to the Law
Our Pittsburgh lawyers handle commercial and residential construction law disputes. This article focuses on the changes to the law governing home improvement contracts.
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Effective July 1, 2009, the Home Improvement and Consumer Protection Act, HICPA, made major changes to the relationship between home owners and contractors.
Why The Change?
Home improvement contractor are known for engaging in breach of contract of numerous types: they will fail to start a job on time, or fail to finish job, or cause damage during the course of a job, or seek payment for alleged “extras” that are not documented clearly in writing. Each such scenario, traditionally, placed the home owner in quandary because a lawsuit against a contractor is often more trouble than it is worth, depending on the contractor’s ability to pay a judgment. Many corrupt contractors have few assets and rely on money received from one job to finish work on another job (stealing from Peter to pay Paul until the pyramid scheme eventually fails), thus leaving no “pot of gold” for aggrieved home owners to execute against to satisfy a judgment.
The Solution in Pennsylvania
The Pennsylvania legislature passed a significant law that governs all “home improvement contracts” (defined below) entered into on or after July 1, 2009. Contractors face stiff penalties, including possible jail time for fraud, plus the risk of not getting paid for work performed, if a home improvement contract fails to reflect compliance with HICPA. For example, a homeowner need not pay the balanced owed on the contractor or pay for change orders if the same are not in writing. There are other requirements. Let’s start at the beginning. Here is the text of the new law. Let us break it down for you. To fall under the Act, the work must qualify as a “home improvement.”
Home Improvements
In order to qualify as a home improvement, the work must be performed on a private residence or land adjacent to a private residence. A private residence is a single family residence or, at most, a multi-family dwelling of not more than two units, such as a duplex. Condominiums and co-ops also fit into the definition of a private residence. In addition to the private residence requirement, the total price must be more than $500. Work that is done to the residence itself, such as repairs, renovations, and alterations will generally qualify as a home improvement. Installation or improvement to driveways, swimming pools and pool houses, garages, security systems, fences, and sheds are also among the types of work that qualify as a home improvement.
Types of Work. Certain work is specifically excluded from fitting the definition of a home improvement, and such work would not be covered by the Act. The sale of a new home is excluded, as is the conversion of an existing commercial structure into residential or non-commercial structures. Any work that is performed without compensation falls outside of a home improvement. Work performed by a landscaper certified by the Department of Agriculture is not included as a home improvement, subject to certain exceptions. The sale of appliances is not a home improvement and neither is the sale of services for commercial or business use if the service takes place somewhere other than a private residence. Certain emergency work is also an exception to a home improvement.
Note that some corrupt contractors will mischaracterize certain contracts as involving “emergency” even where no emergency exists. Such conduct should be confronted in the courts and be reported to the Attorney General.
Home Improvement Contracts
Requisite Writings. The Act requires home improvement contracts to contain certain information to be valid and enforceable against an owner. For purposes of the Act, an owner includes the actual owner of a private residence; any person authorized by an owner to act on the owner’s behalf to order, contract for, or purchase a home improvement; and any person entitled to the performance of the work of a contractor pursuant to a home improvement contract. Although an owner does not need to reside in the residence, a person who owns three or more private residences in Pennsylvania won’t be considered an owner except for the person’s primary residence and any private residences the person uses for personal recreational activities.
Required Insurance. Home Improvement contractors are required to carry $50,000 of liability insurance. This typically covers resulting damage (such as a paint can tipped over, ruining carpet), but not costs incurred for incomplete or work that needs to be re-done.
The contract must be in writing and include the contractor’s registration number. Furthermore, the contract must include the following aspects: date of the transaction; contractor’s name, physical address, and telephone number; approximate starting and completion dates; description of the work and materials to be used; total sales price; amount of any down payment; subcontractors’ names, physical addresses, and telephone numbers; and insurance coverage. A toll-free number to the Bureau of Consumer Protection where consumers can verify the contractor’s information must be provided on the contract. Additionally, a notice must be provided that the individual signing the contract is permitted to rescind without penalty within three days of the date of the signing.
Remedies
Remedies for the Home Owner. The HICPA provides that “[a] violation of any of the provisions of this act shall be deemed a violation of the act (or breach of contract) of December 17, 1968 (P.L. 1224, No. 387), known as the Unfair Trade Practices and Consumer Protection Law. Nothing in this act shall preclude an owner from exercising any right provided under the Unfair Trade Practices and Consumer Protection Law.” This means that a violation could subject a contractor to significant liability. For example, the Unfair Trade Practices and Consumer Protection Law (hereinafter “UTPCPL”) allows a recovery for treble damages (up to three times the amount of actual damages) or $100 per violation, whichever is greater. Another remedy allowed by the UTPCPL is reasonable attorney’s fees, which are awarded in addition to any other award, and which may be substantial.
Criminal Penalties. The Act expands the definition of “fraud” as it relates to home improvement. For example, it is now a third degree felony for contractors to make certain misrepresentations in connection with the performance of a job.
The Contractor’s Right to Recovery Money. In certain instances, the Act can be abused because, technically, if a contractor does not comply with certain portions of the Act (by, for example, proving a written notice of rescission), the contractor may not make a claim for breach of contract for amounts owed to the contractor. In that instance, the contractor is not entitled to the contract price for his services. Rather, he is limited to recovery in quantum meruit (or the reasonable value of services provided), but only if a court determines that it would be inequitable to deny such recovery. In order to recover, a contractor’s contract must conform to the above stated requirements. A contractor cannot recover for unjust enrichment (a remedy whereby the owner would pay the contractor for the increase in value of the property) under the HICPA, a remedy which was traditionally afforded to a contractor.
The Superior Court determined, however, that the HICPA did not apply to oral contracts and that the contractor could proceed on a quantum meruit theory, as denying recovery to the contractor would have led to an absurd result, namely, the owner not having to pay even if the contractor performed perfectly. Durst v. Milroy General Contracting, Inc., 52 A.3d 357 (Pa. Super 2012).
Our Pittsburgh law firm represents home owners, GC’s and subcontractors with regard to all types of home improvement matters. We see these issues from all different sides and angles. Call any time for a free consultation.
In the interim, nothing in this article is meant to be an all-encompassing description of the HICPA. For example, there are many clauses which could be included in a contract that would render the contract voidable (not enforceable at the option of the owner). Any specific questions should be directed to an attorney. Call our Pittsburgh Lawyers any time.
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