Buyer Beware: Repair/Renovation Contracts and the PA Home Improvement Consumer Protection Act

With housing costs through the roof, it is not surprising that many people are choosing to make repairs and renovations rather than moving to larger or newer homes.

In Pennsylvania, the Home Improvement Consumer Protection Act governs the requirements for the contract governing home repairs, and it also provides definitions and explanations so that both licensed Home Improvement Contractors and consumers can understand the process. The Attorney General has also created a brochure and a separate website of resources so that homeowners can better understand their rights as consumers.

As a brief summary, for a contract for home improvement services $500 or more to be valid, there must be a written contract prepared by a registered contractor, and it must include:

• Home Improvement Contractor registration number;

• Signatures of the homeowner or their representative and a representative of the contractor;

• The entire agreement between the homeowner and contractor, including copies of all required notices;

• Transaction date;

• Contact information of contractor (not a PO box);

• Approximate starting date and completion date;

• Description of work to be performed, materials to be used, and specifications that cannot be changed without a written change order signed by both parties;

• Total sales prices or includes time/materials provision providing an estimate and description of time/materials and a statement that the time and materials may not exceed 10% above the initial cost estimate;

• Specified down payment and advanced costs, with cost of special order materials;

• Identifying information for all subcontractors known at the date of signing the contract;

• Agreement to maintain at least $50,000 each in personal injury and property damage liability insurance, with actual amount of insurance coverage specified ; and

• 3-Day Right of rescission pursuant to the Unfair Trade Practices and Consumer Protection Law if the project is anything other than emergency work.

Prohibited Contract Provisions that can render the contract Void by the homeowner:

• Hold harmless clause;

• Waiver of mandatory code requirements;

• Confession of judgment clause;

• Waiver of right to a jury trial (although an arbitration clause may be permitted if it complies with the HICPA and is signed by both parties to indicate their assent to be bound);

• Assignment of, or order for, payment of wages or other compensation;

• Provision that the homeowner agrees not to assert any claim or defense arising from the contract;

• Provision that contractor shall be awarded attorney fees and costs;

• Clause relieving contractor from liability for acts of contractor or their agents in collection of payments or repossession of goods;

• Waiver of any rights under the HICPA; or

• Automatic renewal or recurrence of any provisions of the agreement, unless a clear opt-out procedure and notice provisions are set forth in compliance with the HICPA.

If the contract is voided for any of the above, reasonable value of services may still be owed to the contractor, subject to court analysis.

Home Improvement Fraud is defined and explained in detail in the HICPA, generally relating to:

• Making a false or misleading statement made to encourage someone to enter into any written or oral agreement for home improvement services, for provision of home improvement materials, or to justify an increase in the previously agreed-upon price;

• Damages to a person’s property with the intent to solicit them into an agreement for performing home improvement services or materials;

• Misrepresentation as a government or public utility employee or agent with the intent to cause someone to enter into an agreement for home improvement services or materials;

• Misrepresentation of items as special order materials or misrepresentation of the cost of the special order material;

• Alteration of a home improvement agreement, mortgage, promissory note, or other document without the consent of the consumer; or

• Direct or indirect publication of false or deceptive advertisement in violation of Pennsylvania law.

There are numerous other requirements and described violations set forth in the HICPA that include failure to perform the project without justification and deviation from plans or specifications without a written change order signed by the parties. Further, there are enumerated violations related to deposits in excess of 1/3 of the contract price plus specified special order materials designated in the contract, improper payment requirements, and improper or deceptive financing practices.

A violation of the HICPA is specifically deemed a violation of the Unfair Trade Practices and Consumer Protection Law, which may provide a homeowner the right to recover up to three times the amount they have spent in addition to counsel fees.

Rather than attempting to try to recover for home improvement contractor fraud, it is much easier to avoid the headache by reviewing the contract in detail, confirming that the contractor is properly registered with the Pennsylvania Attorney General as a home improvement contractor, performing a public records and judgment search, checking online reviews regarding consumer complaints, and possibly emailing the Attorney General to request information regarding the contractor you are considering working with.

If you have been the victim of home improvement contractor fraud, you may want to discuss your rights and potential remedies with an attorney in your area who can evaluate your claim and make recommendations.