The Pennsylvania Legislature several years ago passed a law called the Home Improvement Consumer Protection Act (the “Act” or the “HICPA”). The purpose of the law is to establish rules and govern conduct of home improvement contractors who primarily work with residential customers.
This article is a brief overview. However, if any of this is new to you, then you need to talk with a lawyer sooner rather than later to ensure you are protected.
The reality of the law is that home improvement contractors must follow a number of administrative requirements or put their entire business at risk.
Contractors who do no understand the Act can fall into a fatal cycle of customer problems and lawsuits. In fact, if you are not absolutely sure that your contracts and your practices comply with the HICPA, you need to contact an attorney immediately for a review. A copy of the Act can be found here.
The first step for all contractors is to register with the Attorney General’s office. A link to the registration site is here. This is mandatory. If you are not registered, do so immediately.
Do not perform any work in Pennsylvania without being properly registered. If you are not incorporated, do so immediately.
The next step is to ensure that your contracts comply with the Act. The requirements range from ensuring that the contract is signed and has an estimated start and end date to a prohibition against certain types of damages. It also requires the contractor to list their registration number, the 800 number to the attorney general’s office and a statement that the contractor will maintain at least $50,000 in insurance coverage for property damage.
If you perform work under a contract that does not comply with the Act, your customer may be able to declare the agreement as “void” and you could have serious problems getting paid. You could easily be in a position where you do great work, perform as promised, and have a customer throw up roadblocks to payment because of a “technical” default of the HICPA.
Additionally, you cannot include contract clauses that allow you to collect attorney fees or that prohibit certain types of customer claims.
The Act isn’t entirely one-sided. It doesn’t apply if the customer fails to pay or if you have performed as promised. Also, the Pennsylvania Superior Court has ruled that contractors are entitled to be paid for work performed even if the contract is “voided” due to noncompliance with the HICPA requirements.
Here’s a real world example. A customer hires a contractor. The contractor gives an estimate and provides a contract that everyone signs, except, the contract doesn’t include the 1-800 number for the Pennsylvania Attorney General’s office. There are some issues between the customer and contractor, and the customer decides he doesn’t want to pay a remaining balance of $5,000, even though the contractor performed the work. The customer hires a lawyer, who says that the contract is voided and no further payment will be made. The contractor sues and says that the violation of the HICPA is of no issue, it’s a pure technicality and he is entitled to be paid for work performed on the customer’s behalf.
Under the current law — and without saying this is a certainty — I believe the contractor can be paid for the work that was completed regardless of whether the contract was missing a term required under the HICPA. Recent rulings by the Pennsylvania Superior Court suggest that the doctrine of quantum meruit, which provides a right to payment for work done in the absence of a contract, requires payment for any value conferred by a contractor to an owner.
The idea is simple. If a contractor improves property by performing $10,000 in work, and the work is good, the contractor should be paid.
The problem for the contractor under the HICPA is that he has to defend a claim based on a technicality because his contract wasn’t complete. The contractor easily could have avoided the claim if one additional line were included on the agreement.
There is no way to prevent someone from suing. However, because the HICPA does not allow for recovery of attorney fees against consumers, the only “teeth” a contractor may have is to seek sanctions against a consumer who files a frivolous law suit.
As always, the best defense is a good offense. Make sure you contracts are in compliance with the HICPA.