Pennsylvania's Home Improvement Consumer Protection Act: How Contractors Can Learn to Love It

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Pennsylvania has joined New York, Illinois, New Jersey, Texas, Florida, California and other states in micro-managing construction contracts for home improvement work.

Craftsman Book Company has released the Pennsylvania Edition of the Construction Contract Writer program to help contractors write construction contracts that comply with Pennsylvania's new home improvement laws.

Pennsylvania's Home Improvement Consumer Protection Act (HICPA, effective July 1, 2009) requires a written contract for nearly every construction task in or around a residence -- even minor repair work such as re-painting or re-roofing. If the value of work is more than $500 a written contract is required.

The agreement has to include all the usual facts plus a few items one may not expect to see in a construction contract:

  •     The attorney general's phone number -- 800-441-2555,
  • The contractor's street address -- not a P.O. Box,
  • Specific start and completion dates,
  • A description of the materials to be used and a set of specifications,
  • The contractor's property damage and liability insurance limits ($50,000 minimum),
  • A list of subcontractors, each with a phone number and street address (no P.O. Boxes).

If disputes are to be settled by arbitration, the arbitration clause has to be in 12-point bold caps and must specify (1) whether documents will be confidential and (2) whether the arbitrator's decision is final.

If the contract price exceeds $1,000, the down payment can't exceed 1/3 of the total price plus the cost of any special order materials - which have to be listed in the contract.

Time and material contracts (cost-plus agreements) are unlawful under HICPA because the contract has to show a contract price, not an hourly rate.

HICPA makes the entire contract unenforceable by the contractor if any of ten (formerly) common clauses appear in the document. The 'poisonous ten' include hold harmless clauses and terms that award attorney fees to the contractor.

Using a contract that doesn't comply with HICPA is an "unfair or deceptive act or practice" under Pennsylvania's Unfair Trade Practices and Consumer Protection Law. Even a trivial omission gives an owner the right to seek triple damages plus costs and attorney fees. If a contractor has to threaten suit or arbitration to collect, the owner's attorney is sure to scour every word in the contract looking for anything that doesn't comply with HICPA.

Obviously: Contractors beware!

But contractors need not hang up the tool belt just yet. Home improvement contracting in Pennsylvania doesn't have to be a minefield for the unwary. There are still good ways for Pennsylvania contractors to limit their risk. Below are just a few examples.

The estimate should define the job. Contractors take unnecessary risk when they guarantee completion as planned, no matter what's in their estimate. When contractors bid the plans and specs, they're agreeing to complete work as defined in those plans and specs - even if their estimate omits something essential to the job. Instead, the estimate should define the job. That's completely fair and perfectly legal under HICPA. Simply identify the estimate as part of the contract and add a few words, "The estimate defines the work required, no matter what appears in the plans and specs."

Make the owner liable for surprises on the job. Until a wall gets opened up, there's no way to be sure what's in the wall cavity. Nearly all surprises on a home improvement job will increase costs. Almost none will reduce costs. So it's prudent to include a 'differing site conditions' clause in every contract. Nothing in HICPA requires that contractors absorb the loss when something doesn't go as planned. Nearly all contracts for large construction projects include a differing site conditions clause. The U.S. version is Federal Acquisition Regulation Section 52.236-2. If it turns out that something isn't what the owner represented or what the contractor could reasonably expect, a differing site conditions clause provides extra pay for extra work. Both the owner and contractor benefit from a differing site conditions clause. The owner gets a bid based on what can be reasonably expected, not the worst case. The contractor is protected if costs escalate due to surprises.

Limit warranty claims. HICPA is also silent on warranties. That means a contractor is free to follow his conscience when drafting home improvement contracts. Pennsylvania courts imply warranties of habitability and good construction. But contracts can limit the scope or duration of warranty or disclaim those warranties entirely.

The Web site has a good selection of HICPA-compliant contracts with bias fair to contractors. The download is free and available in PDF (Adobe Acrobat), RTF (MS Word or WordPad), and CCF (Construction Contract Writer) formats.

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Robin Allyn

Gary Moselle
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