Monday, March 23, 2009

Home Improvement Consumer Protection Act

On July 1, 2009 the newly enacted Home Improvement Consumer Protection Act (HICPA) will take effect. This legislation is generally intended to protect consumers from dishonest contractors by establishing statewide registration requirements for home improvement contractors. Under HICPA, contractors will be required register with the Attorney General’s Bureau of Consumer Protection. Registered contractors are required to maintain a minimum amount of insurance coverage. Furthermore, the contractors’ contracts must contain specific important information, geared to protecting the rights of consumers. Extensive requirements are set forth under the new law.

What is HICPA?

Pennsylvania has joined NY, NJ, TX, FL, CA, and other states in implementing severe restrictions on construction contracts for home improvement work.
Senate Bill 100 of 2007 Session, PN 2484 was signed into law on October 17, 2008. Governor Ed Rendell signed into law sweeping changes which will forever affect the way contractors in Pennsylvania conduct business. The new law is aimed at protecting homeowners and the elderly from the acts of unscrupulous contractors. It also covers contractors who are registered with other states but do business in Pennsylvania. The penalties for violating the new law are very severe. HICPA only covers work on existing homes. It specifically excludes new home construction.

Are all contractors required to register under HICPA?
No, under HICPA, contractors who performed home improvement work of a total of less than $5,000 during the previous taxable year are not required to register. Also, contractors are exclusively involved in the construction of a new home are not required to register. HICPA applies to any person who owns and operates a home improvement business or who undertakes, or agrees to perform any work performed on a private residence.

Under HICPA, a contractor includes, but is not limited to:
· HVAC
· Swimming pool installers
· Driveway installers/resealers
· Concrete & masonry contractors
· Carpet and flooring installers
· Siding installers
· Certain landscapers
· Roofers
· Insulation installers
· Solar energy system contractors
· Security systems installers
· Fencing installers
· Painters
· Door and window installers (including storm windows and awnings)
· Waterproofing contractors
· Subcontractors or independent contractors who have contracted with a home improvement retailer
· And just about everyone else that works in residential properties

What types of information must contractors disclose when filing their application?
An applicant must provide names, home addresses, telephone numbers, driver’s license numbers, social security numbers, and all prior business names, home addresses of the home improvement business operated by the individual or each partner, officer, manager, etc.
HICPA also requires each applicant to provide a statement which lists whether the individual or the company has ever been convicted of a criminal offense relating to a home improvement transaction, fraud, theft, deception, or fraudulent business practices. Furthermore, each applicant must disclose any final civil judgments entered against it relating to a home improvement transaction in the last 10 years, or whether it has ever filed for bankruptcy. HICPA also requires an applicant to disclose whether a certificate or similar license issued by another state or township was revoked or suspended by a court. Applicants must also inform the Bureau whether they are registered in another state, and if any disciplinary action has occurred in that state.

What if contractors do not comply with the new law by July 1, 2009?
HICPA further establishes a new criminal offense identified as “home improvement fraud”, which will be enforceable by the Attorney General’s office and county District Attorneys. Any violation of the Act by a home improvement contractor will also constitute a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

How do I know that I am dealing with a registered contractor?
The new law does not require contractors to show copies of their registration. However, contractors must include their registration number in their advertisements, contracts, estimates, and proposals. No person shall hold himself out as a contractor or shall a person perform any home improvement without first registering with the Bureau. The Bureau shall maintain a toll-free number from which a caller can obtain information as to whether a contractor is registered.

How long are registrations valid?
Home improvement contractor registrations are valid for two years, and must be renewed biennially.

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

· The days of short one or two page contracts have ended. Contracts with a total price of more than $500 must comply with HICPA. The agreement has to include the usual contract elements and,
o The Attorney General’s phone number- 800-441-2555
o The contractor’s street address (not a P.O. Box)
o Specific start and completion dates
o A description of the materials to be used and a set of specifications
o The contractor’s property damage and liability insurance limits
o Three business day right to rescission
o List of subcontractors, each with phone number and street address 9no P.O. Boxes)
o If disputes are to be settled by arbitration, the arbitration clause has to be in 12-point bold caps.
o Home improvement contracts are not valid if they include any voidable clauses. These include hold harmless clauses and terms that award attorney fees to the contractor.


· If the contract price exceeds $1,000, the down payment cannot exceed 1/3 of the total price plus the cost of any special order materials.
· Contractors must carry insurance covering personal injury and property damage in the amount of not less than $50,000 for each coverage.

What is not covered under HICPA?
· Estimates can be part of the contract. Contractors may include estimate details as part of the contract, no matter what appears in the plans and specs. This is completely fair and perfectly legal under HICPA.
· Nothing in HICPA requires contractors to absorb the loss when something doesn’t go as planned. Nearly all contracts for large construction projects include a differing site conditions clause. If it turns out that something isn’t what the owner presented or what the contractor reasonably expect, a different site conditions clause provides extra pay for extra work. The contractor is protected if costs escalate due to surprises.
· HICPA is silent on warranties. Contractors are free to follow his/her conscience when drafting home improvement contracts.

1 comment:

  1. Your blog is very impressive and interesting. After going through this now I got more information about the HICPA. Now I can made the changes in my home easily.
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