The Pennsylvania Home Improvement Consumer Protection Act: An Update

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On July 1, 2009, the Pennsylvania Home Improvement Consumer Protection Act took effect. Do not let the title deceive you; your business may fall within the breadth of this new law. Covered under the Act are contractors (1) that made more than $5,000 during the previous taxable year from home improvement contracts; (2) that contract to repair, replace, remodel, demolish, renovate, alter, or improve a private residence or the land adjacent to a private residence; and (3) for which the contract price is more than $500. Private residences include single family dwellings, two family dwellings, townhouses and condominiums. Contractors who work only on commercial construction projects, new home construction contractors and suppliers of construction materials are excluded from the requirements of this Act. Home improvement retailers having a net worth of more than $50 million and employees of that retailer are also excluded. Even if 99% of your business is commercial construction or new home construction and 1% residential improvements, this law applies to that 1% of your business. If your business falls under the scope of the Act, or if there is a possibility that your business would fall under its scope, we recommend you register with the Pennsylvania Attorney General’s Office. The cost to register is $50 every two years. Contractors may register online at www.attorneygeneral.gov/hic.aspx.

Under the Act, contractors must maintain minimum insurance coverage and use contracts that contain important information including, but not limited to, the physical address of the contractor (a post office box number alone is insufficient), the start date and completion date of the work, a description of the work being performed, consumers’ rights under the law, the toll-free telephone number of the Bureau of Consumer Protection in the Office of Attorney General for filing a complaint (1-800-441-2555) and a clause giving the consumer the right to rescind the contract within three business days. Certain provisions that have commonly been included in home improvement contracts in the past are now prohibited. These include hold harmless clauses, building code waivers, confessions of judgment, jury trial waivers, waivers of statutory legal rights and dispute provisions authorizing the award of attorney’s fees to the contractor.

Contractors that register with the Attorney General will receive a registration number that must be included with the contract and in all advertisements, estimates and proposals created by the contractor. Advertisement is broadly defined to include newspaper ads, billboards, letterhead, business cards, radio, internet and television ads and arguably includes advertisements on company vehicles. Homeowners should make certain that any home improvements are done only by a registered contractor and that the contractor’s registration number is on the contract.

Another important provision of this new law is that it precludes local governments from requiring home improvement contractors to be licensed (and pay a fee) to the local government unit. However, local governments can still mandate insurance requirements and can charge contractors a fee for “the right to do business” within the township, borough or city.

Under the Act a homeowner may bring a claim under the Unfair Trade Practices and Consumer Protection Law, which allows a court to award up to three times the actual damages sustained plus attorney fees. The Act also creates a criminal offense with the maximum charge being a felony of the second degree carrying a prison term of up to 10 years. A contractor making a false or misleading statement to induce a person over 60 years old to enter into a home improvement contract is an example of conduct that could result in the maximum charge. The penalties are intentionally severe to discourage “no show” contractors and those doing substandard work, thus benefiting legitimate contractors. According to the Attorney General, his office received 2,100 consumer complaints last year from consumers struggling with home improvement contractors.

This article was intended only to make you aware of the Act. We encourage all contractors and homeowners to review the law, which is available in its entirety at the link shown above, and to contact Reager & Adler, PC should you have any questions about your rights and obligations under the Act or if you would like us to review or prepare contracts for your business that meet the strict requirements of this Act.

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