As a home improvement contractor in Pennsylvania, it is crucial that your customer agreements comply with the Home Improvement Consumer Protection Act (HICPA). By adhering to this law, you not only protect your business but also provide transparency and security to your customers.
Established to safeguard consumers during home improvement projects, HICPA sets forth specific guidelines that contractors must follow in their agreements with customers. Failure to comply with these provisions can not only render your contract unenforceable but also give your customers the right to rescind the contract even after the work has been completed.
HICPA applies to most home improvement work at a residential dwelling, whether the work occurs inside or outside the home. Home renovations, new roofs, window replacements as well as pool projects, patios/decks, sheds and new driveways are all projects that fall within the purview of HICPA.
Here are the major provisions that must be included in your customer agreements to comply with HICPA:
1. Contractor's Information
Your customer agreement should clearly outline your business name, address (PO box doesn’t count), phone number, and Pennsylvania contractor registration number. This information establishes credibility and ensures that clients have a way to reach you. If you plan to use subcontractors on the job, their information must also be disclosed.
2. Project Details
The contract must include a detailed description of the scope of the project, including materials to be used, work to be performed, and project timelines. It should also state that changes cannot be made to the scope of work without a written change order. This prevents misunderstandings and sets clear expectations for both parties. It must also state the approximate starting date and completion date (failure to timely complete projects is a very frequent customer complaint).
3. Total Cost
Provide a breakdown of the total cost of the project, including labor, materials, taxes, and any additional fees. Transparency in pricing is essential for building trust with clients and avoiding disputes over payment.
4. Payment Schedule
Outline the payment schedule in the agreement, specifying the amount due at each stage of the project. HICPA prohibits contractors from accepting more than one-third of the total contract price as a down payment, plus the cost of any special order materials. Special order materials are any material, product or equipment that is not a stock item and must be specially ordered and produced or processed for the contractor for a specific home improvement contract.
5. Cancellation Rights
Include information on the customer's right to cancel the contract within three business days without penalty. If you fail to give this notice, the “clock” for the 3-day deadline to rescind does not start to run. Your customer can literally rescind the contract at any stage of the project and potentially be entitled to a refund of a portion or all amounts paid to date. That comes as a shock to unsuspecting contractors who have disputes with savvy homeowners.
6. Consumer Protection Information
Your contract must also include the toll-free number of the Pennsylvania Bureau of Consumer Protection; In compliance with HICPA, contractors must include a notice informing customers of their rights and responsibilities regarding mechanic's liens. This notice serves to educate clients on the potential legal implications of non-payment.
Your Job Estimate Form is not Good Enough
If you are using some form of job estimate form as your contract, you are NOT in compliance with HICPA. Any violation of HICPA constitutes a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, which provides for the potential recovery of three times the consumer’s actual damages and attorneys’ fees. The Act also creates criminal penalties for home improvement fraud, making a violation a potential felony or misdemeanor, and includes a penalty enhancement for home improvement fraud committed against persons 60 years or older.
By incorporating these key provisions into your customer agreements, you not only ensure compliance with HICPA but also demonstrate professionalism and integrity in your business practices. These are only the provisions required by HICPA. A well-drafted agreement would also include provisions relating to warranties, mechanics liens rights, dispute resolution, interest on unpaid balances, arbitration provisions, limitation of liability and other provisions. Remember, a well-drafted contract is not just a legal requirement but also a valuable tool for building positive relationships with your clients and protecting your business.
What You Cannot Include in Your Contract
HICPA also details provisions that contracts cannot include in their agreements. Clauses that waive safety or building code requirements, waive the right to a jury trial, waive of homeowner rights to assert defenses to claims relating to the contract, awards of attorneys fees in the even of default and waivers of the HICPA act are voidable by the homeowner.
If you have any questions or need assistance in reviewing your customer agreements for compliance with HICPA, don't hesitate to consult with the experienced business attorneys at Fiffik Law Group. We can provide you with a fully compliant contract for a reasonable flat fee. Ensuring that your contracts meet the legal standards set forth by HICPA is crucial for the success and reputation of your home improvement business. Stay compliant, stay protected, and keep improving homes with confidence!