A Consumer’s Guide to Pennsylvania’s Home Improvement Consumer Protection Act

This article is a continuation of our April 2009 newsletter article on HICPA. The first article outlined the Contractor’s obligations and rights and this month outlines the Consumer’s rights.

On July 1, 2009, a new consumer protection law goes into effect. Pennsylvania’s Home Improvement Consumer Protection Act (“HICPA” or the “Act”) was enacted to protect consumers from the unfair trade practices and fraudulent activities of home improvement contractors. The Act drastically alters the regulatory environment of the home improvement industry in Pennsylvania, and will entail changes in every stage of home improvement contractors’ interaction with consumers: from advertising and contracting to the completion of home improvement projects.

The provisions of the Act include both civil remedies for consumers and criminal penalties against offending home improvement contractors for violations of HICPA. Consumers who are informed about HICPA will be better able to protect themselves and preserve their rights against unscrupulous contractors.

Highlights of HICPA

HICPA creates criminal penalties for fraud and prohibits contractors from abandoning or not finishing the home improvement.

1. HICPA prohibits contractors from making false statements intended to induce a consumer to enter into an agreement or accept an increased price, and such conduct is deemed fraud under the Act.
2. HICPA also prohibits misrepresentations regarding the contractor’s identity.
3. It is considered fraud if a contractor receives advance payments and then fails to return those payments when he or she inexcusably fails to perform the home improvement services or provide the agreed upon materials.
4. A consumer can demand repayment of the amount paid for home improvement services if 45 days have passed since the contractual start date and no portion of the contract has been substantially performed.
5. The Act prohibits contractors from abandoning or failing to perform without justification a home improvement contract that they have undertaken.
6. Additionally, the Act states that a violation of HICPA constitutes a violation of the Unfair Trade Practices and Consumer Protection Law. In certain circumstances, this can result in a contractor being liable for triple the amount of any damages, as well as attorneys’ fees.

HICPA requires affected contractors to register with the Office of the Attorney General. Individuals and businesses that meet the HICPA definition of “contractors” are required to register with the Pennsylvania Office of the Attorney General. Contractors who do not register with the Office of the Attorney General by July 1, 2009 are prohibited from offering or providing home improvements until they comply. Any unregistered contractor that continues to provide home improvement services after July 1, 2009 could be subject to possible enforcement actions and civil penalties in excess of $1,000.

Once registered, a contractor will have to display its registration number on any advertisement, contract, estimate, or proposal presented to the consumer. Even an advertisement painted onto the side of a company van or truck must have the registration number included with it. Consumers will be able to verify if a contractor is registered by calling a telephone number maintained by the Office of the Attorney General.

HICPA introduces new requirements for home improvement contracts. Specifically, HICPA mandates that in order for a home improvement contract worth more than $500 to be enforceable against an owner, it must be in writing and be signed by both parties. These contracts must include certain notices about the contractor, including information about the contractor’s registration number and insurance levels. HICPA also requires the inclusion of several other provisions that do not ordinarily appear in home improvement contracts, such as a notice with the telephone number for the Office of the Attorney General where consumers can confirm the contractor’s registration.

Contracts that do not have the provisions that HICPA requires can be voided by the owner. Additionally, HICPA prohibits certain provisions, such as clauses which entitle the contractor to attorneys’ fees or which waive a consumer’s right to jury trial. It also establishes guidelines for the use of arbitration clauses in such contracts. Furthermore, if the contract’s total price is above $1,000, it limits the amount that a contractor can require for a deposit. In particular, a contractor cannot require any amount worth more than one-third of the contract price plus the costs of “special order materials.”

When does HICPA apply?

Whether or not HICPA applies to your contractor and your project generally depends on whether they meet the HICPA definition of a “contractor” that offers or performs any “home improvement.” HICPA’s definitions of these terms are fairly broad, but there are also some important exceptions.

What is a “Home Improvement?”

HICPA defines a “home improvement” as all of the following done in connection with land or a portion of the land adjacent to a private residence or a building or a portion of the building which is used or designed to be used as a private residence for which the total cash price of all work agreed upon between the contractor and owner is more than $500:

1. Repair, replacement, remodeling, demolition, removal, renovation, installation, alteration, conversion, modernization, improvement, rehabilitation, or sandblasting.
2. Construction, replacement, installation or improvement of driveways, swimming pools, pool houses, porches, garages, roofs, siding, insulation, solar energy systems, security systems, flooring, patios, fences, gazebos, sheds, cabanas, certain types of landscaping (subject to the exceptions described below), painting, doors and windows, and waterproofing.
3. Without regard to affixation, the installation of central heating, air conditioning, storm windows, or awnings.

There are exceptions for work that will not be considered a “home improvement” under HICPA and to which HICPA does not apply. These exceptions include the construction of a new home, the sale of goods by a seller who doesn’t actually perform any work related to the goods, certain sales of services for commercial or business use, the sale of certain appliances such as stoves, refrigerators, and others which are easily removable without material alteration, and various other exceptions.

Who is a “Contractor?”

As discussed above, HICPA governs home improvements done by a “contractor,” which is defined as any person who owns and operates a home improvement business or who undertakes, offers to undertake or agrees to perform any home improvement. The law applies to all home improvement contractors regardless of whether their businesses were in existence prior to the enactment of HICPA. Subcontractors and independent contractors who have contracted with a home improvement retailer to provide home improvement services to the retailer’s customers are also considered “contractors.”

A “contractor” does not include a person who did less than $5,000 of home improvements during the previous taxable year, a home improvement retailer with a net worth of more than $50 million, or an employee of that retailer that does not perform home improvements.

Recommendations

HICPA has broad application to those who provide or obtain home improvement services in Pennsylvania. Consumers of home improvement services should fully understand the nature of the projects for which they contract and whether they are protected by the Act because their contractors are governed by HICPA. Contractors governed by HICPA have obligations to comply with the Act throughout the home improvement process, starting with their advertising, and ranging from their contract and deposit requirements, to their obligations to complete the project.

HICPA gives consumers additional tools to protect themselves from dishonest home improvement practices, including the ability to verify a contractor’s registration, and to require that changes to the scope or cost of a project are documented and justified. Starting on July 1, you have rights under the Pennsylvania Home Improvement Consumer Protection Act.

If you believe that your rights under HICPA are violated, the attorneys at MacElree Harvey can assess how HICPA relates to your home improvement project and assist you in enforcing your rights to be protected against unfair home improvement practices. The attorneys at MacElree Harvey also assist contractors with HICPA compliance, so we are thoroughly familiar with HICPA’s requirements. Please contact us if you have any questions about HICPA or are unsure about how HICPA applies to you or your project.

The following article is informational only and not intended as legal advice. Speak with a licensed attorney about your own specific situation. © Copyright 2011 MacElree Harvey, Ltd. All rights reserved.