Contractors must take notice of the new requirements regarding Home Improvement Contracts taking effect on July 1, 2009, which will most likely require significant changes, if not wholesale re-drafting of most Contractors’ written form of Contract. Because the Act not only declares existing common practices “Prohibited Acts” and others criminal “Home Improvement Fraud,” a Contractor’s existing form Contract may guide an unwary or uninformed Contractor into a transaction voidable by the Owner at will, or a transaction that can form the basis of civil Consumer Protection liability, and even a third degree felony.
The Act requires that, in order to be valid and enforceable, a Home Improvement Contract must be in writing. Although this was always a good practice, the Act’s requirement means that even relatively modest Home Improvement work should be documented with a written contract.
The regulatory reach of the Act is so broad that it prescribes classes or materials, defines “special order materials” for all Contractors, and limits the amount of an allowable deposit based on the total sale price of each individual Contract. Common provisions in form contracts, such as hold harmless provisions and provisions awarding attorney’s fees to the Contractor will now make the Contract voidable by the Owner at will. Additionally, a Contractor’s refusal to return pre-paid sums as liquidated damages – even when agreed by the Owner – when the Owner abruptly cancels a Contract may constitute criminal “Home Improvement Fraud.