The Home Improvement Protection Act

In an effort to catch dishonest contractors and put an end to their fraudulent actions, Pennsylvania has enacted the Home Improvement Consumer Protection Act. As of July 1, 2009, the Act requires all contractors who perform $5,000 or more in home improvements annually to register with the Attorney General’s office. Registered contractors must now carry at least $50,000 of personal injury liability coverage and $50,000 of property damage coverage.

Registration with the Attorney General only costs $51, but the new law also affects remodelers in other ways. For instance, due to new requirements in the consumer-protection laws, construction contracts in Pennsylvania must be longer and become more detailed. This has a downside to contractors as a 17-page contract can appear mighty intimidating to a homeowner. The additional contract pages were added to include supplementary and updated clauses in Pennsylvania law. For instance, up to now, contractors were required to provide a single-page right-to-rescind clause in their contract. The new law identifies specific right-to-rescind language that has to appear in 10-point bold type directly above the signature line. The arbitration clause isn’t enforceable if this right-to-rescind notice doesn’t appear in 10-point bold type.

The new act also requires a long list of disclosures to appear in every contract – such as the start and finish date, names and addresses of subs, insurance coverage, and even a phone number for the Pennsylvania Bureau of Consumer Protection. Without these disclosures, a construction contract in Pennsylvania is null and void. Even worse, if a home improvement contractor doesn’t comply with the Home Improvement Protection Act, and a dispute occurs, the property owner has the right to recover thee times actual damages as well as attorney’s fees.

Home improvement contractors who don’t comply with the act should be prepared to work for free should something go wrong; the owner will have them over a barrel. And the fines are tough: if the work is for over $2,000, a violation can become a third degree felony.

The Pennsylvania Home Improvement Protection Act may end up misleading remodeling clients who often choose their remodeling contractor based on bid price. Contractors who don’t carry insurance are unlikely to register with the state. These contractors will have less overhead and will appear attractive to bargain-hunting homeowners as they can easily be the low bidder on many home improvement jobs. Registered contractors are required to carry liability and property damage insurance, increasing the overhead costs they must add to their bids.

Pennsylvania is unique in its stringent homeowner protection requirements on remodelers and contractors. For the contractor it represents a new burden: not only does he have to carry at least $50,000 of personal injury liability coverage and $50,000 of property damage coverage, he now has to hand a potential customer a 17-page contract that may be a deal breaker – even if it is required by Pennsylvania law. And for this contract he has to hire a lawyer well-versed in the changes in Pennsylvania contract law. The new law has made Pennsylvania lawyers very happy.