A. DUIE LATTA, ESQUIRE
KRISTIN A. MOLAVOQUE
EMAIL THE AUTHORS

On July 1, 2009, the Home Improvement Consumer Protection Act (“HICPA” or the “Act”) will become effective in Pennsylvania. HICPA will be enforced by the Office of the Attorney General, and is designed to protect consumers from unfair business practices and home improvement fraud.

HICPA establishes a mandatory registration program for contractors who offer or perform home improvements in Pennsylvania. Additionally, it mandates the use of written contracts for certain home improvement agreements with consumers in order for the contract to be enforceable by the contractor. HICPA also prohibits or restricts the use of certain provisions in such home improvement contracts, and requires the inclusion of others. As such, HICPA will provide consumers with new rights and protections with home improvement work and contracts, but will impose significant new requirements and restrictions on contractors who offer or perform home improvement services.

Anyone who owns or operates a home improvement business that is subject to the requirements of HICPA needs to take immediate action to prepare for compliance.

Highlights of HICPA

1. HICPA requires certain “contractors” to register with the Office of the Attorney General if they performed $5,000 or more of “home improvements” in Pennsylvania during the previous year. As discussed in the following section, HICPA defines these terms broadly, so they include many businesses that offer or perform services at the homes of consumers, even if those services would not typically be considered “home improvements.” Contractors who do not register with the Office of the Attorney General by July 1, 2009 will be 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. The Office of the Attorney General is encouraging contractors to begin the registration process early to ensure timely compliance with HICPA. HICPA requires the contractor's registration number to be included in all advertisements, contracts, estimates, and proposals. Once registered, home improvement contractor registrations are valid only for two years and must be renewed.

2. HICPA requires contractors performing home improvements to carry a minimum level of insurance. Contractors will need to provide information about this insurance to obtain a registration number from the Office of the Attorney General. Contractors will also need to provide information about this insurance in their home improvement contracts.

3. HICPA introduces new requirements for home improvement contracts. Specifically, HICPA mandates that in order for a home improvement contract for 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. Significantly, HICPA also requires the inclusion of several other provisions that do not ordinarily appear in home improvement contracts, such as a notice containing a 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 will not be enforceable. Additionally, HICPA prohibits certain provisions, such as a statement that the contractor will be awarded attorney fees or a waiver of an owner’s right to jury trial. Furthermore, HICPA places limitations on how large a deposit can be required, and restricts the use of certain provisions, such as agreements to arbitrate disputes. For all these reasons, it is essential to develop or update written home improvement contracts so that they comply with HICPA.

4. HICPA creates criminal penalties for fraud and prohibits contractors from abandoning or failing to finish the home improvement. 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.

Does HICPA apply to you?
Whether or not HICPA applies to you largely depends on whether you are included in HICPA's definitions of a “contractor” that offers or performs any “home improvement.” While HICPA's definitions of these terms are somewhat broad, there are some exceptions.

HICPA defines “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.

HICPA states that the following are not considered “home improvements” under HICPA:

1. The construction of a new home.

2. The sale of goods or materials by a seller who neither arranges to nor performs, directly or indirectly, any work or labor in connection with the installation or application of the materials.

3. The sale of services for commercial or business use or for resale, if the service takes place somewhere other than at a private residence.

4. The sale of appliances, including stoves, refrigerators, freezers, room air conditioners and others which are designed for and easily removable from the premises without material alteration.

5. Any work performed without compensation by the owner of the owner's private residence or residential rental property.

6. Any work performed by a landscaper certified by the Department of Agriculture under the Plant Pest Act, except to the extent that the work includes any of the following at a private residence:

a. The construction, replacement, installation or improvement of buildings, driveways, swimming pools, porches, garages, roofs, siding, insulation, solar energy systems, security systems, flooring, patios, non-decorative fences, doors, lighting systems concrete walkways, and windows.

b. The placement of retaining walls, fountains, or drainage systems.

7. Emergency work pursuant to the Unfair Trade Practices and Consumer Protection Law.

8. The conversion of existing commercial structures into residential or noncommercial structures.

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.”

HICPA states that the following is not included in the definition of a “contractor”:

1. A person for whom the total cash value of that person's home improvements is less than $5,000 during the previous taxable year.

2. A home improvement retailer having a net worth of more than $50 million, or an employee of that retailer that does not perform home improvements.

As can be seen from the definitions above, with limited exceptions, HICPA has broad application to those who perform home improvements in Pennsylvania. It is important for contractors who provide home improvements to prepare for HICPA compliance.

Recommendations
HICPA is designed to protect consumers, but in doing so, it necessitates that contractors comply with new registration and home improvement contract requirements. If HICPA applies to you, you should register and become HICPA compliant as soon as possible. You may obtain an application online or by contacting the Pennsylvania Office of Attorney General, Bureau of Consumer Protection. The cost is $50 per application. In addition to registration, it is critical for affected contractors to update their contract documents to meet HICPA's requirements for home improvement contracts.

The attorneys at MacElree Harvey can assist you with all aspects of HICPA compliance. Please contact us if you have any questions about HICPA or are unsure about how HICPA applies to you. MacElree Harvey can help you determine whether you should register under HICPA. We can also assist you in the development or review of your contracts, advertisements, estimates, and proposals, in order to assess whether they are HICPA-compliant.

MacElree Harvey
17 West Miner Street
Post Office Box 660
West Chester, PA 19381-0660
p| 610.436.0100
f | 610.430.7885
f | 610.429.4486
e| info@macelree.com