Home Improvement Contracts: Protect Yourself as a Contractor and as a Homeowner

Are you a licensed contractor who works on homes?  Are you a homeowner considering hiring a contractor to renovate your home?  Before you begin working on another home improvement project as a contractor or, if you are a homeowner, before hiring a contractor to work on your home improvement project, it is imperative that you understand how California’s laws governing home improvement contracts (HICs) affect you.  Contractors who fail to abide by these laws could face the loss or suspension of their license, disgorgement of money received or possible jail time.  Homeowners who choose not to familiarize themselves with these requirements may fail to fully protect their homes, often times a person’s largest investment, by unwittingly hiring unscrupulous contractors.

The Contractor’s State License Board (CSLB) serves as California’s consumer protection agency protecting homeowners from contractor malfeasance.  Due to an influx of contractor complaints received by the CSLB, the California legislature amended the Business and Professions Code Section 7159 by adding more than 11 pages of requirements for HICs.  The HIC requirements range from easy-to-fix details such as the required font size for certain notices included in a HIC to important restrictions such as the maximum amount of down payment that a contractor can collect.  This article will outline some of the major points that a contractor must include, and that a homeowner has the right to request, in any HIC.

Written Contract and Font Size

A HIC must be legible, in writing, signed by all parties and at least be in 10-point font with headings in 10-point boldface font (unless a larger size is required by the Business and Professions Code Section 7159 (in some cases 12-point boldface font)).

Down Payment

A contractor cannot demand or accept payment for work or materials until the work is actually done or the materials are actually delivered.  Additionally, a down payment cannot exceed $1,000 or 10% of the contract amount, whichever is less.

Work Description

            The description of the work to be done should be thorough and include start and end dates, the materials to be used, the size and dimensions of the project, the equipment specifications, the cleanup and removal of debris and materials, and any special requests such as what to do with extra materials.

Change Orders

            To avoid problems and to determine if there will be any costs that are outside the scope of the original work description, make sure that any change orders are in writing and signed by both parties.

Required Notices

The following notices must be provided with every HIC:

  • Insurance Notice
  • Worker’s Compensation Notice
  • Mechanics Lien Notice
  • CSLB Notice
  • 3-day Right to Cancel
  • 7-day Right to Cancel

Possible Consequences

            Failure to include required provisions subjects a contractor to CSLB discipline, including:

  • Fines between $100 – $25,000
  • Possible imprisonment not to exceed one year
  • Full restitution
  • Suspension or loss of contractor’s license

Your review of the above information should help familiarize you with some of the requirements of California’s laws regarding HICs.  We are available to fully discuss the implications of California’s laws with regards to your business as a contractor or your home improvement project if you are a homeowner.

If you would like to discuss homeowner improvement contracts, please contact your Encore Law attorney.

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