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New contract rules for Home Construction Service Suppliers

posted by Michael Fortney  |  Jan 20, 2014 2:41 PM in Construction Law:Home Construction Issues

New contract rules for Home Construction Service Suppliers 

A new Ohio law creates a new set of rules for residential contractors that, if followed, exempts contractors from liability under the Consumer Sales Practices Act for projects exceeding $25,000. 

In order to enjoy the protection of the new law, residential contractors must maintain general liability insurance in an amount not less than $250,000.  

For residential construction contracts exceeding $25,000, the new law requires a written contract between the contractor and the owner, and requires that the contract include the following provisions: 

(1)  the contractor's name, physical business address, business telephone number, and taxpayer identification number;

{C}(2)  {C}the owner's name, address, and telephone number;

(3)  the address of the project;

(4)  a general description of the home construction service, including the goods and services to be furnished as part of the service;

(5)  the anticipated start and finish dates;

(6)  the total estimated cost of the home construction service;

(7)  any cost of installation, delivery, or other cost that the total estimated cost does not cover;

(8)  a copy of the contractor's certificate of insurance showing general liability coverage in an amount of not less than two hundred fifty thousand dollars;

{C}(9)  {C}the dated signatures of the owner and the contractor. 

In addition, the contract must include the following written notice regarding extra costs: 

EXCESS COSTS

 IF AT ANY TIME A HOME CONSTRUCTION SERVICE REQUIRES EXTRA COSTS ABOVE THE COST SPECIFIED OR ESTIMATED IN THE CONTRACT THAT WERE REASONABLY UNFORESEEN, BUT NECESSARY, AND THE TOTAL OF ALL EXTRA COSTS TO DATE EXCEEDS FIVE THOUSAND DOLLARS OVER THE COURSE OF THE ENTIRE HOME CONSTRUCTION CONTRACT, YOU HAVE A RIGHT TO AN ESTIMATE OF THOSE EXCESS COSTS BEFORE THE HOME CONSTRUCTION SERVICE SUPPLIER BEGINS WORK RELATED TO THOSE COSTS. INITIAL YOUR CHOICE OF THE TYPE OF ESTIMATE YOU REQUIRE:

 ..... written estimate ..... oral estimate 

There are two exceptions to these new contract requirements.  If the contract is for a fixed price in which the contractor agrees not to charge any extra costs, the above notice language is not required, but items 1 through 9 must still be provided.  If the contract is a "cost-plus contract" in which the cost is based on materials plus, labor, plus an agreed percentage of profit or stipulated fee, then  neither the excess notice provision nor items 1 through 9 are required to be provided in the contract.

The new Home Construction Service Supplier law is full of do's and don'ts.  For example, a home construction service supplier may not: 

{C}•  commence work without entering into a written contract that complies with the statute;

{C}• charge for any excess cost that the owner has not approved; or

{C}•   require a down payment greater than ten percent of the contract price (but may take a 75% down payment on special order items). 

The new Home Construction Service Supplier law has several remedies that are very similar to those previously available under the CSPA.  These remedies include the owner's right to rescind the contract or recover actual economic damages plus noneconomic damages not exceeding $5,000 and attorney's fees.  However, the ability for a homeowner to recover treble damages has not been carried over to the Home Construction Service Supplier law. 

 

For more information on the scope and how to properly revise home construction agreements to meet the requirements of the new Home Construction Service Supplier law, contact the construction lawyers at Fortney & Klingshirn.  A complete list of the statutory restrictions and remedies of the Home Construction Service Supplier law can be seen at http://codes.ohio.gov/orc/4722.


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