Over the past decade we have seen an increasing number of states create licensing boards in an effort to regulate and oversee the work being performed by contractors and remodelers. In recent years New Jersey, Georgia, and other states have enacted home improvement registration requirements, and Pennsylvania is the most recent addition to the list of states that now require contractor licensure and compliance with a specific set of contractor-based laws.
Certainly the goals of these regulations are to increase the protections for consumers, but it also must be noted that as states become strapped for cash, the creation of a licensing scheme is often an easy way to raise revenue, and it is anticipated that more states will enact licensing laws focusing on the contracting industry in the coming years.
What is most concerning about Pennsylvania’s new contractor law, however, and may be a warning sign of things to come, is that Pennsylvania has made it illegal for the contractor to obtain his or her legal fees if the contractor sues the customer for a balance due. In other words, if you work in Pennsylvania, it appears that you will not be able to recover your attorney fees if you sue your customer — even if you win the case.
Think Twice Before Taking Legal Action
There is some question about whether such a prohibition is even constitutional, as it clearly interferes with the rights of two private parties to freely contract with each other, but what is clear is that it places a serious set of operational handcuffs on a contractor’s ability to do business in Pennsylvania. After all, it certainly is not cost-effective if you have to sue a customer for money owed but will end up paying your attorney a large portion of anything you recover. If you cannot recover your legal fees, it could easily turn out that most contractors would end up losing money even if they won their court case or arbitration proceeding against a customer.
We have been advising our clients that, in the future, Pennsylvania contractors need to reconsider bringing legal action against a consumer and should instead focus more on using Pennsylvania’s mechanic lien laws on a regular basis to ensure they will get paid for their work. Fortunately, Pennsylvania has fairly simple mechanic lien law procedures, requiring a basic lien claim form to be filed in county court within six months after completion of contracted work and a claim notice to then be filed with the customer.
—D.S. Berenson is the Washington, D.C., managing partner of Johanson Berenson LLP (www.homeimprovementlaw.com), a national law firm specializing in the representation of contractors and the home improvement industry. He may be reached at email@example.com.
This article is for informational purposes only and should not be construed as legal advice.