In an effort to thwart dishonest contractors and their fraudulent actions, Pennsylvania has enacted the Home Improvement Consumer Protection Act. In effect 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 carry at least $50,000 of personal injury liability coverage and $50,000 of property damage coverage.
The registration costs just $51, but some remodelers are finding the new law also costs a lot of time and effort.
Registration Gets Personal
“The law is designed to stop unscrupulous individuals from ripping off their customers, and I’m all for that,” says Jim Benoit, owner of Benoit & Czarnecki Design & Construction, in Newtown Square, Pa. “It’s only been a few days, but it seems like it’s punishing the reputable companies as well.”
Benoit says that getting a registration number is no big deal, but that part of the registration process required him to turn over his Social Security number and home address, which didn’t sit well. “I’m not looking to hide from anyone, but I find that to be a disturbing part of the application process,” he says, indicating that business owners who incorporate do so in part to create a public record of their company and to protect themselves as individuals.
Moreover, Benoit says that due to requirements in the law, his company’s contract has grown from nine pages to 17. “It was fairly long to start with, but such a long contract can be intimidating to some clients,” he says. The additional pages were added to accommodate additional and updated clauses. For instance, up to now, companies were required to provide a right-to-rescind, which had been a single page. The new law identifies specific right-to-rescind language and requires multiple copies to be included in the contract.
Benoit also says that some aspects of the new law, such as the removal of a hold-harmless agreement, will "really affect" his right do to business.
Homebuilders Fight Legislation
Remodeler Dennis Gehman has found himself on both sides of the fence with the new Home Improvement Consumer Protection Act. Gehman says he has visited Harrisburg, Penn., the state capital, several times to speak with the Attorney General about creating a licensing structure for Pennsylvania contractors, even suggesting using NARI's Certified Remodeler standards as a template. "Oddly enough, the ones fighting us are NAHB becuase their new construction builders don't want to hear about licensing," Gehman says.
Greg Harth agrees. "New construction has been fighting it all the way," says Harth, co-owner of Harth Builders, Spring House, Penn., and current Bucks-Mont NARI chapter president. "The Pennsylvania Builders Association's position is that they'll fight anything that adds a dollar of cost to a project."
For this reason, the new Act (which requires registration - not licensing) is geared toward home improvement contractors only. And while Gehman advocated aspects of the law to state legislators, he agrees that "for the most part, this only hurts the contractors who are doing their best to work within the law."
Like Benoit's, Gehman's contracts have become longer and more detailed. "We invetsed about $750 to have our attorney review our revised contracts after I spent about 20 hours going over them," he says. "Like anything new, our sales staff doesn't like the new paperwork, but I tell them we don't have a choice."
Oversight by State Attorney General
As remodelers re-work their contracts, homeowners gain a range of protections from the Act. According to Pennsylvania Attorney General Tom Corbett, issues involving home improvement or repair projects are among the most prevalent complaints fielded by his office’s Bureau of Consumer Protection. In 2008, the Attorney General’s office received more than 2,100 complaints of customers struggling with problems involving home improvement projects.
Corbett says the office filed numerous legal actions last year against no-show contractors and others doing substandard work. The filings sought more than $2 million in consumer refunds, fines, and civil penalties. The Home Improvement Consumer Protection Act is designed to provide new security for consumers who hire home improvement contractors, and to authorize criminal penalties for home improvement fraud.
So far, more than 32,000 contractors have registered with the Attorney General’s office, which is advising homeowners to visit its website before moving forward with a home improvement project. A visit to the website will allow users to identify if a contractor is complying with the law, the level of insurance the contractor has, and if the contractor has a criminal record or has any civil judgments (including bankruptcy) against them.
“This legislation gives us new tools to identify and prosecute problem contractors,” Corbett said in a press release. “It will also help consumers avoid frustrating and potentially expensive problems in the future.”
Questions About Enforcement
But as Benoit pointed out, while consumer protection is the goal of the Act, upstanding contractors who operate legitimate businesses seem to be bearing more responsibility in the law than the bad-apple contractors it intends to weed out.
“We believe strongly in the registration portion of the Act, but there are some things in the Act itself that we’re not crazy about,” says Kathy Benelli, executive director of the National Association of the Remodeling Industry's Bucks-Mont chapter. “The law seems to protect the consumer more than the contractors, who may find it difficult to do the work they need to do.”
Remodelers involved in getting the law passed say that the industry originally urged the state government to pass legislation requiring contractor licensing -- not just registration. Harth says that state's NARI chapters will continue to push for licensing requirements in the future, but that the registration law makes headway for the industry.
“Pennsylvania is slow to respond to anything -- it was the 49th state to have a uniform building code,” Harth notes. “Neighboring states have licensing laws. New Jersey instituted licensing a few years ago, and I have a feeling that helped push Pennsylvania one step closer with this registration.”
The challenge now becomes encouraging contractors to register. “There are some contractors on the fringe who are dragging their feet,” Harth says. “I won’t pay someone to do work for me as a sub who hasn’t been registered by the state.”
Benoit says the Act may end up widening the gap for remodeling clients choosing on price. Contractors who don’t carry insurance are unlikely to register with the state, but will appear to uneducated homeowners as low-cost bidders. Registered contractors are required to carry liability and property damage insurance, which increases costs that they must account for in bids.
“It’s always easier to sell yourself as a professional, and if these aren’t the types of customers you want, that’s fine,” Benoit says. “But at this point in the game, any customer pays the bills.”
Harth agrees, but adds that unregistered lowball contractors may be less inclined to make sales in order to avoid headaches and risk. “That can reduce competition, which pushes our price structure down,” Harth says, “so in that regard, it’s a good thing.”
Registered contractors will also see more benefits as the is enforced, though how that will happen is up in the air. "My hope is that the Attorney General will put some teeth into the law by enforcing it," Gehman says. "That's when those of us who are complying with it will be able to shine. Meanwhile, we use our knowledge and compliance as a way to educate consumers, new leaders, and our clients about the law."
With the new law in effect for less than two weeks, remodelers say they don’t have a clear indication of how well it will work, but that education will be key. So far, Benoit says he has seen some public service announcements on television, but Harth notes that there hasn’t been a great amount of publicity. “There haven’t been a lot of public courses or education, but there has been some heated conversation, he says. “Our NARI chapter has had a couple of events to educate our constituency, and it’s going to be up to remodelers to let their clients and potential clients know how the Act works and why it’s important.” --Lauren Hunter, associate editor, REMODELING.