One of my clients framed his company's first contract: “We will wire your house for $125.00.” In today's legal environment, that note would subject him to criminal penalties. Most lawmakers have concluded that homeowners need protection from contractors. Check to see if these commonly “prohibited acts” apply in your state.
Bait and Switch. An offer (the “bait”) is used as an inducement for the homeowner to talk to a salesman, but then the bait is substituted with a less favorable product or service (the “switch”). Applying this language in the abstract is not easy, particularly with regard to services. “Authorized dealer”? “Highly trained and experienced employees”? Review flyers and ad copy.
Assistance With Home Financing. Read the statute closely. It can be illegal to participate in arranging a mortgage that exceeds the contract price.
Business Names. Conducting a home improvement business in any name other than the licensed name is prohibited. Not only are we talking about fictitious names, but also shortened or incomplete names. If your company is “New Remodeling and Design/Build Contracting Corporation, Inc.,” don't use letterhead or business cards that read “New Remodeling and Design/Build” or some other variation, unless those names are on your license.
Gifts and Rewards. You could be violating your state's consumer protection laws by thanking a subcontractor or homeowner for a referral by giving money or a present.
Saying It's Done Before It's Done. It can be illegal to misrepresent that repairs, alterations, modifications, or services have been performed. A disgruntled homeowner could do a lot with this broad language.
Not Fulfilling a Dispute Resolution. This can be a prohibited act. Be sure you can follow through on promises like: “Pay me and that job will be done on time” or, “I'll take care of all the damage to your landscaping.”
A homeowner has an array of remedies for a contractor's breach of contract: money damages for the cost of repairs, the cost of completion, and other direct expenses. Home improvement laws add to these remedies. They carry fines, loss of licensing, criminal misdemeanor charges, and, in some states, treble damages. If the homeowner has been induced into the agreement by a misrepresentation, the contract may be deemed void and all payments must be returned. The harm is multiplied to the innocent contractor because he must defend himself in court and before licensing boards against these broad statutes.
Take preventive action. Review the law with your attorney; instruct your employees, particularly salespeople, on how to present your company to clients, both in person and by advertisement; learn what words and phrases should not be used with homeowners when describing your business and giving progress reports during construction; and consult with legal counsel at the inception of any dispute. —Gerard Ittig, an attorney, specializes in construction contract disputes. His Web site is www.Ittig-Ittig.com.
This article is for informational purposes only and should not be construed as legal advice.