REQUIREMENTS FOR HOME IMPROVEMENT CONTRACTS
California law provides a series of powerful protections for homeowners hiring contractors to perform home improvement work. Both owners and Contractors must be familiar with the law.
California’s Business and Professions Code Section 7159 defines a “home improvement contract” as an agreement, whether oral or written, between a contractor and an owner and which includes all labor, services, and materials to be furnished and performed thereunder, if the aggregate contract price, including all labor, services, and materials to be furnished by the contractor, exceeds five hundred dollars ($500).
B&P Section 7159 requires the following in the contract:
(1) The writing must be legible.
(2) Any printed form shall be readable. Unless a larger typeface is specified in this article, text in any printed form shall be in at least 10-point typeface and the headings shall be in at least 10-point boldface type.
(3) (A) Before any work is started, the contractor shall give the buyer a copy of the contract signed and dated by both the contractor and the buyer.
(B) The contract shall contain on the first page, in a typeface no smaller than that generally used in the body of the document, both of the following:
(i) The date the buyer signed the contract.
(ii) The name and address of the contractor to which the applicable “Notice of Cancellation” is to be mailed, immediately preceded by a statement advising the buyer that the “Notice of Cancellation” may be sent to the contractor at the address noted on the contract.
(4) The contract shall include a statement that, upon satisfactory payment being made for any portion of the work performed, the contractor, prior to any further payment being made, shall furnish to the person contracting for the home improvement a full and unconditional release from any potential lien claimant claim or mechanics lien for that portion of the work for which payment has been made.
(5) A change-order form for changes or extra work shall be incorporated into the contract and shall become part of the contract only if it is in writing and signed by the parties prior to the commencement of any work covered by a change order.
(6) The contract shall contain, in close proximity to the signatures of the owner and contractor, a notice stating that the owner has the right to require the contractor to have a performance and payment bond.
Section 7159 also requires the following:
The Contract Must Include the Contractor’s Name, Business address, and License
All home improvement contracts to contain the name, business address, and license number of the contractor. Employing an unlicensed contractor can spell disaster for you. Not only will the law consider the unlicensed contractor to be your employee, and thus hold you legally responsible for any damage or injuries caused to someone else (e.g., your contractor’s backhoe damages your neighbor’s property), but if your unlicensed contractor is injured on your property, you will be held personally liable for all of his or her medical bills.
Be sure to verify your contract is licensed by checking with the Contractors State License Board.
The Contract Must Include a Detailed Description of the Work
Every home improvement contract must include a detailed description of the work to be performed. California law requires contractors to use a specific heading for this section of the contract. The provision of the home improvement contract that details the description of the work must be titled “Description of the Project and Description of the Significant Materials to be Used and Equipment to be Installed.”
The contractor should include detail as to the dimensions, quantity, color, configuration, and manufacturer of any materials to be installed. The contract should include as much detail as possible.
The Contract Must Include the Total Price of the Project
The contract should include not just the price of the contractor’s labor, but also the cost of all of the materials, applicable state/local fees (e.g., application and permit fees, etc.), and even HOA-related fees, if the contractor is handling the application process for you.
California law requires that this section of the contract be titled “Contract Price.
If Payments Are to Be Made, A Payment Schedule Must Be Included.
Section 7159 requires that if a downpayment will be charged, the details of the downpayment shall be expressed in substantially the following form, and shall include the text of the notice as specified in subparagraph (C):
(A) The heading: “Downpayment.”
(B) A space where the actual downpayment appears.
(C) The following statement in at least 12-point boldface type:
“THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.”
Section 7159 also requires the section of the contract reserved for the progress payments shall include the following statement in at least 12-point boldface type:
“The schedule of progress payments must specifically describe each phase of work, including the type and amount of work or services scheduled to be supplied in each phase, along with the amount of each proposed progress payment. IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED. HOWEVER, A CONTRACTOR MAY REQUIRE A DOWNPAYMENT.”
For those home improvement contracts that do contain required progress payments, the section of the contract containing that payment schedule must be titled “Schedule of Progress Payments.”
The Contract Must Include Approximate Start and End Dates
The law requires those sections to be titled “Approximate Start Date” and “Approximate Completion Date,” respectively. Any delays should always be agreed to in writing.
The Contract Must Include a Description of Available Manufacturer Warranties
Manufacturers’ warranties ensure that all the fixtures, equipment, or products used in your project will work as intended. Your contractor should include as an attachment to the contract a copy of each existing warranty available for all products purchased for your project.
The Contract Is Required to Have a Provision Regarding Change Orders
The heading regarding Change Orders must be entitled “Extra Work and Change Orders,” and must include a statement that: “Extra Work and Change Orders become part of the contract once the order is prepared in writing and signed by the parties prior to the commencement of work covered by the new change order. The order must describe the scope of the extra work or change, the cost to be added or subtracted from the contract, and the effect the order will have on the schedule of progress payments.
The Contract Must Include a Mechanics Lien Notice
A mechanics lien is a legal claim against the property of a homeowner aimed at securing payment owed to a contractor (or subcontractor) or materials supplier who wasn’t paid for work performed or supplies delivered. Every home improvement contract must include a mechanics lien notice, and the title of the heading must be “Mechanics Lien Warning.” The specific language used in the notice can be found in Section 7159.
Conclusion
In addition to the requirements discussed herein, owners and contractors should consider including the following provisions that:
1. Award the prevailing party in any litigation its attorneys’ fees and costs.
2. Details about who is responsible for obtaining all building permits and ensuring that all necessary inspections occur.
3. Requires the contractor to remove all debris and trash.
4. Makes it clear that any property damage must be addressed by contractor’s insurance.
Finally, the Contractor should always provide the Owner with a Certificate of Insurance prior to beginning any work.
Michael Wales is an attorney with Counterpoint Legal in the San Diego office and primarily focuses his practice on Business, Employment, and Construction Law. Mr. Wales may be reached at 619.780.3303 or at [email protected].
