State laws are making it really tough on contractors by requiring specific disclosures and statements in their home improvement and construction contracts. The days of handshake agreements are over. Failure to include state-mandated disclosures or statements in a construction contract can result in fines, or make any construction contract null and void.
Many contractors are unaware of these state changes in the laws affecting contracts. Contractors typically run small businesses and put their emphasis on building to state codes rather than keeping track of legal changes required by state contract law. Many contractors still do business on a handshake or use a simple "boilerplate" one-size-fits-all contract that most-likely omits specific state requirements.
Some of the toughest states on construction contract requirements are Pennsylvania, Texas, New York, New Jersey, Florida, and California.
Pennsylvania requires a long list of disclosures to appear in a construction contract - such as start and finish dates, names and addresses of subs, insurance coverage and a phone number for Pennsylvania Bureau of Consumer Protection. Omit these disclosures and your construction contract is unenforceable in Pennsylvania. Some clauses that are commonly found in home improvement contracts can actually render the contract unenforceable. Failure to comply with the state requirements is a misdemeanor if the contract is for a small job under $2,000. But if the job is a larger job - for over $2,000, a violation is a felony.
Texas requires that contractors deliver a 2-page disclosure statement before the construction contract is signed. Texas Property Code requires a notice in contracts for building or remodeling a residential property that qualifies as a homestead. Forget this notice and you're liable for up to three times the actual damages plus attorney's fees. Arbitration clauses in Texas construction contracts have to be in 10-point bold type, or they're void.
New York requires a long list of specific disclosures in contracts for home improvement, home repair, and construction of custom homes contracts. Failure to comply brings a fine of $100 to $2,500.
New Jersey requires all home improvement contracts for more than $500 be in writing. Failure to comply can result in offering the property owner a full refund, or awarding three times any damages caused.
Florida requires a 3-day right to cancel in your contract or you're subject to a $1,000 fine. Omission of the construction industry recovery fund notice in a contract risks a $500 fine.
California requires specific disclosures in every contract. Omit the ones required by sections 7030, 7159 or 7164 of the Business and Professions Code and you may be explaining to the State License Board why your license shouldn't be pulled. If your contract doesn't have the disclosures required by the Code of Federal Regulations section 460, you may be subject to a $11,000 fine! At best, you have no right to collect.
How can contractors protect themselves? Large construction companies hire lawyers to write their contracts. Smaller home improvement contractors have to figure out for themselves what they have to include in their contracts to make sure that they're in compliance. A contract that doesn't have all the disclosures required and that doesn't meet all your state's requirements is like not having a contract at all. Not only are you at the mercy of your customer's goodwill, but you could be in trouble with the law.
Bill Grote
http://www.construction-contract.net
http://www.constructioncontractwriter.com
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