Is your home renovation contract legal? – Real Estate and Construction

In an effort to protect homeowners, California has established extensive requirements for the form and content of home improvement contracts. California Business and Professional Code Article 7159 spells out these requirements in minute, and sometimes painful, levels of detail. The unfortunate result for entrepreneurs tends to be confusion and avoidance.

Many contractors operate with non-conforming contracts, or have no formal contract and simply operate on a bid basis. The consequences of such an act may include disciplinary action by the State Contractors Licensing Board (CSLB), fines and an unenforceable agreement. It is worth spending the time and effort on a contractor to bring their contracts into compliance. To this end, the following is an attempt to cover many of the requirements of Section 7159, although this list is by no means exhaustive.

When is a contract necessary?

In general, a home improvement contract is required for repairs or modifications to a residential property. According to Section 7151 of the California Business and Professions Code, this includes “the construction, erection, replacement or improvement of walkways, swimming pools, including spas and hot tubs, decks, patios, awnings , storm windows, landscaping, fences, porches, garages, fallout shelters, basements and other improvements to structures or land adjacent to a dwelling house. ”A very wide range of activities construction costs are covered, but section 7159 does not apply to new construction or projects under $ 500.

Basic contract requirements

As for the basic format, everything written in the contract must be readable. The type should not be less than 10 points anywhere, a 12 point type is required in some places. The contract must state “Home improvement” in 10 points. The first page of the contract should show the date the buyer signed the contract. The first page should also show the name and address of the contractor, followed by an indication that this is the address to which a notice of termination should be sent.

The contractor must deliver a copy of the agreement, signed and dated by both parties, to the owner before work begins. Accordingly, the contract should contain the following 12-point statement: “You are entitled to a fully completed copy of this agreement, signed by you and the contractor before the start of the work. Likewise, change orders can only be incorporated into the contract if they are written and signed before work begins. The contract should include the overall price, financial charges if applicable, and a description of the project and the materials to be used, with separate headings for the three. As with all construction contracts, the contractor must include his license number.

A title should be included for the approximate start date, followed by the approximate start date, with a statement explaining what constitutes a substantial start. A separate entry for completion is required, followed by an approximate completion date.

What to say about payments

If a down payment is billed, there should be a down payment header followed by a space to indicate the down payment amount. This must be followed in bold 12 point letters by: “THE DEPOSIT CANNOT EXCEED $ 1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICH IS THE LESS.

If progress payments are to be invoiced, there should be a heading for them, and a list of payments to be made in dollars and cents with reference to the corresponding works and materials. The section should contain the following notice: “The progress payment schedule should specifically describe each phase of the work, including the type and quantity of work or services to be provided in each phase, as well as the amount of each progress payment. offers. 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 DEPOSIT. ”The contract should also explain that a lien release must be made for progress payments before additional payments can be required.

Other notification requirements

Section 7159 also sets out various notice requirements. Contractors must indicate whether they have liability insurance and workers’ compensation insurance. A notice from the CSLB including contact details and available services is also required. The HIC should also specify the owner’s right to terminate within a certain number of days. For contracts negotiated at home, there is a right of withdrawal of 3 days, or (new for 2021) a right of withdrawal of 5 days for seniors. For goods destroyed in a sudden or catastrophic emergency for which a state of emergency is declared, the cancellation period is 7 days. The possibility of a mechanical lien being placed on the property must also be stated and with specific language provided for in section 7159.

Originally posted Feb 3, 2021

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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