Pennsylvania home improvement contract requirements

Who the act covers

A home improvement is work on or next to a private residence where the total cash price agreed is more than $500: repair, replacement, remodeling, demolition, installation and the like, and specifically roofs, siding, insulation, solar energy systems, security systems, flooring, patios, fences, sheds, driveways, pools, painting, doors and windows, and waterproofing. A contractor is anyone who runs a home improvement business or performs home improvements, unless their home improvement work totaled less than $5,000 in the previous tax year. Subcontractors working for big-box retailers count as contractors.

Contractors must register with the Bureau of Consumer Protection in the Office of Attorney General before holding themselves out or doing any work, and the registration number must appear on every advertisement, contract, estimate and proposal (section 6).

The contract checklist

Section 7(a) says no home improvement contract is valid or enforceable against an owner unless it:

1. Is in writing, legible, and shows the performing contractor's registration number.
2. Is signed by the owner (or their agent) and by the contractor or a salesperson for the contractor.
3. Contains the entire agreement, including attached copies of all required notices.
4. States the date of the transaction.
5. Gives the contractor's name, address and telephone number. A post office box alone isn't an address.
6. Gives approximate starting and completion dates.
7. Describes the work, the materials, and a set of specifications that can't be changed without a written change order signed by both owner and contractor.
8. States the total sales price, or sets out a time-and-materials arrangement (below).
9. Lists any down payment and any amount advanced for special order materials, separately.
10. Names every subcontractor known at signing, with address and phone number.
11. Promises to keep liability insurance of at least $50,000 for personal injury and $50,000 for property damage, and states the coverage you carry at signing.
12. Includes the Bureau's toll-free number for checking registrations.
13. Includes notice of the owner's right of rescission.

Time-and-materials jobs

If you bill time and materials, give the owner a written initial cost estimate before starting, and the contract must state: the estimate's dollar value; that the cost may not exceed it by more than 10 percent; the total potential cost, estimate plus 10 percent, in actual dollars; and that the cost won't go above that figure without a written change order signed by both of you.

The three-day right of rescission

Anyone who signs a home improvement contract may rescind it without penalty within three business days of signing, regardless of where it was signed (section 7(b)). That's broader than the FTC Cooling-Off Rule, which only reaches sales made away from your place of business, so a contract signed in your showroom is still rescindable. The only carve-out is the emergency provision of the Unfair Trade Practices and Consumer Protection Law. You must hand the owner a completed copy, free, with all required notices, when the contract is signed (section 7(c)).

Deposits and payments

• One-third, on jobs over $5,000. For a contract with a total price over $5,000, you may not take a deposit of more than one-third of the price, or one-third plus the cost of special order materials designated in the written contract (section 9(10)). Large retailers that post a letter of credit with the Bureau are the exception.
• Nothing before signing. You may not demand or receive any payment before the contract is signed (section 9(9)).
• Refunds when you don't show. If no substantial portion of the work is done and more than 45 days have passed since the contract's start date, you must refund within ten days of the owner's certified-mail request (section 9(2)).
• Change orders for every deviation. Departing from plans or specifications in any material way needs a written change order, dated and signed by both, showing the price change for each deviation (section 9(6)).

Clauses that backfire

Under section 7(e), the owner can void the whole contract if it contains a hold harmless clause, a waiver of building code requirements, a confession of judgment, a jury trial waiver, a wage assignment, a promise not to assert claims or defenses, a clause awarding you attorney fees, a waiver of rights under the act, or an automatic renewal without a clear opt-out. An arbitration clause survives only if it's in capital letters, 12-point bold, on its own page, with a separate line for each party to sign and date on the day the contract is executed, and says whether the award is binding and whether the dispute stays confidential (section 7(d)).

Penalties

• Consumer protection law. Any violation of the act is a violation of the Unfair Trade Practices and Consumer Protection Law (section 10).
• Home improvement fraud. False statements to win a job, keeping an advance payment for work never done, or misrepresenting special order materials is a third-degree felony above $2,000 and a first-degree misdemeanor at or below it, one grade higher if the victim is 60 or older (section 8).
• Prohibited acts. Working unregistered, abandoning a job without justification and the payment violations above are all prohibited under section 9.

Signing it electronically

Pennsylvania's Electronic Transactions Act gives electronic signatures legal effect (see e-signature law in Pennsylvania), and nothing in the act requires a paper contract. The arbitration clause is the detail to watch: it needs its own signature line for each party, dated the day the contract is executed. For notices the law requires in writing, get the owner's consent to electronic records first (15 U.S.C. § 7001(c)).

Setting it up in SignMaster

1. 1

   Load the fixed details

   Put your registration number, the Bureau's toll-free number, your insurance amounts and the rescission notice into a contract template.

2. 2

   Give arbitration its own page

   If you use arbitration, put it on a separate page with its own signature fields for the owner and for you, plus a date signed field beside each.

3. 3

   Separate the money

   Use separate currency fields for the down payment and the special order materials, and a text field listing known subcontractors.

4. 4

   Sign in one sitting

   With Sign in person, the owner signs the contract and the arbitration page together, you countersign, and everyone gets the completed copy by email before you leave.