Legal Requirements and Concerns For “Home Improvement” Residential Construction or Remodeling Contracts in California.

Special legal requirements apply to “Home Improvement” construction, repair or remodeling contracts in California, for the protection of HomeOwners or owners of certain residential properties under Business & Prof. Code sec. 7159, and the regulations of the Contractor’s State License Board.

The law defines “Home Improvement Contract”:

“Home improvement” means the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property and shall include, but not be limited to, the construction, erection, replacement, or improvement of driveways, swimming pools, including spas and hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements of the structures or land which is adjacent to a dwelling house. “Home improvement” shall also mean the installation of home improvement goods or the furnishing of home improvement services. ”
Bus. & Prof. Code § 7151. See also Bus. & Prof. Code § 7159(b).

Bus. & Prof. Code § 7159( c) et seq, sets forth most of these special requirements, including requirements that there be a signed, written contract for a fixed price only, include firm start and completion dates, include a description of the work and major materials to be used, set forth a payment schedule, a notice regarding the contractor’s liability insurance, and mechanics liens rights, plus a notice of the homeowners’ “Three Day Right to Cancel” the contract, to the extent required by Bus. & Prof. Code §7159(e)(6)(A) and Civil Code § 1689.8, etc. (See related legal article)

Also, in some circumstances set forth in Bus. & Prof. Code §§ 7159 & 7159.5, the contract must include a right for the property owner to cancel the contract in a limited time period, including but not limited to section 7159(e)(6)(A) and Civil Code § 1689.8 regarding the homeowner’s right to cancel the contract.

On any substantial project, it is advisable to have the construction contract be first reviewed with an experienced Construction Lawyer before signing, as the legal issues and contract language can be quite tricky, lengthy and complex for even sophisticated owners or non-specialized attorneys to deal with on their own!!

And make sure the contractor is property licensed for the specific type of work he is performing, and check references from prior jobs in detail!

Because changes and extra work are a frequent cause of claims, excessive costs and litigation on construction projects of all types, it is best if you define exactly what you want the contractor to do before you sign a construction contract, and make sure that the scope of work is exactly described in the construction contract..

On larger or even mid-sized projects it is best to have an architect or an experienced building designer (for two story or less wood-framed homes) to define the exact product and all finishes and materials to be used, dimensions, etc in detailed “Construction Drawings”, which are typically more detailed than the plans needed to get a building permit.

If the need for changes or extra work does come up due to unforeseen conditions or for other reasons, put all change requests in writing which describes the changes and extra work in good detail, and try to agree on a price and a signed change order before any changes are built out by the contractor.

All extra work requires a fixed price written change order being signed in advance, pursuant to Bus. & Prof. Code §7159(d)(13) and Bus. & Prof. Code §7159.6.

But failure to have a written Change Order signed by all parties does not prevent the contractor from changing a reasonable amount for the extra work, but will usually help reduce disputes and delays in the work.

Under Bus: Prof Code §7115 the contract must also describe in writing the contractor’s general liability insurance status. Usually the contractor should, by contract, be required to add the property owner as a n “Additional Insured” on a contractor’s General Liability Insurance policy, and to receive a Certificate of Insurance reflecting this coverage.

Contractors who use workers who themselves do not have their own contractor’s license for the work they are doing must also carry Workers Compensation Insurance to protect those employees.

Failure to carry such Workers Compensation Insurance for such employees when required may prevent the contractor from getting a building permit in its own name, may create liability risks for property owners, and could result in the automatic suspension of a contractor’s license!

If the property owners will not be living in the property while the construction work is being performed, it is advisable that the property owner’s homeowners insurance carrier be notified of this fact in writing, and that “Builders Risk” or other coverage be obtained to protect the property and its replacement against fire, vandalism, etc., as often ordinary homeowners insurance may not cover such losses.

There are also additional requirements and prudent precautions that should be followed . See,

Failure of a contractor to comply with these statutory or regulatory requirements may possibly, depending on the relative sophistication of the parties and the facts, either invalidate the contract and/or subject the contractor to license suspension or revocation by the Contractors State License Board,

N.B. The contents of this Article do not constitute legal advice or create an attorney-client relationship, and you may NOT rely on it without seeking legal advice regarding your particular situation from a competent California Building or Development lawyer or Construction Contracts attorney.

Please also note that factual situations vary, and statutes, regulations and case law as well as the terms of insurance policies, endorsements and exclusions are frequently and constantly changing and evolving, and these written materials thus also may now be or may become outdated or incorrect.

For further information on this topic and how the current law and policies may apply to your unique project, contract, job, claim or issues, Contact Us via email, phone (415)788- 1881 or visit our website for other contact information.

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