Pennsylvania’s Home Improvement Consumer Protection Act (“HICPA”), originally enacted in 2009, was recently updated to address time and materials contracts. HIPCA is intended to enhance consumer protections in residential home construction projects. HICPA requires that residential contractors performing covered home improvements must display a HICPA registration number and use a written contract that complies with HICPA for all jobs over $500.00. Contractor violations of HICPA could result in civil or criminal penalties and the revocation of the contractor’s registration certificate. Prior to the recent HICPA update, time and materials contracts were unenforceable in Pennsylvania.
Since October 22, 2014, HICPA permits contractors to contract with an owner to perform work on a “time and materials” basis. “Time and materials” is defined in HICPA as “a construction practice where the contractor and owner agree that the contractor will perform the home improvement and the owner will pay the contractor under the home improvement contract based on the actual cost of labor at a specified hourly rate and the actual costs of materials and use of equipment, plus an agreed upon percentage of the total actual costs or a fixed amount, over and above the actual costs, to cover the contractor’s fee and overhead costs reasonably incurred in the performance of the home improvement.” If a contractor does in fact contract with an owner to perform work based on a “time and materials” basis, then HICPA requires that the contract provide:
(i) an initial cost estimate in writing to the homeowner before any performance of the home improvement commences (and specifically the dollar value of the initial cost estimate for the services to be performed under the time and materials provision);
(ii) a statement that the cost of the services to be performed under the time and materials provision may not exceed 10% above the dollar value indicated in the initial cost estimate;
(iii) the total potential cost of the services to be performed under the time and materials provision, including the initial cost estimate and the 10% referenced in clause (ii), expressed in actual dollars (i.e. – $XXX.XX); and
(iv) a statement that the cost of the services to be performed under the time and materials provision shall not be increased over the initial cost estimate, plus a 10% increase, without a written change order signed by the homeowner and the contractor.
The October 2014 HICPA revision also requires that a contractor must update HICPA registration information within 30 days after any change in that information required to be included in the contractor’s registration application.
Gibbel Kraybill & Hess LLP (“GKH”) advises contractors who own and operate home improvement businesses or who perform home improvements. Please contact GKH’s Corporate and Organizations Practice Group in the Lancaster office at 717.291.1700 for additional information.
DISCLAIMER: This does not serve as a comprehensive narration of HICPA and you are encouraged to consult with your advisors. This synopsis does not serve as or constitute legal advice and is not intended, and may not be used, to avoid penalties that may be imposed on a taxpayer.