Home Repair & Remodeling Contractors Beware!
By H. Allen Yow

Attorneys representing clients engaged in the home repair and remodeling business need to be aware of the recent decision from the Third District Appellate Court of Illinois, Central Illinois Electrical Services, LLC v. Slepian, 2005 WL 1514645, and the provisions of the Home Repair and Remodeling Act, 815 ILCS 513/1 et. seq., hereinafter “the Act”. In Slepian, the Appellate Court reversed the trial court’s judgment in favor of a contractor, who had filed a complaint to foreclose a mechanic’s lien. In so holding, the Appellate Court found the provisions of the Act could be asserted as an affirmative defense by homeowners.

By way of background, persons engaged in the home repair and remodeling business must be in compliance with the Act. According to the General Assembly, the purpose of the Act is to safeguard the life, health, property and public welfare of Illinois citizens and to “promote fair and honest practices” in the home repair and remodeling business. The Act defines “home repair and remodeling” to mean “the fixing, replacing, altering, converting, modernizing, improving, or making of an addition to any real property primarily designed or used as a residence, other than maintenance, service or repairs under $500.00.” Under the Act, such work includes the “construction, installation, replacement or improvement of driveways, swimming pools, porches, kitchens, bathrooms, basements, chimneys, chimney liners … windows, roofs, awnings, and other improvements to structures within the residence or upon the land adjacent to the residence.” Home repair and remodeling, however, does not include the “sale, installation, cleaning or repair of carpets; the repair, installation, replacement or connection of any home appliance …when the persons replacing, installing, repairing or connecting the home appliance are employees or agents of the merchant that sold the home appliance or sold new products at the same time." Landscaping is exempt from the Act. The Act applies to single-family homes or dwellings and multiple family homes or dwellings containing six or fewer apartments, condominiums, townhouses or dwelling units. The Act defines "person" to include any "individual, partnership, corporation, business, trust or other legal entity."

To be in compliance with the Act, a person engaged in the home repair and remodeling business must comply with Sections 15, 20 and 25 of the Act. Section 15 requires that prior to commencing home repair or remodeling work for over $1,000.00, the contractor “shall furnish to the customer for signature a written contract or work order that states the total cost, including parts and materials listed with reasonable particularity and any charge for an estimate.” The contract must state the name and address of the contractor.

Section 20 of the Act provides that prior to the execution of a home repair and remodeling contract for over $1,000.00, the contractor must provide the customer with a copy of the “Home Repair: Know Your Consumer Rights” pamphlet. Both the consumer and the contractor must sign an acknowledgement form entitled “Consumer Rights Acknowledgment Form” that states: “I, the homeowner, have received from the contractor a copy of the pamphlet entitled " Home Repair: Know Your Consumer Rights.” With regard to contracts with a value of $1,000.00 or less, the contractor must provide a copy of the pamphlet, but a written acknowledgement of receipt is not required. The pamphlet must be in a separate document and in 12 point type. The pamphlet must read as follows:

HOME REPAIR: KNOW YOUR CONSUMER RIGHTS

As you plan for your home repair/improvement project, it is important to ask the right questions in order to protect your investment. The tips in this fact sheet should allow you to protect yourself and minimize the possibility that a misunderstanding may occur.

AVOIDING HOME REPAIR FRAUD

Please use extreme caution when confronted with the following warning signs of a potential scam:

(1) Door-to-door salespersons with no local connections who offer to do home repair work for substantially less than the market price.

(2) Solicitations for repair work from a company that lists only a telephone number or a post-office box number to contact, particularly if it is an out-of-state company.

(3) Contractors who fail to provide customers references when requested.

(4) Persons offering to inspect your home for free. Do not admit anyone into your home unless he or she can present authentic identification stabling his or her business status. When in doubt, do not hesitate to call the worker’s employer to verify his or her identity.

(5) Contractors demanding cash payment for a job or who ask you to make a check payable to a person other than the owner or company name.

(6) Offers from a contractor to drive you to the bank to withdraw funds to pay for the work.

CONTRACTS

(1) Get all estimates in writing.

(2) Do not be induced into signing a contract by high-pressure sales tactics.

(3) Never sign a contract with blank spaces or one you do not fully understand. If you are taking out a loan to finance the work, do not sign the contract before your lender approves the loan.

(4) Remember, you have 3 business days from the time you sign your contract to cancel any contract if the sale is made at your home. The contractor cannot deprive you of this right by initiating work, selling your contract to a lender, or any other tactic.

(5) If the contractor does business under a name other than the contractor’s real name, the business must either be incorporated or registered under the Assumed Business Name Act. Check with the Secretary of State to see if the business is incorporated or with the county clerk to see if the business has registered under the Assumed Business Name Act.

(6) Homeowners should check with local and county units of government to determine if permits or inspections are required.

(7) Determine whether the contractor will guarantee his or her work and products.

(8) Determine whether the contractor has the proper insurance.

(9) Do not sign a certificate of completion or make final payment until the work is done to your satisfaction.

(10) Remember, homeowners should know who provides supplies and labor for any work performed on your home. Suppliers and subcontractors have a right to file a lien against your property if the general contractor fails to pay them. To protect your property, request lien waivers from the general contractor.

BASIC TERMS TO BE INCLUDED IN A CONTRACT

(1) Contractor’s full name, address, and telephone number. Illinois law requires that persons selling home repair and improvement services provide their customers with notice of any change to their business name or address that comes about prior to the agreed dates for beginning or completing the work.

(2) A description of the work to be performed.

(3) Starting and estimated completion dates.

(4) Total cost of work to be performed.

(5) Schedule and method of payment, including down payment, subsequent payments, and final payment.

(6) A provision stating the grounds for termination of the contract by either party. However, the homeowner must pay the contractor for work completed. If the contractor fails to commence or complete work within the contracted time period, the homeowner may cancel and may be entitled to a refund of any down payment or other payments made towards the work, upon written demand by certified mail.

Homeowners should obtain a copy of the signed contract and keep it in a safe place for reference as needed.

IF YOU THINK YOU HAVE BEEN DEFRAUDED OR
YOU HAVE QUESTIONS

If you think you have been defrauded by a contractor or have any questions, please bring it to the attention of your State’s Attorney or the Illinois Attorney General’s Office. Attorney General Toll-Free Numbers:

            Carbondale                   (800) 243-0607
            Springfield                    (800) 243-0618
            Chicago                        (800) 386-5438

Section 25 of the Act requires a contractor to maintain public liability and property damage insurance in the amount of $100,000 per person and $300,000 per occurrence for bodily injury and $50,000 per occurrence for property damage, unless the contractor has a net worth of not less than $1,000,000. In addition, the contractor must maintain public liability and property damage insurance in the amount of $10,000 per occurrence for home repair or remodeling not in conformance with applicable State, county, or municipal codes, unless the contractor has a net worth of not less than $1,000,000.

Section 30 of the Act provides that, “it is unlawful for any person engaged in the business of home repairs and remodeling to remodel or make repairs or charge for remodeling or repair work before obtaining a signed contract or work order over $1,000.” Section 35 of the Act provides for enforcement by the Attorney General or the State's Attorney of any county and that a violation of the Act constitutes a violation of the Consumer Fraud and Deceptive Business Practices Act.

Slepian, decided on June 23, 2005, appears to be the first appellate decision to interpret the Act. The Plaintiff, Central Illinois Electric Services (CIES), filed a complaint to foreclosure its mechanic’s lien against the Defendants, Harvey and Rosalee Slepian (Slepian), alleging the Slepians failed to pay CIES $14,000 for labor and materials provided to the Slepians under an oral contract for electrical work on their property. The Slepians filed, inter alia, an affirmative defense claiming CIES violated the Act and, therefore, the oral contract for services was void and could not form the basis of recovery under a mechanic’s lien. According to the decision, in 2000 the Slepians embarked on a home remodeling project, which lasted over two years and cost approximately $1,000,000. Between October 2000 and June 2002, CIES provided services in the form of electrical work to the Slepians. CIES was the second electrical contractor to perform services on the project. CIES’ monthly billings totaled $57,375, of which the Slepians paid all but $14,000. When CIES commenced work on the project, it was not provided with any particular plans, job specifications or architectural drawings for the renovation project. It was undisputed, however, that before beginning work for the Slepians, CIES did not provide a written estimate of the proposed work nor did CIES furnish to the customers for their signature a written contract or work order which set forth the estimated cost. Further, there was no dispute that at the time CIES commenced work, the anticipated costs exceeded $1,000. The trial court ruled in favor of CIES finding the Act inapplicable to the case before it.

On appeal, the Slepians argued the trial court erred in finding the Act inapplicable. In response, CIES asserted that because another electrical contractor preceded CIES on the project, it did not “initiate” the remodeling work. CIES also argued the Slepians were constantly changing the scope of the project and, therefore, it was impossible to provide an estimate of the total cost at the time CIES began working on the site. The Appellate Court rejected CIES’ contentions. The Court held the Act clearly provides that any person engaged in the business of home remodeling or repair, when beginning work on a project that will exceed $1,000 in cost, must provide the customer a written work order of reasonable particularity. The Act, therefore, applies to both original and successor contractors. The Court found the Act does not provide an exception for projects billed on a time and material basis or on projects that become unpredictable in scope and nature. The Appellate Court concluded that the Act applied and remanded the for further proceedings.

As a result of Slepian, a contractor seeking to enforce a mechanic’s lien must make sure that he/she has complied with the provisions of both the Mechanic’s Lien Act and the Home Repair and Remodeling Act. Moreover, failure to strictly follow the Act's requirements may also defeat a contractor's breach of contract action.

Biography

H. Allen Yow is a shareholder in the law firm of Rammelkamp Bradney, P.C., which has offices in Jacksonville, Springfield and Winchester. Mr. Yow concentrates his practice in general litigation, family law and municipal law. He is a member of the General Practice, Solo and Small Firm Section Council.