Home Improvement Consumer Protection Act (HICPA)

The business environment for home improvement contractors in Pennsylvania has been radically altered by the enactment of the HICPA.  HICPA is designed as a consumer protection, and it is expected the courts will liberally construe the Act in favor of consumers.  Therefore, strict compliance by contractors is required.

Under the Act, effective July 1, 2009, home improvement contractors who perform more than $5,000.00 worth in annual business directly with consumers are required to register with the Attorney General’s Office, the Bureau of Consumer Protection and to obtain a registration number from the Bureau.  In addition to registration, there are stringent new requirements which must be included in a contract between the home improvement contractor and the consumer in order for the contract to be enforceable.  It is imperative you review your standard contract to ensure enforceability.

In addition to the registration and contractual requirements, HICPA makes violations of the Act a violation of the Unfair Trade Practices/Consumer Protection Law, potentially subjecting a contractor to treble damages in a suit by a consumer. Fraud in relation to home improvement contracts is also now subject to criminal prosecution. Set forth below is a summary of some of the significant portions of HICPA. You may access the registration materials and HICPA at http://www.attorneygeneral.gov/hic.aspx.  To have your standard contract reviewed for compliance or for any additional questions regarding compliance with HICPA, please contact Pat Henigan at 610-565-3701, ext. 254.

1. Definitions

  • Covers repair, replacement, demolition, construction, painting, HVAC, etc.
  • Applies only to private residences
  • The contract price must exceed $500.00
  • New home construction is not covered

2. Contractor Registration with Bureau of Consumer Protection

  • Registration required before doing any work or holding himself out as contractor
  • Must include on contracts the toll-free number for public access to registration information. 1-484-520-6680

3. Registration information

  • Contractors must provide the following information to the Bureau of Consumer Protection—
  • Name(s), address, driver’s license #, federal employer ID #, SSN
  • Prior relevant criminal offenses (fraud, etc.)
  • Prior bankruptcies – last 10 years
  • Civil judgments related to home improvement (H/I) transaction
  • Proof of liability insurance – personal injury ($50k), property damage ($5k)

4. Home Improvement Contracts – not valid or enforceable, unless…

  • The contract is written, in legible form and is signed by all parties
  • Identification of, including registration numbers, all contractors and subcontractors
  • Contains the entire agreement
  • Contains a detailed description of work, materials, specs
  • Mandates that no changes are chargeable without written change order
  • Itemizes the sales price, receipt of deposit and schedule of payments
  • Contains the contractor’s  insurance information
  • Toll-free number to Bureau of Consumer Protection
  • Notice of right of rescission without penalty within 3 business days of signing
  • Copy of completed contract to owner at time of execution

5. Contract voidable by the consumer if the following clauses are in contract

  • Hold-harmless clause
  • Waiver of any local/state/federal safety or building code requirement
  • Confession of judgment clause
  • Waiver of right to jury trial
  • Assignment of wages
  • Agreement not to assert any claim or defense
  • Grant of attorney fees or costs to contractor
  • Release of liability for collections of payments, repossession
  • Waiver of rights under HICPA
  • Certain automatic/recurring renewal provision make contract voidable

6. Home improvement retailer contracts (HIRC)

  • Covers retailers (undefined) with net worth in excess of $50,000,000.00 who do not perform home improvements
  • H/I retailer shall comply with HICPA contract requirements
  • HIRCs not valid or enforceable, unless in writing with all of following—
    • Name, address, phone of retailer
    • Information about person signing for retailer
    • Complies with most provisions in (4), above

7. Contractor right of equitable recovery

  • Nothing in HICPA precludes contractor from recovery of payment for work performed
  • Based on reasonable value of services requested by the owner, if—
    • Contractor has complied with (4), above, and
    • Court determines it would be “inequitable” to deny such recovery

8. Arbitration clause

  • Nothing in this Act shall preclude a court from setting aside an arbitration clause on any basis permitted under Pennsylvania law.
  • If the contract contains an arbitration clause, it shall meet the following requirements or be deemed void upon motion of either party—
    • Text of clause must be in capital letters
    • 12 pt. bold-face type
    • On separate page from rest of contract
    • Separate line for each party to show assent to be bound
    • Not effective unless both parties sign and date
    • Shall clearly state whether decision is binding or appealable to court
    • Shall state whether facts/documents/decision are confidential

9. Home Improvement Fraud is a crime

  • A person commits “home improvement fraud” if with the intent to defraud, or injure anyone, or with the knowledge that he is facilitating fraud or injury by anyone, the actor—
  • Makes a false or misleading statement to encourage a person to enter into a H/I contract, or to justify an increase in a previously agreed upon price; or
  • Receives an advance payment and fails to perform the contract when specified, and fails to return the payment. Exception, force majeure, labor strike, etc.; or
  • Misrepresents or conceals identifying contractor ID information, while soliciting a person to enter into an agreement; or
  • Damages property to induce a person to enter into a contract; or
  • Falsely represents a government affiliation to induce entry into a contract; or
  • Misrepresents an item as a special order; or
  • Alters a H/I contract or payment agreement without the consumer’s consent; or
  • Publishes a false or deceptive advertisement, in violation of relevant state law about advertisements

10. Prosecution of Home Improvement Fraud

  • Grading – M-1 or felony, depending on value of the contract, age of victim, priors, etc.
  • Penalties may include revocation/suspension of H/I contractor certificate

11. Prohibited Acts

  • No person shall—
  • Fail to register, as required
  • Fail to refund money within 10 days of request for refund, if all the following apply—
    • No substantial work has been performed at time of request
    • More than 45 days have elapsed since starting date in contract
  • Accept a certificate of completion or the like, knowing that it is false or work isn’t complete
  • Knowingly use a false proof of performance in order to make/accept an assignment or get/grant credit or loan or right to receive payment under an H/I contract
  • Abandon or fail to perform a H/I contract, without justification (e.g., nonpayment)
  • Materially deviate from plans/specs, without signed/dated change order, with prices
  • Be involved in financing, knowing that the H/I contract states higher than actual price
  • Advertise or offer to perform a H/I contract if the person does not intend to accept or perform the contract at the advertised price
  • Demand or receive any payment before the contract is signed
  • Receive a deposit of more than 1/3 of the contract price (contracts of more than $1,000)
  • For a salesman to fail to account for/remit a payment to a contractor whom s/he represents
  • Change liability or identifying information, after the contract is entered into, in a fraudulent or deceptive manner likely to cause confusion or misunderstanding, without advising the owner in writing within 10 days of any such change.

12. Unfair Trade Practices & Consumer Protection Law (UTPCPL)

  • A violation of any provisions of HICPA shall be deemed a violation of the UTPCPL.
  • Nothing in HICPA shall preclude an owner from exercising a right under the UTPCPL.

13. Regulations

  • The Bureau of Consumer Protection may adopt rules and regulations to carry out HICPA.

14. Pre-emption of local registration

  • Registration – registration under HICPA precludes other fees/licensing/registration
  • Building permits – Local govt. can require building permits and reasonable permit fee
  • Local govt. responsibilities remain under Pa. Construction Code and Workers Comp. Law
  • No effect on trade licensing standards (plumber, electrician, etc.)
  • No effect on local regulations for liability insurance adopted before January 2006 and in effect on July 1, 2009