In 1997, the Connecticut legislature passed the Home Improvement Act (“HIA”) to protect homeowners from unscrupulous contractors who do poor work, or no work at all, after being paid. While the HIA is helpful to consumers who have been wronged, it is easy for contractors to run afoul of its numerous licensing, contracting, and other regulatory requirements. For better or worse, the days of the “handshake deal” are long gone.
The HIA applies to any home improvement contractors, home improvement salespeople, and new home construction contractors who act for, or on behalf of, a third party. But what does this mean? What is a home improvement contractor? Depending on the circumstances, determining whether or not you are acting as a home improvement contractor can be a difficult first step.
Connecticut statutes describe “home improvements” to include repair, replacement, alteration, improvement, or rehabilitation of any land or building used as a private residence, dwelling, or rental property, among other things. Within this definition, the specific meaning of the word “repair” or “alteration” can mean different things in different circumstances. What constitutes a repair in one situation might not in another. This is a largely fact-specific inquiry that requires careful research and analysis. If you incorrectly determine that your company is not a home improvement contractor, you could face future penalties and fines.
If you do determine that your business performs “home improvements,” the next step is to register with the Department of Consumer Protection (“DCP”). Once complete, your license is valid for a year before it must be renewed. Though the initial licensing and renewal processes are relatively straightforward, there is a lot to keep track of. Additionally, you should have a Limited Liability Company (“LLC”) or other business formed (if not, it is definitely worth considering). The LLC’s annual report and other documents must be filed annually as well to ensure the business remains compliant with other state regulations. This is all without mentioning that you will have to keep up with daily work, billing, and all the day-to-day activities that go into running a business. Making sure you stay compliant while also running a successful business is a lot for one person, and even multiple people, to handle at once.
Looking specifically at the billing aspect of the HIA, every home improvement contractor/salesperson must provide his or her client with a contract that complies with all of the HIC’s specific rules and regulations. If a contract does not comply, it cannot be enforced- i.e. if the contract does not meet all of the standards, you cannot collect any unpaid balance from your customer. Additionally, if something went wrong during construction and the customer filed suit, the amount he or she can recover increases exponentially. Depending on the circumstances, the customer could be entitled to double or triple damages, and/or their attorney’s fees. A small mistake on a low-dollar job can turn into a big problem very quickly.
Even if you do not need to register under the HIA, there are still contract requirements for a number of professionally licensed trades, such as electricity and plumbing. Failure to provide contracts that comply with these regulations can allow customers to recover extra damages in a lawsuit.
With all this being said, if you currently own a home improvement business, are thinking about starting one, or work as a licensed professional, it’s a good idea to contact an attorney. An attorney will not only research and review relevant law to see if you need to register, but they can also assist in the registration process, draft contracts to ensure you comply with relevant rules and regulations, and try to limit your personal exposure.