this is a draft of a story that will appear in April CE Pro, but thought it was important enough to post sooner rather than later.
-julie
New California Codes Affect Installer Contracts
Law dictates everything from font size to change order procedures
by Alan L. Pepper, Esquire
Ask integrators and they’ll probably tell you they’re in the home technology or low-voltage business. But really, they’re in the home-improvement business. That’s an important distinction, especially in California where new codes affect home-improvement contractors, including home systems integrators.
In California, the installation of home improvements by electrical contractors (C-10, C-7 etc.) has long been governed by those portions of the California Business and Professions Code (B& P Code) regulating contractors.
Much of the work performed by home systems installers is covered by California’s Home Improvement laws. The California legislature and Governor recently enacted SB 30, which significantly changes the requirements for home improvement contracts.
The law spells out new requirements for the contractor, and describes the customer’s rights under the new law. It also advises the customer on how to contact the Contractors State License Board. (B & P Section 7030)
The basic provisions regarding the form of every home improvement contract, include:
• The contract must be in writing and signed by all parties.
• The writing must be legible.
• The minimum type size is 10 point and headings must be 10-point bold type (B & P Section 7159). Previously, there were no type-size requirements.
Specific Requirements of New Law
• A notice regarding whether or not the contractor carries general liability insurance.
• A notice concerning workers’ compensation insurance.
• A notice in 12-point type advising the buyer that he is entitled to a completely filled in copy of the agreement.
• Disclosure regarding the contract price and financing terms, if any.
• A notice in 12-point type advising the customer on the limitations of the amount of a down payment that may be collected by the contractor, and other limitations on progress payments.
• A notice regarding the processing of extra work or change orders.
• A very lengthy statement regarding the mechanic’s lien laws (B & P Sections 7159.3 and 7159.4).
• A special new notice regarding the customer’s right to cancel the contract within three business days following the date of the transaction. This is different from the notice currently required for home solicitation contracts under Section 1689.7 of the California Civil Code. The new law suggests that you must continue to give the customer two copies of the notice of cancellation form as required under the Civil Code, and also give additional notices in the contract regarding the right to cancel.
• The contract must set forth the agreed contract amount, which must include the entire cost, excluding finance charges.
• If there is a separate finance charge, it must be set out separately from the contract amount.
• Limitations on the size of the down payment.
• Limitations on the amount of installment payments.
• Requirement regarding providing mechanic’s lien releases (B & P Section 7159.5).
• Provisions regarding extra work or change orders. The change must be in writing, describe the extra, changed or deleted work, the change to the price, and the impact on any progress payments ( B & P Section 7159.6).
The various new notices and provisions, which require using a new contract form as of July 1, 2005, will result in a much larger and complex contract form for home systems installers.
For this reason, companies in California who provide services or product covered under the Home Improvement Act should contact an attorney or other contract advisor to assist in developing a suitable contract.
Alan L. Pepper, Esq. is an attorney with Los Angeles-based Mitchell, Silberberg & Knupp, LLP (
www.msk.com).
