Does Your Contracting Business Need to Register for the PA Home Improvement Consumer Protection Act?
A few years ago, Dateline NBC ran a piece with several horror stories from victims of unlicensed and unscrupulous home contractors. In some cases, unwary consumers shelled out more than $100,000 and faced foreclosure without work being performed. Because the contractors in question were typically not licensed, their victims could not track them down and obtain refunds.
Such news is not just disconcerting to consumers. The majority of contractors who run their businesses in a conscientious and professional manner can be just as frustrated with such reports because it reflects poorly on them.
The Pennsylvania Legislature has recently addressed this issue in enacting the new Pennsylvania Home Improvement Consumer Protection Act (the "Act"), which takes effect July 1, 2009. The Act requires home improvement contractors to register with the Attorney General and provide detailed information on the identities of their principals and the location of their offices. Such information in intended to be used to keep track of consumer complaints against individual contractors and to help consumers locate contractors to properly enforce contractual agreements.
The Act also makes life difficult for contractors who fail to register even though they are required to do so. Such contractors will generally be barred from enforcing their contracts against homeowners, which will leave them holding an empty bag if a homeowner fails to pay. In addition, because a failure to register when required is deemed a prohibited act, such contractors greatly increase their risk of liability under the Unfair Trade Practices and Consumer Protection Law, which could result in, among other things, civil penalties.
Thus, it is important to register a contracting business if required by the Act. But who is deemed a "Contractor" under the Act and required to register? In general, a "Contractor" is a contractor or a subcontractor that has performed at least $5,000 of "home improvement" work during the previous year.
A "home improvement" under the Act generally includes construction, installation, repair, maintenance or similar activities for a contract price of greater than $500 in connection with the following:
- land or a portion of land adjacent to a private residence; and
- a building or portion thereof designed to be used as a private residence.
For purposes of the Act, a "private residence" includes single houses, duplexes and other single units located in any multifamily dwelling, such as condominiums and cooperative units. Nevertheless, the following are generally excluded from the term "home improvement":
- constructing a new home;
- selling materials home improvement but not performing any related work or labor;
- providing services for a business in a nonresidential setting that will later be resold by the business;
- selling appliances and similar items easily removable from residence;
- work performed free of any charge;
- certain landscaping work by certified landscapers;
- certain emergency work; and
- the conversion of commercial structures into residential structures.
The good news is that registration can be accomplished easily online by clicking here. The application fee is $50 and the registration must be renewed every two years. For more information, please see the PA Attorney General’s list of related FAQs or the Building Industry Association of Lancaster County’s information page.