Topic:
HOME IMPROVEMENT; CONSUMER PROTECTION; CONTRACTORS;
Location:
CONTRACTORS - HOME IMPROVEMENT;

OLR Research Report


June 2, 2004

 

2004-R-0477

HOME IMPROVEMENT ACT

By: Daniel Duffy, Principal Analyst

You asked (1) what the Department of Consumer Protection (DCP) can do to enforce the Home Improvement Act, (2) how the Home Improvement Guaranty Fund operates, and (3) for a summary of the act's provisions setting requirements for home improvement contracts.

SUMMARY

The law requires home improvement contractors to register with DCP. To register, a contractor must identify himself and pay annual fees. There are no other requirements.

Registered home improvement contractors are subject to a wide range of enforcement mechanisms. For example, DCP may impose a fine for working without a required registration. The fine is up to $500 for a first offense, up to $750 for a second offense, and up to $1,500 for subsequent offenses. DCP may investigate alleged violations of the Home Improvement Act. It can suspend or revoke a contractor's registration and impose fines. The Attorney General's Office can seek restraining orders. Both agencies can act against contractors under the Connecticut Unfair Trade Practices Act (CUTPA) because violations of home improvement law are statutorily deemed to be CUTPA violations. Further, violations may be punished under criminal law.

A registered contractor must use written contracts that meet statutory requirements. Among other requirements, contracts must include start and completion dates and a notice of a consumer's three-day right to cancel. The law also requires contractors to participate in the Home Improvement Guaranty Fund. The guaranty fund exists to reimburse consumers who are financially hurt by a registered contractor's actions under a contract.

HOME IMPROVEMENT CONTRACTORS

The law requires home improvement contractors to register with DCP. Under home improvement law, a “contractor” is someone who owns or operates a home improvement business, or who makes or offers to make home improvements. A “home improvement” is defined as including the repair, replacement, remodeling, alteration, conversion, improvement, or addition to, a building or land used or designed to be used as a residence with six or fewer units costing more than $200. The law specifically includes certain activities, such as the construction, installation, replacement, or improvement of driveways and waterproofing in connection with a building intended for use as a residence. It also specifically includes sandblasting and installing swimming pools, porches, garages, roofs, siding, insulation, solar energy systems, flooring, patios, landscaping, fences, doors, and windows (CGS 20-419).

A contractor does not have to register if the total cash price for an improvement is never more than $200 and if the total cash price for all of his contracts in a 12-month period is not more than $1,000.

A “home improvement” does not include (1) the construction of a new home, (2) the sale of goods in which the seller does not arrange for their installation, (3) the sale of goods furnished for a commercial purpose, (4) the sale of appliances designed to be easily removable, or (5) any work performed by the homeowner (CGS 20-419).

State-licensed professionals working in their field are exempt from the Home Improvement Act, as are government employees and schools offering vocational education program courses in home improvement (CGS 20-428).

The law requires a contractor to show his registration certificate when requested, state that he is registered, and include his registration number in all advertising.

DCP'S ENFORCEMENT POWERS

DCP may investigate and hold hearings on any matter related to home improvement. The commissioner may issue subpoenas; administer oaths; compel testimony; and order the production of books, records, and documents. He may seek enforcement orders in court (CGS 20-424).

The DCP commissioner can suspend, revoke, refuse to issue, or refuse to renew a contractor's registration and put a contractor on probation, issue a letter of reprimand, or require a contractor to post a bond (described below), as a condition of registration renewal (CGS 20-422). He may take these actions for (1) conduct likely to mislead, deceive, or defraud the public or commissioner; (2) untruthful or misleading advertising; (3) failure to reimburse the guaranty fund for money paid because of his actions; (4) unfair or deceptive business practices; or (5) any violation of home improvement law (CGS 20-426).

The commissioner may require a $10,000 bond. It must protect (1) the state for its use and (2) anyone who has a cause of action against a contractor who failed to comply with relevant state law and account for any money deposited with him. The DCP commissioner may release the bond 12 months after the contractor stops being registered if there are no pending claims. The law provides that the bond may not be construed to require a surety company to complete a home improvement contract. Surety companies issuing such a bond must inform DCP within 30 days after a bond expires or terminates (CGS 20-426a).

DCP can impose civil fines for (1) working without being registered, (2) willfully employing or supplying for employment an unregistered individual, (3) willfully and falsely pretending to be qualified, (4) working after a registration has expired, or (5) violating home improvement law. The penalties are up to $500 for a first violation, up to $750 for a second violation, and up to $1,500 for subsequent violations. Higher penalties are incurred only if the second or subsequent violations occur within three years of the preceding violation (CGS 20-427).

ATTORNEY GENERAL'S POWERS

The law authorizes the attorney general, at the DCP commissioner's request, to seek court orders temporarily or permanently restraining a contractor from violating home improvement law (CGS 20-424).

CONNECTICUT UNFAIR TRADE PRACTICES ACT

By law, a violation of the Home Improvement Act constitutes a violation of the Connecticut Unfair Trade Practices Act. The law prohibits businesses from engaging in unfair and deceptive acts or practices. CUTPA allows the DCP commissioner to issue regulations defining what constitutes an unfair trade practice, investigate complaints, issue cease and desist orders, order restitution in cases involving less than $5,000, enter into consent agreements, ask the attorney general to seek injunctive relief, and accept voluntary statements of compliance. The act also allows individuals to sue. Courts may issue restraining orders; award actual and punitive damages, costs, and reasonable attorneys fees; and impose civil penalties of up to $5,000 for willful violations and $25,000 for violation of a restraining order.

CRIMINAL PENALTIES

Violations of most home improvement law provisions are class B misdemeanors and subject the violator to a penalty of up to six months in prison, a fine of up to $1,000, or both. Someone who fails to refund the amount paid for a contract within 10 days commits a class A misdemeanor and is subject to a penalty of up to one year in prison, a fine of up to $2,000, or both, if (1) no substantial portion of the work has been done, (2) more than 30 days have passed since the scheduled start date, and (3) the total cash price of the improvement is more than $10,000 (CGS 20-427(c)).

HOME IMPROVEMENT CONTRACTS

All home improvement contracts must include certain provisions describing the contractor and the job. Contracts must (1) be written, (2) signed by both parties, (3) include the entire agreement, (4) be dated, (5) identify the contractor and state his address, (6) include a notice of cancellation rights, (7) include starting and completion dates, and (8) be entered into by registered contractors or salesmen. A contract without these provisions is not valid or enforceable against a homeowner. The contractor must give the homeowner a copy.

A contractor, in any ensuing litigation, may recover payment for the work actually performed if the contract is written and signed, includes a cancellation notice, starting and completion dates, and be entered into by a registered contractor or salesman (CGS 20-429).

Home improvement contracts must comply with the requirements for home solicitation sales. The Home Solicitations Sales Act gives consumers three days in which to cancel a contract. Sellers must inform consumers of this fact by a notice printed in the contract and by a separate sheet that explains a consumer's rights more fully (CGS 42-135a).

HOME IMPROVEMENT GUARANTY FUND

The Home Improvement Guaranty Fund is both a means of recourse for consumers who suffer harm from a contractor and a possible sanction for a contractor. It serves as a recourse because it reimburses people who cannot recover losses suffered from a contractor's failure to fulfill a contract. It is a sanction because a contractor's registration, and his ability to work, are made conditional on his repaying the fund for any money paid out on his account.

A homeowner who obtains a court judgment against a registered contractor or one who was registered within two years of entering into the contract with the homeowner, may ask the DCP commissioner to be reimbursed from the fund. The fund may reimburse a consumer for up to $15,000 for a single claim. The restitution order may come from a suit brought by the homeowner, a civil suit brought by the state under the Connecticut Unfair Trade Practices Act (CUTPA), or a criminal proceeding brought under home improvement law. The request must be made within two years after the final judgment has been made or the time for appeal has passed. A homeowner can ask for the amount of the judgment other than punitive damages, minus any amount already recovered from the contractor.

The homeowner must affirm that he has had a writ of execution served on the contractor and that the officer executing it stated (1) that there are no bank accounts or real property to satisfy the judgment, (2) that the amount realized from such accounts or property was insufficient to satisfy the damage portion of the judgment, or (3) the amount realized and the amount still due. A homeowner with a judgment from small claims court, which can be for as much as $3,500, is exempt from the affirmation requirements. Before paying from the fund, the commissioner must give the contractor an opportunity for a hearing to contest whether he already paid the homeowner.

Once the fund has paid a homeowner, he must assign his rights to recover the money to DCP. It may seek to recover it from the contractor, plus reasonable interest. The commissioner may revoke the registration of any contractor whose actions have caused a guaranty fund payment and make reinstatement conditional on repaying the fund. The commissioner may allow a contractor to register before repayment if he agrees to repay by a certain date (CGS 20-432).

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