Connecticut General Assembly
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September 23, 1998 98-R-1178
FROM: Dan Duffy, Principal Analyst
RE: Home Improvement Guaranty Fund
You asked for a summary of the law establishing the Home Improvement Guaranty Fund and in particular the law relating to eligibility for reimbursement.
SUMMARY
Home improvement contractors must register with the Department of Consumer Protection (DCP). To register, a contractor must identify himself and pay annual fees. A registered contractor must use written contracts that meet state requirements and 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. A consumer can make a claim against contractor who is registered when the contract is signed or who was registered at some point during the two-year period before the contract was signed. A consumer should obtain a court judgment and seek to enforce it before asking for reimbursement from the fund.
HOME IMPROVEMENT CONTRACTOR REGISTRATION
Registration
Connecticut requires home improvement contractors to register with the 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 sandblasting; waterproofing; and the installation of driveways, swimming pools, porches, garages, roofs, siding, insulation, solar energy systems, flooring, patios, landscaping, fences, doors, and windows.
A “home improvement” does not include (1) building 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).
Registering
Home improvement contractors and salesmen must pay annual $60 registration fees to DCP. All registration fees are deposited into the General Fund. Contractors and salesmen are also required to participate in DCP’s Home Improvement Guaranty Fund. These fees are $100 for contractors and $40 for salesmen. (In total, contractors must pay $160 annually and salesmen must pay $100).
Exemptions
The law does not apply to (1) someone who earns $1,000 or less from home improvements during 12 consecutive months, (2) state-licensed professionals working in their field, (3) government employees, and (4) schools offering vocational education program courses in home improvement (CGS §§ 20-419(3) and 20-428).
Home Improvement Contracts
All home improvement contracts must include certain provisions describing the contractor and the job. Contracts must (1) be written, (2) be 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. 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 entered by a registered tradesmen (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 the contract with the homeowner, may ask the DCP commissioner to be reimbursed from the fund. 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 $2,500, 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).
Prohibited Acts
The law prohibits anyone from (1) presenting another’s registration certificate as his own; (2) giving false and material evidence to the commissioner to register; (3) impersonating a registered individual, (4) using an expired, suspended, or revoked registration; (5) making or offering to make home improvements without being registered; (6) representing that registration constitutes state-endorsement; (7) employing an unregistered salesman; or (8) failing to make a refund within 10 days if no substantial part of the work has been completed and more than 30 days has passed since the scheduled starting date (CGS § 20-427).
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