Home Improvement Laws in California

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Multiple California statutes and city ordinances exist where a homeowner can find laws regarding home improvement. The California Civil Code contains rules regarding contracts between homeowners and contractors. The California Business and Professions Code contains rules regarding licensing requirements for contractors, including insurance. The California Code of Civil Procedures contains rules regarding lawsuits relating to home improvement, such as claims involving fraud and construction defects. City ordinances contain rules to prevent the development of dangerous and substandard residential buildings.

Home Improvement Definition

The California Business and Professions Code defines home improvement as repairing, remodeling, altering, converting or modernizing a dwelling or structure, or land adjacent to a dwelling house. The construction, erection, replacement or improvement of driveways, swimming pools, including spas and hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches, garages, fallout shelters and basements constitute home improvement. Home improvement also means the installation of home improvement goods, like a water filter or the furnishing of home improvement services, like regular landscaping services.

Contracts for Home Improvements

A home improvement contract is an agreement formed between a contractor and a property owner, or between a contractor and a tenant. It can also be an agreement between a salesperson, like a home improvement salesperson, and a property owner, homeowner or tenant. The California Department of Consumer Affairs, which oversees the Contractors State License Board, refers to the party who purchases goods and services from a contractor as a consumer.

There are multiple requirements for home improvement projects. California law mandates that a home improvement project over $500 must be outlined in a written contract. The contract must be legible, easy to understand and let the consumer know of her rights to cancel or rescind the contract. Any subsequent changes to the contract must be in writing. A contract should contain all the terms upon which the consumer and contractor have agreed.

What Should Be in a Contract for Home Improvements

A contract should describe in detail the products to be used, including detailed information such as the color and size of tiles, and the work that will be performed, including who will be doing what work. The contract should include a detailed written payment schedule and should provide who will get the necessary permits as well as the date of completion. The contract should explain who will do cleanup and removal of debris and materials. As to swimming pools, the contract must include a plan and scale drawing that shows the shape, dimensions, and construction and equipment specifications for the job.

A home improvement contract should also provide the name, business address and contractor's license number. If the contract price or scope of work changes, the parties must draw up a written change order. Both parties must sign the change order before making the changes. The order then becomes a part of the contract. A consumer should get the contractors’ warranties for labor and materials and any manufacturer warranties in writing.

Payments to a Contractor

The payments to the contractor cannot exceed the value of the work performed. The exception to this rule is the down payment. The down payment must be $1,000 or less, or 10 percent of the contract price, whichever is less, for a home improvement job or swimming pool, excluding finance charges. There is not an exception for special-order materials.

The contract price must be a fixed amount stated in dollars and cents. If there are progress payments to be made, the contract must contain a schedule of the payments, and each progress payment must be stated in dollars and cents. The contract must reference the amount of work or services to be performed and any materials or equipment to be supplied. Change orders to contracts must also contain a fixed price.

Insurance for Home Improvements

A contractor with employees or workers is required to have workers' compensation insurance. A contractor is not required to have general liability insurance. This type of insurance protects a property that gets accidentally damaged during a project. A homeowner can talk to his insurer about paying for a temporary rider to his home insurance policy. This is extended insurance coverage for a set period of time or a particular use.

Local Ordinances

City ordinances regarding home improvement are generally found in a city’s municipal code, including its housing code, building code, existing building standards, electrical code, plumbing code, mechanical code and green building code. The housing code remedies the existence, and prevents the development of, dangerous buildings. The building code regulates and controls the design, construction and quality of materials of buildings and structures to be erected within the city. The existing building standards establish minimum standards to regulate and encourage the proper maintenance and use of existing buildings and structures.

The electrical code sets requirements to provide a minimum standard for electrical installations. The plumbing code mandates requirements for the design, alteration, installation and repair of materials for plumbing, fire sprinkler and swimming pool piping. The mechanical code regulates the design, construction and installation of heating, venting, air-conditioning and refrigeration equipment. The green building code is meant to enhance the design and construction of buildings that will reduce energy use and encourage sustainable construction practices.

Special Ordinances

Some cities have special ordinances relating to particular matters of concern, like earthquakes. One example is San Francisco’s Mandatory Soft Story Retrofit Ordinance. This ordinance requires the retrofit for all San Francisco multi-unit, soft-story buildings. A soft-story building is a wood frame structure with five or more residential units and having two or more stories over a soft or weak story, permitted for construction before January 1, 1978. A party should talk with his contractor about extra costs relating to special ordinances like this.

Home Improvement Fraud

There are many ways a contractor, subcontractor or supplier can defraud a property owner. The contractor can fail to complete the work, not finish the work by deadline, or use different materials than the contract specified. A consumer has four years in which to file a complaint with the Contractors State License Board about a faulty project. The deadline can be extended if the contract contains additional warranties.

One common type of fraud is a contractor misleading a property owner about having a state license. To obtain a license, a contractor must post a bond of at least $7,500 with the Contractors State License Board. A property owner who sues a licensed contractor for defective work can also sue the company that issues the bond. The property owner should name the bonding company as a defendant. The Contractors State Licensing Board will have the name of the bonding company.

Lawsuit Against Contractor

A property owner can sue an unlicensed contractor for treble damages arising out of work for which a license is required. This is a penalty of up to three times the damages incurred, in addition to the actual damages that the owner incurred. The total amount of the damages and penalty cannot exceed the limit for small claims court.

A contractor who has not substantially complied with licensing laws cannot sue and recover for home improvement work that requires a contractor’s license. The contractor must prove she had the necessary license at the time the work was done in order to recover. An unlicensed contractor can sue for payment for work in a home improvement contract for which a license is not required. An example of such work is the installation of finished products that do not become a fixed part of the structure, such as a free-standing kitchen cart.

Failure to Comply With Rules

A contractor who does not comply with the rules in the California Business & Professions Code will be found in violation of state law. His license is subject to discipline, and he can be criminally prosecuted. The Contractors State License Board has the power to issue citations of up to $5,000 for using a form of contract that does not comply with contract laws. As a rule of thumb, it usually takes about six pages of contract language for a home improvement contract to comply with state contract laws.

A failure to comply with contract rules also opens the contractor up to receiving only the reasonable value of her work. This can be difficult to prove. A property owner can void a noncompliant contract in her sole discretion. The property owner can eliminate the terms of the contract, such as a markup on custom-built wooden cabinets, that would be favorable to the contractor.

Mechanics' Liens

A mechanic's lien is a legal document filed by a contractor, subcontractor or supplier that never received payment for work performed or material provided. The contractor makes a claim against the property and records it with the county. The contractor can then sue the property owner in court to foreclose on the lien. Even if a property owner pays the contractor in full, any party involved in the project that was not paid can record a mechanic's lien and sue to foreclose on the property.

A property owner can protect himself against a mechanic's lien by asking the contractor to provide a list of all the subcontractors and material suppliers on the project. The list should contain the dates work will start and end. A contractor who wants to file a mechanic's lien must send a Notice to Owner warning about the property lien. A material supplier or subcontractor who wants to file a mechanic's lien must send the property owner a Preliminary Notice of its right to file a lien within 20 days of delivering products and/or materials, or within 20 days of beginning the work.

A property owner can also protect herself by paying with a joint check payable to the contractor and subcontractor or material supplier. If the property owner does not take steps to protect herself, she could be forced to pay twice. The court could also sell her home to pay the lien. Any lien, including a mechanics lien, can affect a consumer’s personal credit rating and ability to borrow or refinance.

Guidance on Home Improvement Contracts

A property owner who wants more guidance on whether the contract contains the necessary information and is formatted correctly should consult a contract attorney with experience in reviewing home improvement contracts. This attorney should be familiar with the practices of local builders and local builders' associations. Understanding how local contractors craft contracts helps the attorney identify what parts of the contract may be illegal.

As an example, it is illegal for a contractor to use a “time and material contract” or “cost plus contract” for residential projects. In this type of project, the contractor is paid on the basis of actual cost of direct labor and actual cost of materials and equipment used. Such an arrangement is fine for commercial projects, but not home improvement contracts. This is because time and material contracts do not contain the start and stop dates and payment schedule that states when the work will be completed.

When a property owner hires a contractor, he and the contractor have different interests. A contractor who wants to examine the contract from her perspective should hire her own attorney.

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