The Ohio General Assembly recently enacted the Home Construction Service Suppliers Act (“Act”), which took effect on August 31, 2012. Perhaps the biggest benefit from the Act, enacted by HB 383, is the exemption of all “Home Construction Service Contracts” from the Consumer Sales Practices Act. This exemption allows home builders to avoid being subject to the “treble damages” provisions of the Consumer Sales Practice Act.
A “home construction service contract” is defined as a contract between an owner and a supplier to perform home construction services, including services rendered based on a cost-plus contract, for an amount exceeding $25,000. “Home construction service” means the construction of a residential building, but does not include construction performed on a structure that contains four or more dwelling units, except for work on an individual dwelling unit within that structure, or construction performed on the common area of a condominium property.
The Act requires a written agreement with a customer when the total cost of the project is $25,000 or more. As a result, all home builders must review their existing home construction contracts to ensure compliance with the Act. This written agreement must include the following information: (1) the name, address, and phone number of the parties, including the builder’s tax identification number; (2) the location of the property; (3) a general description of the construction services, including any appliances or other goods and services to be furnished; (4) the commencement and completion dates for the project; and (5) the total, estimated cost of construction and the identification of installation, delivery, or other costs not included in the estimate. The home builder must also attach a certificate of insurance to the written agreement evidencing that the home builder maintains at least $250,000 of liability coverage.
Additionally, the written agreement must include a provision entitling the customer to a written or oral estimate when the total amount of reasonably unforeseen, but necessary, costs of construction exceed $5,000*:
IF AT ANY TIME A HOME CONSTRUCTION SERVICE REQUIRES EXTRA COSTS ABOVE THE COST SPECIFIED OR ESTIMATED IN THE CONTRACT THAT WAS REASONABLY UNFORESEEN, BUT NECESSARY, AND THE TOTAL OF ALL EXTRA COSTS TO DATE EXCEEDS FIVE THOUSAND DOLLARS OVER THE COURSE OF THE ENTIRE HOME CONSTRUCTION CONTRACT, YOU HAVE A RIGHT TO AN ESTIMATE OF THOSE EXCESS COSTS BEFORE THE HOME CONSTRUCTION SERVICE SUPPLIER BEGINS WORK RELATED TO THOSE COSTS. INITIAL YOUR CHOICE OF THE TYPE OF ESTIMATE YOU REQUIRE:
_______Written Estimate _______Oral Estimate
In addition to the above contractual requirements, the Act prohibits unfair practices including:
- Acceptance of a down payment of more than 10% of the total contract price before the commencement of construction;
- Falsely representing the nature of any repairs or work;
- Failure to construct the home in a workman-like manner, which is generally governed by the minimum, quantifiable standards of the Ohio Home Builders Association;
- Failure to provide, within a reasonable time after the owner’s request, any replaced parts unless the parts are to be rebuilt and sold by the supplier or returned to the manufacturer in connection with the warranty service and this fact is disclosed to the homeowner;
- Failure to provide a full refund of any material or service not provided;
- Failure to provide, within a reasonable time after the owner’s request, an itemized receipt for any item that has been retained for repair. The receipt must include the identity of the person performing the repairs, name and dated signature of the person who actually accepts the item, and a description, including make and model number or other features that will reasonably identify the item turned over for repair services;
- Requiring the home buyer to waive any rights conferred by the law;
- When an item is “being inspected or diagnosed,” falsely representing that the item is in a dangerous condition when such is not the case;
- Failure to provide the owner with a copy of any document signed or initialed by the owner;
- Failure to disclose to the homeowner that an outside company will perform a repair or service when the contract disclaims any warranty for work performed by an outside company; and
- Falsely representing that repairs must be performed away from the property where the home construction service is being performed, when such is not the case.
The consequences for non-compliance could include an award of “non-economic” damages in an amount not exceeding $5,000, termination of the contract, and payment of the owner’s attorneys’ fees. In sum, home construction builders should immediately review their construction contracts to ensure compliance with the new Act. If you have questions concerning the Act, please contact Krugliak, Wilkins, Griffiths & Dougherty, Co., LPA, or the authors at 330-497-0700.
*This requirement does not apply to a cost-plus contract.
About the authors: David Butz, Esq. is a director at the Firm serving in the litigation and real estate practice groups, and his practice focuses on representing and defending home builders in construction litigation and arbitration.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.