Reasons to know consumer laws

Editor’s Note: While this material was presented with Ohio contractors in mind, Baron said the CSPA and HSSA guidelines are similar or the same in other states. Review your state's laws prior to acting on material published here.

It’s critical for landscape contractors to know consumer laws if they perform residential jobs. Dan Baron, attorney at law at Baron Law in Cleveland, presented on this topic during an Ohio Landscape Association meeting Feb. 15 in Independence, Ohio.

“(If you do residential work), you must know consumer laws – that is if you do in-home sales consultation, these laws apply to you,” he said. “A lot of contractors don’t realize these laws exist until they get sued.”

According to Ohio Revised Code, if a contractor commits a deceptive act or practice, the homeowner may rescind the transaction or recover up to three times the amount of his actual damages or $200, whichever is greater. Baron said there are expensive consequences to violating consumer laws, such as the Consumer Sales Practices Act or the Home Solicitation Sales Act, which are detailed more below.

To explain the consequences, Baron gave this hypothetical example: A landscape contractor, bids a home construction project for Mr. Homeowner for $250,000. Mr. Homeowner accepts the job, signs a standard written contract and makes a deposit with the contractor, who begins work on Aug. 1, 2017. From there, all payments are made on time, all work is completed on time and the job is perfectly performed by the contractor by Feb. 1, 2018.

Yet that same day work is completed, Mr. Homeowner mails this letter to the contractor. “Dear landscape contractor – We love the work you did. It is perfect, everything we wanted! This serves as our notice to you that we are cancelling the contract for your construction work on our home. Please return all monies paid to you ($250,000) within 10 days. Love, Mr. Homeowner. P.S. – Seriously, we loved the work you did, but we want all the money back.”

The contractor refuses to refund, and Mr. Homeowner sues the landscaping company and its owner individually in common pleas court seeking $750,000 in damages, an additional $250,000 in punitive damages and $30,000 in attorney fees. Who wins? According to Baron, Mr. Homeowner wins, and the company and its owner are each responsible to pay $1,030,000.

“If there’s damages involved (with a residential customer like with this hypothetical situation), a dispute with them could cost three times as much as it could have if you followed simple steps,” Baron said.

Types of consumer law

Baron said consumer law comes into play for any sale made at a homeowner’s residence, and there are two types for contractors to consider.

First, the Home Solicitation Sales Act (HSSA) applies to all home solicitations costing more than $24. The only exception is if business-to-business (or commercial) sales. The punishment for violations under this act are both criminal and civil.

Second, the Consumer Sales Practices Act (CSPA) applies to all consumer transactions. The punishment for violations under this act include very large damages up to three times the initial cost of a job.

Common HSSA violations

Baron listed a few violations he sees landscape contractors make with regard to HSSA consumer laws:

• Right to cancel: According to consumer laws, contractors must provide homeowners with a “right to cancel” notice – and this needs to be given to them twice. This form gives the homeowner three days to cancel a contract or scope of work. Baron suggested giving homeowners a detachable form, so the homeowner has one copy and the contractor keeps the other copy.

“This is the No. 1 item I see left out of landscapers’ contracts with homeowners,” he said. “It might seem slightly impractical to give that stuff to homeowners, but homeowners do have that three-day right to cancel.” He added consequences when contractors neglect to do this can be serious – if a homeowner takes this to court, he may rescind the transaction and recover from the contractor up to three times the amount of actual damages.

• Right to cure: Including this in contracts protects contractors against receiving three-times in damages if a homeowner tries to sue in this area. So, if a homeowner notices any defects from a contractor job within 60 days of the completed work, the homeowner must request that defects are cured before filing a lawsuit. This gives contractors 30 days after notification of right to cure to fix any defects. “With this in the contract, the homeowner must give you an opportunity to fix their property and it gives you a chance to negotiate before they take this to court,” Baron said.

Common CSPA violations

Baron listed a few violations he sees landscape contractors make with regard to CSPA consumer law:

• Contract: Baron recommended all contractors make written (not oral) contracts when doing residential work.

• Deposits and Receipts: Contractors must provide homeowners with a receipt that clearly states a description of goods and services. “I don’t like paperwork, either, but you need to give a receipt,” he said. In the contract, include language that indicates whether the deposit is refundable to the homeowner.

• Estimates: When performing an “in-home sale,” one law states that homeowners are entitled to an estimate. Baron advised that upon first face-to-face consultation with a homeowner, contractors should have the customer sign a form that states: You have the right to an estimate if the expected cost of repairs or services will be more than twenty-five dollars. Circle or initial by your choice: Written estimate, oral estimate, no estimate.

“This might look foreign, but most of you have initialed or signed a document like this,” Baron said. “It’s the same statement you sign if you get your car fixed at the shop. But contractors must follow this same law to be protected, so provide homeowners this during the first face-to-face consultation.”

• Cost breakdown: To prevent a lawsuit or confusion on the part of the homeowner, provide them with a breakdown of material and labor costs. Baron recommended this be a fairly comprehensive document with exact details on every single cost in the job from labor to specific materials used. “I see a lot of smaller companies do their estimates where it will say, ‘the job costs $8,000 total, and the labor costs $5,000 out of that and materials are $3,000,’” he said. “That’s not itemized, and attorneys love to sue over that.”

• Subcontractor: Contractors need to let the homeowner know if a subcontractor will be performing work on the job. This information must be included in a written contract.