There are three sure signs of spring. Middle-aged men in tuxedos drag groundhogs out of their dens to predict how long winter will last. Seed catalogs arrive in the mailbox. And homeowners start planning home improvement projects. Many home improvement projects go well. Some don’t. In the last year, we have advised homeowners whose contractors didn’t complete the project, owners that have discovered unacceptable construction defects, contractors that been locked out due to contract disputes and contractors who are trying to collect what is due.
Wisconsin has laws and regulations that protect homeowners and contractors. This article address some of things both owners and contractors should know before beginning a home improvement project.
As usual we start with a quiz: True of False?
1. No building permit is needed for home improvement projects of $15,000 or less.
2. Any contractor can obtain the building permits needed to add a bathroom.
3. Wisconsin regulates the terms of home improvement contracts and changes to project schedules.
First, Know the Rules
The most important protections homeowners and contractors have are planning, knowing what to ask for, and knowing the law. There are a number of helpful brochures on building permits and home improvement projects available from state and local authorities. The Department of Agriculture Trade and Consumer Protection ATCP 110 regulates unfair marketing, contracting and construction practices. Wis. Stats. 779 gives contractors who follow the required steps the right to file construction liens to help ensure they are paid. Wis. Stats 779 also makes contractors responsible to pay their employees, subcontractors and material suppliers.. Wis. Stats 895.07 protects homeowners and contractors by requiring 90 day notice prior to litigating construction defects.
If You Don’t Have Plans, You Are Planning for Trouble
Planning takes time and offers a roadmap to guide you through the construction process. Socrates said, “Know thyself.” Make a sketch and write description of the work to be done. Specify by brand and model any equipment that the owner and the contractor will each purchase and/or install. Specify the quality and colors of important materials so the contractor can properly estimate allowances for lighting, floor coverings, etc. Sketching and writing out the plan helps owners add details to the dream and contractors recreate that dream from construction materials.
Owners should get multiple written bids from licensed contractors who are recommended by friends. Check references, Better Business Bureau ratings and suits filed on CCAP. If possible, go see their work. Owners should review the contractor’s license, workers compensation insurance, liability insurance and all building permits before work commences
Supervision keeps the job on track. Check on progress. Building inspectors (and your architect, if you have one) act as inspectors general. All alternations to a home require building permits. All work which affects the occupancy, area, structural strength, fire protection, exits, light, or ventilation of a building, requires a building permit. Minor repairs or alterations do not require a permit if they do not affect the occupancy, area, structural strength, fire protection, exits, light, or ventilation of a building. (See, for example, Oshkosh Building Code 7-12 and 7-30 exempting only minor repairs up to $1,000 in value). No one may start work under a home improvement contract until all required State and local permits have been issued. By law, your contractor must inform you about building permits required and give you copies of all inspection reports. Oshkosh and other municipalities will not issue permits to unlicensed contractors (factsheet). If you are adding space, you may need an occupancy permit for the new room(s).
Depending on the size of the project, owners may hold back 10% to 50% or more of the project price until the project is completed, inspected, approved and the contractor provides lien releases from all employees, subcontractors and suppliers.
What You Don’t Know About Advertising Statements Can Be Expensive
Wis. Stats. 100.18 (factsheet) and ATCP 110.02 (factsheet) allow homeowners to recover damages induced by untrue deceptive or misleading advertisements including the oral promises attorneys advise you to get in writing. Deceptive advertising includes:
o bait and switch selling tactics,
o disparaging or discouraging one product offered for sale to induce the buyer to purchase other products,
o substituting products or materials for those specified without the homeowners consent,
o failing to have available a quantity of the advertised product sufficient to meet reasonably anticipated demand, and
o misrepresenting that certain products or materials are unavailable or that there will be a long delay in their manufacture, delivery, service or installation.
Having second thoughts after signing? Wisconsin law allows homeowners three business days to cancel, but only if you were solicited and signed a contract for more than $25 at any location other than the contractor's regular place of business. Solicitation includes personal calls, telephone calls and direct mail. The contractor is required to provide owners with two copies of the notice of the right to cancel at the time the contract is signed. To cancel the sale, owners must sign and date a notice of cancellation and mail it to the contractor before midnight of the third business day. Sending cancellation notices by certified mail, return receipt requested, protects contractors and lets owners know the notice was delivered.
Let Your Contract Be Your Guide
ATCP 110.05 requires written contracts for all home improvement projects solicited and signed outside the contractors office and/or requiring payments prior to completion. Outside the office means in person, by mail, telephone, handbill or circular. Contractors and owners should protect themselves with a written contract that meets the requirements of ATCP 110.05. Contract requirements include:
o Name and address of the contractors and salesperson
o A description of the work to be done and the principal products and materials to be used or installed in performance of the contract. The description shall include, where applicable, the name, make, size, capacity, model and model year of principal products or fixtures to be installed, and the type, grade, quality, size or quantity of principal building or construction materials to be used. Where specific representations are made that certain types of products or materials will be used, or the buyer has specified that certain types of products or materials are to be used, a description of such products or materials shall be clearly set forth in the contract.
o A description of what the contract price does not cover. If the contract is time and materials, the contract should say how these are determined (e.g. hourly rates and mark-ups).
o Any warranties the contractor promises.
o All terms relevant to pricing and payment should be set forth.
o The written contract must be delivered before payments are made or work begins.
An accepted bid is a contract. Be careful as a bid may not contain all the information required by law for your protection.
Enforce Your Rights to Resolve Problems Without Litigation
ATCP 110 gives owners remedies for project delays or refusals to perform if you have paid for services in advance. Wis. Stats 779 gives lien rights to contractors and regulates the use of payments. Construction defects are handled under Wis. Stats 895.07.
What if the project is delayed? ATCP 110.02(7)(c) requires a contract schedule in the written contract and, in any case, that the contractor give owners notice and obtain their approval for any delay in the schedule.
If an owner has made an advance payment and believes the contractor has failed to supply materials and services in a timely manner, ATCP 110.07 gives the owner the right to do any or all of the following by sending a certified letter (form) to the contract.
o Cancel the contract.
o Demand return of all payments the contractor has not yet expended on the project with 15 days.
o Demand delivery of all materials paid for with the owner’s funds within 15 days or 5 days after delivery to the contractor, whichever is later
o Demand a detailed written accounting for all payments made within 30 days.
What if the contractor cannot or will not fix a construction defect? Wis. Stats. 895.07 requires that you give a contractor notice and a right to cure before filing suit. If you have made advance payments, ATCP 110.07 may apply. If you are thinking about litigation, please call so we can explain the procedure.
What happens if the contractor has financial issues? Wis. Stats. 779.02(5) and ATCP 110 require contractors to use all payments received on behalf of the owner exclusively for the owner’s project. Contractors must pay employees, subcontractors and suppliers before using an owner’s funds for his services, overhead and profit. Except for the initial deposit, owners should make payments only on written request with copies of signed lien releases from the contractor, each of his laborers and each of his suppliers. Lien releases for progress payments should be a partial lien release in the amount of the payment to be received. A lien release for a final payment should waive all lien rights. The final draw request on any project requiring a building permit should include a warranty that the project meets all applicable code requirements.
In construction projects, as in the rest of life, problems rarely go away and often get worse. Know the rules, make your plan, make frequent progress inspections and insist on formalities. If things go wrong, ask for advice on proper steps to take to protect your rights.
The law has teeth. If a contractor violates Wis. Stats. 100.18 and/or ATCP 110, the homeowner could receive double damages and attorney fees. Under Wis. Stats. 895.446, contractors may be liable for triple damages and attorney fees if they fail to pay 100% of all the project costs before reserving funds for overhead and profit.
For more information, email Ken Friedman, call him at 920-231-1500 or post a comment here.
Saturday, March 7, 2009
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