Home Improvement Practices Rules

When the seller repairs property damage or cures defects


 Debbi Conrad  |    July 07, 2014
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When a seller in an offer to purchase transaction is faced with curing defects as part of the inspection contingency or must repair property damage between acceptance and closing, the seller will be working with various improvement contractors. The same is true for any homeowners looking to make improvements.

The rules for governing contractors who make these types of repairs and improvements have recently been modified by the Department of Agriculture, Trade and Consumer Protection (DATCP). The Wis. Admin. Code chapter ATCP 110, Home Improvement

Practices rules prohibit unfair trade practices that harm consumers and honest businesses. The rules were updated to reflect current practices in the home improvement industry. The new rules keep important protections for consumers, but also reduce paperwork, streamline processes and eliminate unnecessary requirements for business. The new revisions to Wis. Admin. Code chapter ATCP 110, found at docs.legis.wisconsin.gov/code/admin_code/atcp/090/110.pdf, became effective June 1, 2014.

Home improvements defined

These new rules apply to "home improvements," defined to include the remodeling, altering, repairing, painting or modernizing of residential or non-commercial property, or making additions thereto. It includes, but is not limited to, the construction, installation, replacement, improvement or repair of driveways, sidewalks, swimming pools, terraces, patios, landscaping, fences, porches, garages, basements and basement waterproofing, fire protection devices, heating and air conditioning equipment, water softeners, heaters and purifiers, wall-to-wall carpeting or attached or inlaid floor coverings, and other changes, repairs or improvements made with respect to residential or non-commercial property. "Home improvements" do not include the construction of a new residence or a major renovation where the total price is more than the assessed value of the existing structure.

Home improvement contracts

A home improvement contract can be an oral or written agreement between a home improvement contractor, called a “seller” in the rules, and the property owner, called “the buyer” in the rules. However, a written contract is required if the property owner is required to pay any consideration before the work is completed or if the contract was initiated via solicitation by the contractor. This would apply if the contractor solicited business face-to-face, by mail or telephone, or using handbills or circulars left at the property. A home improvement contract may also be between a contractor and a tenant if the tenant will be required to make any payment under the contract. All agreements where a contractor is to perform labor or provide services for home improvements, or furnish materials in connection therewith, are covered by the ATCP 110 rules.

Practice pointer: Any broker or agent working with a party engaging in repairs, improvements or remodeling may want to be sure that the party receives a copy of the Home Improvement Consumer Tips and the Right to Cure consumer brochures available from the DATCP at datcp.wi.gov/uploads/Consumer/pdf/HI-ConsumerTips136.pdf. 

Lien waivers

The ATCP 110 rules previously required contractors to provide lien waivers, both partial and final, in exchange for owner payments. Under the revised rules, the contractor is required to provide lien waivers only if the property owner or tenant requests them.

Under the revised Wis. Admin. Code § ATCP 110.025, the contractor is required to provide specific notice language to the owner, in a separate written notice, advising that he or she has a right to request lien waivers, and the contractor must retain evidence that the owner acknowledged receipt of the notice.

Practice pointer: This would be important for any repairs performed as part of a real estate transaction, especially if the repairs were for damage occurring between acceptance and closing because that section of the offer requires lien waivers. See, for example, lines 206-215 of the WB-11 Residential Offer to Purchase.

Permits and inspection certificates

Home improvement contractors must obtain all required state or local building permits before work can begin under the contract. Currently, all building permits must be issued prior to the start of work. The contractor must provide copies of all building inspection reports to the owner. Under the revised § ATCP 110.03, in lieu of providing inspection reports, the contractor can provide the owner with a summary of the inspections if the inspector does not issue an inspection document. Copies of inspection certificates for any legally required inspections shall be furnished to the owner when the project is completed and before final payment is due.

Practice pointer: This underscores the importance of pulling any necessary building permits for all repair, remodeling and improvement work done. Unpermitted work can lead to trouble with the local code authorities as well as placing the contractors in violation of the rule.

Manufacturer’s warranties

Contractors are still required to provide copies of all warranties. Contractors must provide manufacturers’ product warranties either at the time the consumer and contractor enter into the contract or when the product is installed. The updated § ATCP 110.04 also provides the option for contractors to provide the written manufacturer's warranties at the completion of the project so long as the owner is given notice of this practice in the contract.

Material substitutions

Wis. Admin. Code § ATCP 110.023 previously required written owner approval of any substituted products or materials that differ from those specified in the home improvement contract or that the seller represented would be used. If the home improvement contract was in writing, the owner’s consent to substitutions also must be in writing. The rule also includes a note that confirms that electronic communications can satisfy the written approval requirement. The revised § ATCP 110.023(1) also indicates that the consumer can authorize alterations verbally if the substitution does not represent any additional cost or a decrease in the value of the finished product and the contractor maintains documentation verifying the owner's approval. 

Practice pointer: Owners authorizing substitutions via email or by text would be wise to preserve documentation of that message in the event of disputes later on.

Proof of insurance

If a contractor is providing insurance, the contract must clearly state the terms, conditions and limitations, as well as the name and address of the insurer. Under § ATCP 110.05(4), the contractor is required to furnish a copy of the insuring or protection agreement to the owner before final payment is made. The revised rule states that a contractor can provide a declarations page or some other evidence of the insurance policy rather than the entire policy.

Notice of contract performance delay

A contractor is required to give an owner notice of an impending delay if the work would not be completed by the deadline stated in the contract. However, the revised § ATCP 110.027 clarifies that notice can be given electronically. In addition, contractors are not responsible for delays caused by action or inaction of the owner, destructive acts of nature, or disruptive civil disorder.
Wis. Admin. Code chapter ATCP 110 also addresses deceptive sales tactics, contract and disclosure requirements, and a three-day “cooling off” period for contracts solicited by the contractor (such as a door-to-door solicitation). 

Consumer remedies 

If, under a home improvement contract, a owner pays a contractor for any home improvement materials or services before the contractor provides those materials or services, the owner will have certain remedies if: (a) the contractor fails to provide the materials or services by the deadline specified in the home improvement contract; (b) the contractor fails to give the owner notice of an impending delay as required under § ATCP 110.027 or fails to obtain the owner’s agreement to a new performance deadline; or the owner believes that the contractor has failed to provide the materials or services in a timely manner when the home improvement contract does not specify a deadline. If there is a violation, the owner may: 

  • Cancel the contract. 
  • Demand the return of all payments that the contractor has not yet used. 
  • Demand delivery to the home improvement site of materials that have not yet been used. 
  • Demand a written accounting for all payments that the owner made to the contractor. 
  • Sue to contractor. Any person who suffers a monetary loss because of a violation of chapter ATCP 110 may sue the violator directly under Wis. Stat. § 100.20 (5) and may recover twice the amount of the loss, together with costs and reasonable attorneys’ fees.

The changes to the Home Improvement Practices rules will hopefully help protect property owners and contractors and allow remodeling, repair and improvement projects to run more smoothly.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.

 

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