We can agree that consumer protection laws serve a useful purpose. But laws too complex invite evasion. California’s home improvement contracting law is a poster child for that proposition. Most contractors don’t comply simply because they can’t figure out what the law requires. California’s CSLB assesses fines (“civil penalties”) against contractors who don’t comply – but does very little to make compliance easy.
Making It Easy
I’ve listed below everything California requires in a home improvement contract. Any residential job (including painting, landscaping and yard improvements) for more than $500 that’s done for an owner or a tenant occupying a residence needs these notices and disclosures. If you’re interested, required notices and disclosures make up 18 pages of this 21-page contract.
The entire contract has to be in writing, legible and in at least 10 point type.
Page 1 — The title “Home Improvement Contract” in boldface type.
Page 1 — The statement: “Any Notice of Cancellation can be sent to this address.”
Page 1 — The name and the address of the contractor.
Page 1 — Name and registration number of any salesperson.
Page 1 — The date the contract was signed by the owner.
Page 1 — In 12-point bold type: “You are entitled to a completely filled in copy. . .”
Page 2 — The contract price in dollars and cents.
Page 2 — An approximate date when work will begin.
Page 2 — What constitutes substantial commencement of the work.
Page 2 — An approximate date of completion.
Page 2 — The heading “List of Documents Incorporated into this Contract.”
Page 3 – The down payment can’t exceed $1,000 or 10%, whichever is less.
Pages 3 and 4 — A payment schedule showing the amount due by job phase.
Pages 4 and 5 – California’s Mechanics’ Lien Warning.
Page 5 — A statement on release of lien in exchange for payment.
Page 6 — Confirmation that the contractor carries (or doesn’t carry) liability insurance.
Page 6 — The name and phone number of the insurance carrier.
Page 6 — Information about the Contractor’s State License Board.
Page 8 — The statement on performance and payment bonds.
Page 8 — Notice of California’s 3-day right to cancel.
Page 9 — A checklist for homeowners.
Page 10 — Information about commercial general liability insurance.
Page 11 — A change order form incorporated into the agreement.
Page 11 — Notes about extra work and change orders.
Page 11 — A statement on requirements for a change order.
Page 12 — Receipt acknowledging delivery of the California’s 3-day right to cancel.
Pages 13 and 14 — California 3-day Notice of Cancellation.
Pages 18 and 20 — Federal right of rescission (Reg Z) notice.
Pages 19 and 21 — Explanation of the effects of rescission.
In the specs — A description of the site and significant materials to be used.
In the specs — Brand names if brands were mentioned during negotiations.
Add if the job includes a residential swimming pool:
Page 9 — Checklist for homeowners — swimming pools.
Plans and specs — A plan and scale drawing of the pool.
Add if the job includes structural pest control:
Page 3 — A reference to the structural pest control inspection report.
Page 7 — A lien notice for the owner in Bus and Prof Code section 8513.
Page 7 — Right to contract for pest control, B and P Code section 8514.5.
Add if the job includes thermal insulation:
Page 15 — Disclosure of insulation material, R-value and coverage area.
Add if arbitration is required to settle disputes (residential):
Page 5 — A disclosure that disputes must be settled by arbitration.
Page 6 — Initialed consent that disputes will be settled by arbitration.
Add if the contract includes a credit term (retail installment contract):
Page 6 — California security agreement notice and disclosures.
Pages 16 and 17 — Federal Truth in Lending disclosures.
Easier Still
Craftsman’s Construction Contract Writer drafts perfectly legal construction contracts for every state: residential and commercial prime contracts and subcontracts, cost-plus (time & material) contracts, green LEED contracts (commercial, IT or gut-rehab), home improvement contracts, pool contracts and construction management (consulting) contracts. The trial version is free.