Law Costs Contractors

By: Chad I. Michaelson, Esquire cim@muslaw.com

A new law meant to protect consumers from unscrupulous home remodeling contractors likely will increase the business costs of all contractors.

The Pennsylvania Home Improvement Consumer Protection Act imposes a host of new requirements on contractors in the home improvement business.

For one thing, contractors performing work on private residences will have to register with the Bureau of Consumer Protection every two years, starting July 1, 2009. Any contractor who earns more than $5,000 annually will have to register.

While the registration cost is only $50, it will be a little more expensive for contractors to include their new registration number on all advertisements, as the law requires. Contractors will have to pay for new billboards, car insignia, letterhead, business cards and other marketing material.
The new law also states that all remodeling contracts must contain a number of detailed terms and conditions. Under the new law, contractors also must get written change orders signed by both the contractor and customer for every change to the scope of work.

The new law requires contractors to maintain liability insurance covering a minimum of $50,000 in both personal injury and property damage. While many contractors currently have insurance, for some smaller ones, buying insurance will be a new business cost.

The largest cost burden of the new law will be borne by contractors who commit the new criminal offense of "home improvement fraud," for which the penalty could be as much as ten years in jail and a fine of $25,000.