Monday, June 8, 2009

Oregon's New Construction Contract Law

Legislators in Salem dropped a list of new statutes on Oregon contractors in 2008. Like many other states, Oregon has jumped with both feet into writing residential construction contracts. And, like other states, Oregon imposes stiff penalties on contractors who aren’t paying attention. Most of the new requirements are simple disclosures designed to educate the buyer (home owner) before agreeing to anything.

If the value of a residential job exceeds $1,000, you'll need to supply a notice about construction liens. If the value exceeds $2,000, the contract has to include both a Consumer Protection Notice and a Notice of Procedure. All three of these notices have to be signed by both the contractor and the owner. The contractor has to keep a file copy for two years. The fine for failure to comply is up to $5,000. These three disclosure forms are available from the Oregon Construction Contractors Board at the CCB site. Unfortunately, these disclosures are just the beginning.

Oregon Administrative Rule 812-012-0110 requires that residential contracts explain property owner rights and terms of the contract. Most of what's required is strictly routine -- names and numbers. But some of what has to be in the contract is pretty much off the wall -- a description of the right to file a complaint. The same rule requires a checkbox in the contract disclosing whether arbitration is required to settle disputes. These disclosures are part of the contract. So no separate signature is required. Finally, for residential work, the owner has to receive notice of the right to cancel, using either the federal right of rescission form or an equivalent Oregon form.

More disclosures are required if the project is a new residence (rather than home improvement). As of July 2008, the contractor has to offer a written warranty against defects in material and workmanship. The owner has to acknowledge receipt of that offer and indicate either acceptance or rejection. No separate signature is required because this offer has to be part of the basic contract. Finally, you have to provide a Moisture Intrusion and Water Damage Maintenance Schedule and get the form signed by both the contractor and the owner.

If you haven't been counting, a total of seven disclosures are required, each with many parts. Obviously, it's easy for an Oregon contractor to make a mistake. And more than a few have. In the last three months of 2008, nearly 600 Oregon contractors were fined by Oregon's Construction Contractors Board. The average fine was about $1,000. Another 218 warnings were issued. Licenses were pulled on 204 contractors. In all, more than 2% of all licensed contractors in Oregon were cited by the CCB. And that was in just three months! Many of these fines were the result of a simple mistake – such as failure to attach a Consumer Protection Notice.

Oregon's seven disclosures add at least four pages to the shortest, simplest home improvement contract you can imagine. I wonder if disclosures aren't subject to the law of diminishing returns. Every additional disclosure form deflates the shock value of disclosures already made. If there's a practical limit to how much disclosure is too much, Oregon may be getting close.

But don't get me wrong. I like disclosures. The more the buyer knows, the better informed the decision. True, the new Oregon rules create a mine field for Oregon residential contractors. You have to be careful. But with one exception, Oregon has resisted the temptation to tip the fairness scale against contractors. That's what Pennsylvania and Texas do -- flatly outlawing some contract clauses or demanding others. Oregon doesn't do that. At least not yet.

The one exception: Oregon Revised Statutes Section 87.037 denies lien rights to prime contractors who do work valued at over $2,000 without a written contract. Think about that. No right to collect on the contract and no lien rights. It's heavy stuff. If you expect to get paid, you better have a written contract.

I can recommend a safe path through the maze Oregon has laid out. Construction-Contract.net has a good selection of residential contracts that comply with Oregon law. All download at no charge.

If you're serious about writing contracts that comply with Oregon law, have a look at OregonConstructionContract.Com.

3 comments:

  1. Hi Gary,

    Thanks for the very useful blog. I wish that I have read this sooner.

    We hired a shady contractor "Dan Thomas Concrete CCB 122421" in July 2009 for concrete work. He didn't want to sign a contract because our project only cost $5000.

    To cut the story short, we paid him the full amount ($5500) plus additional $500 after he completed the job in 1st Aug 2009.

    A few weeks later, we received 3 right to lien notices that he didn't pay his suppliers.

    BTW, some of the material were ours too. he used our home as the deliver address for his other project.

    I know the material were delievered to our house, but there isn't any signed contract.

    As the job is based on verbal contract, can the vendors have the right to put lien on our house?
    (Maybe the only doc that has his name is the Portland City permit)

    Under the court of law, is he my contractor?
    Do the vendors have the right to put lien on our house?

    Thanks Gary,

    ReplyDelete
  2. Expect valid liens to be filed if subs or suppliers have not been paid. (It's possible that they have been paid by now. Call each sub or supplier to find out.)

    If subs and suppliers have not been paid, I believe there's still an opportunity to recover. Dan Thomas Concrete CCB 122421 has been a licensed Oregon contractor since 1997, has a clean record, and has already settled disputes with three clients, according to the CCB site.

    https://ccbed.ccb.state.or.us/ccb_frames/consumer_info/search_results.asp?regno=122421

    Dan Thomas Concrete needs to settle one more dispute -- with you this time. From your comment, you've got a lot of leverage:

    Lack of a written contract as prescribed by Oregon Administrative Rules § 812-012-0110 is a violation of Oregon Revised Statutes § 701.305 and is punishable by a fine of from $500 to $2,000.

    Failure to provide the notices required by Oregon Revised Statutes §§ 701.310 (Notice of Right to Cancel), 701.320 (Offer of Warranty), 701.330 (Consumer Notice), 701.335 (Maintenance Schedule), 701.340 (Commercial Structure Warranty) or 701.348 (Building Sewer Notice), 87.093 (Construction Liens) makes the contractor liable for a fine of $500 to $1,000 for the first offense, up to $2,000 for the second offense and suspension of a contracting license for the third offense.

    You can initiate a complaint right from your disktop:

    https://ccbed.ccb.state.or.us/ccb_frames/enforcement_complaints/

    From what you say, this is a case perfect for CCB enforcement action.

    My suggestion: Check with subs and suppliers. If they have not been paid, follow up with CCB. You should come out OK.

    Then do Dan Thomas Concrete a favor. Recommend the site ConstructionContractWriter.com for a letter-perfect Oregon contract every time.

    ReplyDelete
  3. Thanks Gary for the useful links, I will start the complaint once I gather all the necessary information.

    He is licensed in both Oregon state and Washington state, I did find a Federal District Court lawsuit "Cruz et al v. Dan Thomas Construction Inc." Case Number: 3:2009cv00215.

    I have already confirmed with the suppliers that he didn't pay the bills. In fact, the suppliers told me that the lien process will begin this Friday.

    Dan Thomas told us that we will have a bigger bills if we don't pay the suppliers because there will be more fees when the lien is processed.

    Right now, my family is debating if we should give in and pay all his bills to the suppliers, including the material that he delivered to my house for his other projects.
    (Dan Thomas is very savvy, since all the material are lumped into the same invoice, I won't know which is mine and his)

    God bless you for the good work that you are doing!

    Once again, thank you for your advice

    ReplyDelete