Monday, May 31, 2010

Contracting in D.C. -- The Home Solicitation Sales Notice

Not many residential contractors think of themselves as door-to-door salespeople. But the law in most states puts nearly all residential contractors in the home solicitation sales business.

"So what," you say. "I'm not doing anything shady. I deliver real value and have nothing but satisfied customers."

Maybe so. But there's reason to be concerned and some steps you need to take. I'll explain both points using District of Columbia Code § 28-3811 as an example. (Requirements in 27 states are similar, though not identical.)

First, what's covered by the D.C. law?
Any cash or credit sale negotiated at or near the residence of an owner is defined as a home solicitation sale. That includes just about every home improvement contract ever written. You need to be on site to bid the job. There's an exception for deals closed at a permanent place of business where goods or services are sold. That excludes jobs written by big box retailers. But otherwise, if you discuss any construction work at the home of the property owner, it's a home solicitation sale and has to comply with § 28-3811.

Second, what does the law require?
That's easy. The answer in nearly all states is the same. The owner has three business days to cancel the deal. And in each of the 27 states plus the District, your contract has to include a notice of the right to cancel written in very specific words. In the District, those words are in § 28-3811(g)(2).

Is there any way around this 3-day right to cancel?
Yes, but it's not going to work every time. First, if there's a true emergency and if the owner signs a waiver, there is no right to cancel. Second, it's not a home solicitation sale if the owner initiates the contact and invites the contractor to make a sales call.

What's the penalty for omitting the notice?
Most states impose a fine up to $1,000. But that's just the beginning. Until the notice is delivered, the owner has the right to cancel the deal and get a full refund – even years after work is done!

I attach the Federal (Reg Z) 3-day right to cancel to my contracts. Isn't that enough?
In each of these 27 states and the District of Columbia, the local right to cancel is in addition to the Federal right to cancel. You need to provide both the state cancellation notice and the Federal cancellation notice as separate documents in these states:

Alabama, Alaska, Arizona (credit sales only), Arkansas, Connecticut, District of Columbia, Florida, Georgia, Hawaii, Indiana, Kentucky, Michigan, Mississippi, Missouri, Montana, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Oregon, Rhode Island, Texas, Vermont, Washington (roofing and siding only), West Virginia, Wisconsin, and Wyoming.

And what about the other 23 states?
Each has a home solicitation sales act. But in each of these 23 states, attaching at least two copies of the Federal Regulation Z notice to your contract meets the state requirement.

A word to the wise.
Don't give clients forever to request a full refund. If you do business in one of the 27 states or the District, include the required cancellation notice in your contract. If you make a living as a residential contractor in any of the 27 states, complying with state law is easy. Get Construction Contract Writer. The trial version is free.

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