Every contractor who does residential work knows about a
home owner's three-day right to cancel. But what you may not know is how
vicious this innocuous little form can be. Here's a short quiz to test your
understanding. Answers are below.
True or false?
1. The 3-day right to cancel is a federal notice and isn't required in most states.
2. There no harm in skipping this form. It's safe to leave it out of your contracts.
3. If you decide to include the notice in your contract, one copy is enough.
4. The 3-day right to cancel is required only on major home improvement jobs.
5. The 3-day right to cancel is required only if you extend credit to the owner.
First, something that should be obvious: Don't start work, don't deliver materials, don't schedule crews until three business days after the contract is signed. When a contract is cancelled under federal law (12 C.F.R. 226.15), you have to undo the deal at your own expense. Any lien you thought you had is cancelled. You're liable for twice any finance charge up to $1,000 plus costs and attorney fees.
Answer to Question 1 – Not required in most states.
False. The 3-day right to cancel is a federal right. But it's a right granted in all states any time you do work on the principal residence of the owner. Even if your state has its own 3-day right to cancel, you still have to deliver the federal form, filled out with the date of signing, your mailing address and the last day to cancel.
Answer to Question 2 – It's safe to skip this form.
False. It's not safe at all. Omitting the 3-day notice gives the owner three years to cancel (§ 226.15-b).After cancellation, you have the right to take materials back. But you have to make a full refund! Imagine making a full refund on a home improvement job three years after completion. More on that later.
Answer to Question 3 – One copy of the form is enough.
False. 12 CFR 226.15-b requires that each owner receive two copies of the cancellation notice. If two adults are living in a home, it's safe to assume that both are owners. Delivering less than four copies of the 3-day right to cancel is like delivering none at all. See Weeden v. Auto Workers Credit Union, Inc., 1999 U.S. App. LEXIS 5272.
Answer to Question 4 – Required only on major jobs.
False. The federal 3-day notice is required on every job that qualifies as the principal residence of the owner, whether a custom home, home improvement or home repair. There is no threshold dollar amount. Even replacing a water heater gives the owner 3 days to cancel. In a true emergency, the owner can waive the right to cancel with a written statement.
Answer to Question 5 – Required only if you extend credit.
False. The 3-day right to cancel exists on every job that could result in a lien on the owner's property. And that's every job because all states give contractors a construction lien for their work.
Don't let this happen to you.
A few years ago Alma and Robert Johnson needed a little work done on their front porch at 65 Stanford Street, Providence, Rhode Island. Interstate Contractors got the job. They finished the work and got paid -- $12,400. Unfortunately for Interstate, their work was better than their contract. I'll explain.
Two years later, the Johnson's had some financial reverses. Their home fell into foreclosure and the Johnsons filed for bankruptcy. One of their creditors had a smart attorney with the good sense to pull out the contract for that front porch job. Turns out, Interstate's contract wasn't quite right. There wasn't any federal 3-day cancellation notice. That was Interstate's Mistake One. The Johnson's could still cancel the job, two years after completion, and get a full refund under federal law. Great! But it gets better.
Rhode Island gives owners a 3-day right to cancel – but only if the owners don't get the federal right to cancel notice. Well, the Johnsons never got their federal notice. So Rhode Island's law applied. Interstate must have known that. Interstate's contract with the Johnsons included the Rhode Island 3-day cancellation notice. Unfortunately, the Rhode Island notice wasn't quite perfect. It wasn't in 10-point bold type. And one part of one paragraph was missing. Bingo! Interstate's Mistake Two.
So the Johnsons canceled under Rhode Island law. Interstate now had 20 days to refund the full $12,400. Too bad. They didn't make it. And that was Mistake Three. Failure to make a full refund in 20 days made Interstate liable to the Johnson's creditors for double the contract amount -- $24,800. And that was the award of the court. (I'm not making this up. See 239 B.R. 255.)
Like I said, that federal 3-day notice can be full of nasty surprises.
My recommendation: Don't be an Interstate. Use quality contracts that comply with both your state law and federal law. You'll find plenty here.
I am a consumer in Maryland that has read your blog with great interest. I am told, but not sure that I believe it, that this Federal law (12 C.F.R. 226.15) does NOT apply to a (in my case Maryland) renovation or construction contract and this federal law only applies only to the extension of credit when there is a security interest. This seems to go against the point you make in Question 5. Can you clarify?
ReplyDeleteThe Federal 3-day right to cancel (rescind) applies any time work is done on the principal residence of the owner. This federal right of rescission applies in all states even if there is no loan on the project.
DeleteThe Federal Truth in Lending Act is entirely different. TIL applies to every business (not just construction)::
(1) If credit is extended to a consumer, and
(2) If there is a finance charge or payments are due in more than four installments after work is completed, and
(3) If the credit is primarily for personal, family or household purposes.
TIL requires extensive disclosure of loan terms but does not include a right of rescission.
My brother and his wife just entered into a TEXAS residential construction contract with a general contractor/builder.
ReplyDeleteThere will NOT be a bank loan involved.
Rather, they will be using the proceeds of an insurance settlement received because a tornado destroyed their house.
Since no lender will be involved, are you sure that 12 CFR 226.15 will still apply as regards the 3-day rescission period?
The reason that I am having difficulty understanding your position regarding your ANSWER to Question 5 above (i.e., "The 3-day right to cancel exists on every job that could result in a lien on the owner's property. And that's every job because all states give contractors a construction lien for their work.") is because the title of Part 226 is "Truth in Lending," but as I stated in my brother's case there is NOT any bank lender.
I apologize for asking this question, but I really do NOT understand and need your help. Thank you, and have a very nice day! Best regards, Sissy
Hello again, Mr. Moselle!
ReplyDeleteI forgot to tell you one important thing, it seems - the builder/contractor is a Texas company, i.e., NOT from another state.
Best regards,
Sissy
Hi Sissy.
DeleteTruth In Lending (12 Code of Federal Regulations Part 226.1(c)(1)) gives borrowers three days to rescind any loan agreement which results in a security interest on the primary residence of the borrower. This is commonly called “Regulation Z.” TIL also requires extensive disclosure of loan terms such as interest rate, number of payments, etc. Since there is no lender on your brother’s job, there is no loan agreement and Reg Z does not apply to any lender. But your brother will sign a construction contract. Texas mechanics’ lien law will give the prime contractor a security interest on your brother’s new home while under construction. That prime contractor won’t have to make TIL loan disclosures because there is no loan. But since the contractor gets a security interest (lien) in the project, the contractor has to comply with the Reg Z three-day right to rescind.
Texas law requires a second three-day right to rescind notice if the construction contract is negotiated and signed at some location other than the office of the prime contractor. That’s Texas Business & Commercial Code § Section 601.052. Omitting the 3-day right to cancel form (1) voids the contract under § 601.201 and (2) gives an owner the right to collect actual damages plus attorney's fees and court costs under § 601.202. Section 601.152 requires that the prime contractor mention this right to cancel at the time the contract is signed. The domicile of the contractor doesn’t affect any of these obligations.
Sorry this is so complex.
So if I am unhappy with my roofing contractor, I can cancel our contract since I was never offered orally and/or written a 3-day cancellation notice? I am in Texas. My roofer is doing an awful job, to say the least. I've looked through the paperwork signed; we have no cancellation notice at all. Does this allow me to void the contract and hire a better contractor?
ReplyDeleteFiring a contractor in the middle of a job is asking for trouble. Certainly a defective contract doesn’t give you the right to terminate the contract. Anyhow, better options are available. Courts in most states won’t give the owner a windfall simply because the contract is defective – or even completely void. A court will award the contractor some amount, usually less than the contract price. But you don’t want to win a lawsuit. You want a good roof. To get that, you’ll need some leverage with this contractor. Here’s my recommendation. (1) As soon as possible, describe the defects you see. Follow up with a letter to the roofing contractor. No threats needed. Just identify the problems. Essentially this is a warranty claim. For example, “The job does not comply with the code, does not reflect good workmanship, etc. Here are the details . . .” Then explain that you don’t want to file a complaint with the Attorney General. You just want a good roofing job. (2) Assuming that doesn’t get results, try plan B. Explain that legal counsel has advised that the roofer’s contract does not comply with Texas law and is not enforceable. Specifically, the contract does not comply with Texas Business & Commercial Code § 601.001 to § 601.205. Section 601.052 of the Act requires that the contract include a notice of the three-day right to cancel. Section 601.053 requires that duplicate Notice of Cancellation forms be attached to the contract. Omitting the cancellation form (1) voids the contract under § 601.201 and (2) gives an owner the right to collect actual damages plus attorney fees and court costs under § 601.202. (I’m assuming work is being done on your residence and that the contract was negotiated and signed at some place other than the office of the contractor.) That will drive your roofing contractor to legal counsel – who will probably recommend that the roofer settle up with you double-quick.
ReplyDeleteI have entered into a contract in the state of Rhode with a contractor on 7/7/16. It is for the removal of a non load bearing wall and 2 bathrooms. While taking down the wall, the employee who did the demo decided to completely cut some electrical wires without a permit and consulting an electrician. Subsequently, the electrician made it very clear during a follow up conversation that nothing should have been cut without a consult and permit. I also paid 500 Dollard towards remedying the electrice that has been done, and feel I shouldn't have given any. 2 months later (after a verbal "3-5 days will be resolved") my power isn't on, holes have been cut in multiple places to remedy the situation and 3/4 of my house is uninhabitable. Also, finishing touches that were said would be finished on the wall removal haven't been. Additionally, they have moved forward with the demo of the first floor bathroom. I gave an additional $4500 toward the bathroom, and paid in full for the wall. Regarding the bathroom, They spent 2 days on the demo and haven't shown up in nearly 2 weeks to move forward. Someone either doesn't show, or there is an excuse as to why progress isn't being made. I want to abandon the contract and have consulted an attorney. I was never given the Federal 3 day right to cancel notice as well. What are my rights? I have 3 children, am a single parent and have lost all patience. Any feedback would be greatly appreciated. Thank you.
ReplyDeleteYou could terminate the contractor and hire a replacement contractor. That tends to be expensive -- paying the new contractor (almost certainly at a higher price) while defending against the claims of your first contractor. Remember, Rhode Island provides lien rights to all who improve real property. Your first contractor has advantages in court. I don't recommend relying on the federal right of rescission to resolve this dispute. I've never seen a case where Reg Z has helped resolve a case like this. Basically, the law is a blunt tool poorly designed to resolved what you've described. There are better choices, such as mediation or arbitration. Start with the Rhode Island Contractors' Registration and Licensing Board: http://www.crb.state.ri.us/consumerprotection/index.php. You're entitled to an administrative hearing. Prepare your case carefully -- pictures, witnesses, statements. The hearing officer has authority to assess fines, order work to be completed or even suspend the contractor's registration. That's a heavy incentive for any contractor. The threat of an administrative hearing should help focus the attention of your contractor on the job at hand.
ReplyDeleteIn California, from a contractual standpoint, what differentiates a residential job from a commercial job?
ReplyDelete"Residential" is defined in Section 1.1.3.1 of the California Residential Code as any space intended for regular use as a sleeping accommodation (with exceptions). California Civil Code Sections 895 to 945.5 set standards for residential "dwellings". California breaks "residential" into sub-categories for contract purposes. For example, contracts for construction of four units or less must meet specific requirements. Contracts for improvement of owner-occupied dwellings must meet other requirements.
DeleteGary, thank you for this blog. It is very helpful. So even if there is no loan, any contractor that may have a security interest in the property via a lien has to provide the Reg Z disclosures? Does Reg Z's "four installment rule" effect whether the disclosures are required?
ReplyDeleteCorrect. Reg Z disclosures (3-day right to cancel forms) are required any time you do work on the primary home of your client. That's true even if there is no loan and payment is due in full on completion. Every state gives lien rights. So you always have a security interest. Thus, Reg Z disclosures are required by 12 Code of Federal Regulation § 226.15(b). Truth in Lending disclosures are required by 12 Code of Federal Regulation § 226.1(c) and are entirely different. TIL disclosures are required in the contract only if there is loan on the project -- either (1) a loan extended by the contractor, or (2) a loan arranged by the contractor with some other lender. TIL considers it a "loan" by the contractor if payments will be made in more than four installments after work is completed. This "four installments" rule is part of TIL, not Reg Z.
ReplyDeleteMy husband signed a contract with a MN roofing company several weeks ago. Due to the contractor's poor communication (wouldn't return phone calls or e-mails even to tell us when he might have time to speak), we looked into another local company. When we e-mailed the contractor we'd signed with, he immediately responded with: "We have a contract. You will use us, or pay 25% of whatever insurance approved for the job". A nasty note from his lawyer stated the same. After reading through this blog, we realized that the 3 day cancellation notice was missing all together from his contract. When we pointed this out to his lawyer, he rudely replied "Their policy is to paperclip a copy to each contract. However, this is irrelevant". Why would a lawyer have that response? From what I've gathered from others, the 3 day notice is a LEGAL requirement. Is there some strange loophole we don't know about in the state of MN? We didn't even receive a paperclipped notice!
ReplyDeleteThe owner has three years to cancel any home improvement contract for improving the primary residence of the owner if the owner does not receive the 3-day federal notice. That's black letter law in all states, including MN. Anything to the contrary is just blowing smoke.
ReplyDeleteMy husband signed a proposal to get repairs completed on home after tornado damages. The proposal which the contractor is using as a contract does not include the 3-day notice. The contractor is using the insurance assessment to determine the cost for repairs. Our insurance company modify the assessment for additional repairs which were more than what we agreed for the contractor to complete. Our insurance company sent the contractor a copy of the changes but we did not sign any contract or change order modifying the contractor cost of repairs. We wanted another contractor to complete the additional work because of the shabby work of the first contractor and non-responsive to questions "when will you complete the job". The first contractor have sent us an invoice including the new assessment amount from the insurance adjuster. Do we have to pay this amount and can we use the 3-day federal notice. We are in the state of Virginia.
ReplyDeleteOur contractor's contract mentioned the Notice of Cancellation but didn't actually include it: One the front of the contract there was: "You may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the Notice of Cancellation included in this form for an explanation to this right." On the back of the contract, it stated "20. Section 7159 of the California Business and Professions Code as reproduced on the last page of this form, is incorporated hereby in these Terms and Conditions. In case of any lawsuit, customer is responsible for all legal fee (sic) that may accrue."
ReplyDeleteHowever, there was no last page with the 7159 code reproduced and it wasn't found anywhere in the contract. Does this mean that the Notice of Cancellation wasn't included? (I've looked up the contractor's license and he has had previous violations for not including the Notice of Cancellation.)
Our contractor mentions the Notice of Cancellation is his contract but doesn't actually include it. On the front of the contract it says, "You may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the Notice of Cancellation included in form for an explanation of this right." On the back it says, "20. Section 7159 of the California Business and Professions Code as reproduced on the last page of this form, is incorporated hereby in these Terms and Conditions. In case of any lawsuit, customer is responsible for all legal fee (sic) that may accrue."
ReplyDeleteThere was no Notice of Cancellation included. Does this mean the contractor can still sue us for not moving forward with our kitchen remodel after he botched our bathroom remodel?
Quoting the statute in your contract is not enough. California Business and Professions Code § 7159(e)(6) and (7) require that the full-page notice of cancellation appear in home improvement contracts if the deal was negotiated some place other than at the contractor's office or store. Failure to deliver the cancellation form does not void the contract. But it gives you the right to cancel the agreement after the three days has passed. Just tell the contractor by email, letter mail or by phone that you're cancelling. At that point, work should stop. You may have to pay for work done to the date of cancellation. But you're no longer obligated under the kitchen remodel contract. I would not be too concerned about liability for legal fees. If your contract requires payment of legal fee of the contractor, California law makes that obligation reciprocal. The contractor will have to pay your legal fees if you prevail in court. Last point: Don't rely on courts to settle this dispute. It takes too long and costs too much. Better choice: negotiate a settlement with the contractor. If not possible, file a complaint with the Contractors State License Board. An investigator will review the facts and make a recommendation -- quicker and far cheaper than getting a decision in court.
ReplyDeleteThank you! Much appreciated.
DeleteI am a residential siding and roofing contractor. There has recently been a crew labor shortage and we have noticed that homes affected by a June 2017 storm are still without repairs. We would like to reach out to these homeowners to offer our services but need to make sure we are having a fact supported conversation with a homeowner about their rights to cancel a repair contract prior to any work starting. I understand that if they did not receive the cancellation notice forms, they can cancel easily. But is there an argument about timely repairs that is assumed with a repair contract?
ReplyDeletethank you.
My June 30, 2012 blog post explains what you need to know about an owner's right to cancel residential repair contracts. https://garywmoselle.blogspot.com/2012/06/changes-in-3-day-right-to-cancel.html
DeleteNo state has any special rule on timely performance of repair contracts. If you specify a completion date, that's the best completion date. If you don't specify a date, the job should be completed in a "reasonable time". But note that many states require a completion date in home repair or improvement contracts.
Eighteen states have adopted special rules on cancellation of jobs at least partially funded by the proceeds of insurance. See my blog post of November 20, 2012 for the first 13 states,
https://garywmoselle.blogspot.com/search?q=storm
Since then, UT, SC, WI, MS & WV have adopted similar laws.
My husband signed the 1 page commit form with a storm chaser. Long story short, the claim was approved for $26,000. The roofer was wanting to rush and do the roof right away but I asked to hold off until spring time due to the cold winter and snow we have. They roofer threatened the 1 page contract I signed, that has no price or scope of work in it. And if we canceled with them I would need to pay 25% of claim. After doing more research, I uncovered many things I did not like about this company. They did a new roof for a neighbor of mine but the stack of shingles sat on the roof for over a month along with the roll off sitting in the driveway over a month as well. Sounds like they fired a the sub contractor doing the work, but then hired a new one. I then realized they hire other roofing companies to do the work for them and all they are as a company are a bunch of sales guys going door to door with hopes of landing a large claim to collect a nice commission check. Their attorney sent me a nasty letter as well, threatening the 25% or to allow them to do the roof. At this time, I do not trust them. I don't have a contract in place for the scope of work, what materials will be used, and what the cost is on this 1 page document. I received other bids and those documents do have scope of work and price all on it. How do I get out of this contract because I clearly will not be using this company who I do not trust.
ReplyDeleteMy husband signed the 1 page commit form with a storm chaser. Long story short, the claim was approved for $26,000. The roofer was wanting to rush and do the roof right away but I asked to hold off until spring time due to the cold winter and snow we have. They roofer threatened the 1 page contract I signed, that has no price or scope of work in it. And if we canceled with them I would need to pay 25% of claim. After doing more research, I uncovered many things I did not like about this company. They did a new roof for a neighbor of mine but the stack of shingles sat on the roof for over a month along with the roll off sitting in the driveway over a month as well. Sounds like they fired a the sub contractor doing the work, but then hired a new one. I then realized they hire other roofing companies to do the work for them and all they are as a company are a bunch of sales guys going door to door with hopes of landing a large claim to collect a nice commission check. Their attorney sent me a nasty letter as well, threatening the 25% or to allow them to do the roof. At this time, I do not trust them. I don't have a contract in place for the scope of work, what materials will be used, and what the cost is on this 1 page document. I received other bids and those documents do have scope of work and price all on it. How do I get out of this contract because I clearly will not be using this company who I do not trust. I live in Minnesota.
ReplyDeleteYou don't mention your state. So I can't quote any state law that may apply. Eighteen states give owners extra protection on insurance jobs. If you're in one of these 18 states, you can cancel the work without penalty up to three days after the claim is approved. Other states offer special protection for home improvement work. For work on the primary residence of an owner, delivery of a 3-day right to cancel notice is required. Without that notice, you have three years to cancel and get a refund. If your roofer makes demands, refer the issue to your state license board or attorney general.
ReplyDeleteThis three day rule sounds serious, I take it that it implies to the state of Florida as well?
ReplyDeleteThis three day rule sounds serious, I take it that it implies to the state of Florida as well?
ReplyDeleteYes. Every Florida construction contract which will result in a lien on the principal residence of an owner has to include a right of rescission - the right to back out of the deal. Since every private (as opposed to public works) construction contract in Florida can result in a construction lien on the property, this federal right of rescission is required on nearly every home improvement and custom home job - even if there is no loan on the project. In a genuine emergency, the owner can waive the right to rescind.
ReplyDeleteGary, if I am building a custom home on a raw lot in Virginia--owner prepared plans--do I understand you correctly that Regulation Z applies to this situation as well because of the security interest that arises as a result of a mechanic's lien? Really?
ReplyDeleteGary, What happens to a 3-day Right when the contractor does the job before the 3 days is up? HVAC jobs are often done on the same day or next day due to the necessity for cooling or heating.
ReplyDeleteMy neighbors signed a contract in WV for a new roof and did sign the 3day right to cancel.... problem is the sales individual would answer the phone calls to cancel and talk about the contract..... they were under the impression that they were signing a lock in prince and paid a 50 deposit not a contract the company resides in PA.... they have continued to try and work this out with the contractor but they insist that they do the work and be paid for it.... what can they do to get off of the contract..... they don’t have the money to do it and couldn’t secure the financing to pay for it .
ReplyDeleteIf the cost of a roofing job is covered by insurance in whole or part, West Virginia Code § 46A-6M-1 to § 46A-6M-6 gives the owner the right to cancel the contract within five days after being informed that all or any part of the insurance claim has been denied. Advance payment is prohibited until the five day cancellation period has passed.
DeleteIf the job is not covered by insurance, the owner still has three days to cancel, assuming the owner received a federal notice of cancellation form from the contractor. If no 3-day cancellation form was received as part of the contract, the owner has three years to cancel. In either case, just send the contractor a note making it clear the contract is cancelled.
West Virginia's Home Improvement Contracting Rule (§ 142-5-1 to § 142-5-4) sets standards for repair and remodeling contracts on homes, apartments and condominiums. Violation is a serious problem for any contractor. From what you say, the contractor has violated that Rule.
My recommendation: Have the owner advise the contractor (by mail or phone) that he plans to file a complaint with the WV Contractor License Board (304-558-7890 in Charleston) if a full refund is not made within 5 days. The owner could also sue for up to $5,000 in WV small claims court.
The law is heavily on the owner's side. But the owner has to make the law work as intended.
My neighbor signed a contract in North Carolina for a new roof contingent on insurance approval (which was approved).
ReplyDeleteThe contract has following in small letters on the back. "If claim is denied this agreement is null and void. You may cancel this contract at any time before midnight on the fifth business day after you have received written notification from your insurer that the claim is not a covered loss under the insurance policy. This right to cancel is in addition to any other rights of cancellation which may be found in state or federal law or regulation. See attached notice of cancellation form for an explanation of the right."
No attached notice of cancellation form was provided. The contract was signed about a month ago and no work has started. No payment made to roofing contractor.
What action can be taken to cancel this contract?
My neighbor has caught the roofing contractor with a couple of lies. And, wont be surprised if they lie about providing a notice.
The notice printed on the back of the contract is the statement required for storm repair work in Kentucky. It means nothing under either North Carolina law or US law.
ReplyDeleteIf the roof to be repaired was on your neighbor’s primary residence, U.S. law requires that the contractor provide the 3-day right to cancel form (Reg Z Notice). Failure to provide that notice gives your neighbor three years to cancel the contract under 12CFR 226.15 (a)(3). “If the required notice and material disclosures are not delivered, the right to rescind shall expire 3 years after the occurrence giving rise to the right of rescission . . .”
My recommendation: Have your neighbor advise the contractor (by mail or phone) that the contract is cancelled for failure to deliver the Reg. Z notice. If that doesn’t settle the issue, file a complaint with the NC Contractor License Board (919-571-4183) in Raleigh.
My neighbor sends her appreciation and many thanks. She says the roofing contractor was threatening to put a lien on the house and take her to court if she didn't move forward with the roof replacement. Once she communicated per your recommendation the roofing contractor quickly backed off and agreed the contract is null and void.
DeleteI live in NC and I hope you can tell me if this also applies to restoration and remediation companies.
ReplyDeleteI signed a contract with one company and after 4 1/2 hours they left and came back and wanted to cut out entire ceilings in several rooms. They had not even been in the attic to see if anything was wet. I had a few friends and myself to check it out. I also had another contractor to check after I told them to leave and he said there was just a few small areas in different rooms that needed sheet rock repair. I immediately cancelled the contract by calling and text message. I didn’t receive the cancellation form. This was all in less than 2 days.
I had already wrote him a check for several thousand dollars for my deductible and I haven’t been able to get any of this back.
Should he have to return any of my money?
My wife and I went through Hurricane Florence and sustained considerable damage to our house.
ReplyDeleteThe contractor we were going to hire told me that I needed to have a remediation company that he was using to come in and check for mold and tear out what was still wet. We had stayed during storm and had fans going even before power was restored using a generator. Our power was back on by third day and our house had completely dried out because it was about 4 weeks before the remediation company arrived . I was really hesitant about signing a contract with them because they seemed to want to tear my whole house apart. After having them to agree to cut out as little as possible to check for mold I signed a contract with them. The same day a crew of 5 people spent about 16 hours all total for the day. I had told them I wanted to see what they tore out and that didn’t happen. Myself and another contractor went into the attic and everything was completely dried out and we could not find anything. The next morning the original contractor showed up with 14 foot scaffolding and I ask what they needed it for and he told me they were going to cut the entire great room ceiling and upstairs ceilings completely out.
That employee had told me that he agreed with me that the house had dried out well. At this point I told him not to unload anything and called the one I signed the contract with I was canceling the contract. I had written him a check for several thousand dollars less than 2 days prior that was my deductible. He refused to give me anything back and almost a month later still hasn’t. I also did not get a cancellation form from him when I signed the contract.
I’m I entitled to my deductible back and how do I go about getting it. He has refused to give it back to me and he is from out of state.
Hi Razz77.
ReplyDeleteI see two questions. Can you (1) back out of the contract and (2) get a refund?
If this work is on your primary residence, U.S. law requires that the contractor deliver a Reg Z Notice (the 3-day right to cancel form) when the contract was signed. If you didn’t get that notice, and did not sign a waiver, 12CFR 226.15 (a)(3) gives you three years to cancel the contract: “If the required notice and material disclosures are not delivered, the right to rescind shall expire 3 years after the occurrence giving rise to the right of rescission . . .” So, the answer to the first question is clearly, “yes”.
Now, about the refund: Here’s what 12 Code of Federal Regulation Section 226.15(d) says:
“(1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void, and the consumer shall not be liable for any amount, including any finance charge.
(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.
(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section.”
If the remediation contractor won’t make a refund, you can (1) sue for a refund in small claims court and (2) file a complaint with the NC Contractor License Board (919-571-4183) in Raleigh. Suggest to the remediation contractor that you plan to do both if you don’t get a prompt refund.
To be fair, the contractor is entitled to payment for remediation work actually done. But notify your insurance carrier of the dispute with the contractor and advise them not to pay for any remediation work before consulting with you.
I live in Virginia and signed a contract to get my windows replaced and then mail the cancellation letter the next day because me and my wife did want to pay the intrest. So after that the company then got us 0%. With that being said shouldn't we have signed a new contract? as we are now having problems with them installing the window and my wife and I don't feel we have a contract because we cancelled the first contract. Shouldn't they have had us sign a new contract?
ReplyDeleteMy guess is that a rescinded rescission does not require a new contract – though I’ve never seen a case on point. But I see two issues: (1) Is the contract enforceable as written? (2) If not, are you liable for work actually done?
ReplyDeleteOn question 1: Almost certainly not. To be enforceable, the contract has to include pages of notices and disclosures required by both Title 18 Virginia Administrative Code Section 50-22-260 and the federal Truth in Lending Act (15 United States Code § 1638). I’ve never seen a valid home improvement contract that meets T-I-L standards (charging interest on deferred payments). Contractors usually leave T-I-L compliance to commercial lenders. Your legal counsel could settle this issue. Maybe a better choice: Explain to your contractor that you plan to call the Virginia Department of Professional and Occupational Regulation at (804) 367-8504 if the two of you can’t settle up on the amount owed.
On question 2: Even if the contract is not enforceable, you’ll be liable under Virginia’s Mechanics Lien Law for any work actually done. The contractor would have to prove the value of work completed. But note that Virginia Code Annotated Section 43-3-D denies lien rights to anyone doing work without the appropriate license or certificate.
Thank you for all your valuable information.
DeleteWe discussed with the owner of a local company, at our home, for a lawn irrigation system. We received a 'contract' (a single page form showing materials and labor costs) by e-mail that evening, which we have not yet signed or returned, three (3) day ago here at our home. We gave a $1,000 personal check as a deposit for a $3,100 project. I'm not sure if this would be considered 'home construction' or improvement, since it's in the yard, but it would be connected to the water system in the basement. We have since come to realize this contractor may have a very poor reputation here in Virginia. Do we have a right to a three day 'out' at this point?
ReplyDeleteYou have the right to rescind and recover your $1,000 deposit. Three reasons: (1) You have not signed the contract. There is no agreement for the contractor to proceed. If no work is done, you’re entitled to your money back. That’s obvious. (2) Even if you had a valid agreement, both Virginia and federal regulations (Title 18 Virginia Administrative Code § 50-22-260, 12 Code of Federal Regulations § 226.15) give you three days to back out of the deal if the work would result in a lien on your home. Beyond doubt, installing a sprinkler system at your home would give lien rights under Virginia law. (3) From your description, the “contract” offered does not meet Virginia standards for a valid agreement under Title 18 Virginia Administrative Code § 50-22-260A(9). My recommendation: Explain to the contractor that: (1) You don’t want to proceed and (2) Want a refund and (3) Plan to contact the Virginia Board for Contractors (804-367-8504) and file a complaint in Virginia small claims court if you don’t get the $1,000 back promptly.
ReplyDeletemy friend in fl signed a construction contract after his primary residence burned due to fire. no 3-day notice was given. just before the 90th day (significant in fl home improvement contracts) the general contractor put a dumpster on site and did "muck out" removal of burned items. prior to signing my friend was promised he would be in his home before the one-year ALE (insurance for additional living expenses) expired. six months have gone by with no further work. the promised time to complete which induced my friend to sign the contract was oral, but not included in the written contract. now the GC says it will be one year from today (18 months total) and my friend will be homeless after the months pf ALE is used up. he wants to fire the GC. what will.can happen if he does.
ReplyDeleteIf no three-day notice was given and if the home is intended as a principal residence, Title 12, Code of Federal Regulations, Section 226.15(a)(3) gives your friend three years to cancel the contract. No special cancellation form is needed. Just end a letter invoking the right to cancel. Section 226.15(d) spells out what has to happen on cancellation. “When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void, and the consumer shall not be liable for any amount, including any finance charge.” Still, I recommend that your friend offer to pay for work actually done (the muck out).
ReplyDeleteHello Mr. Moselle, I have a question. I am having a bathroom remodeled and paid $3000 about 2/3 of the way through a $5,000 proposal for one bathroom and no work on the second bathroom (another $5000). After 6 weeks, the first bathroom remained unfinished. When the contractor came to finish, we asked he complete the first bathroom for the agreed upon amount (another $2000) and that we had changed our minds about the 2nd bathroom. He immediately pulled his worker off the bathroom without doing anything and left the shower installation incomplete (wall with holes around the edge and not shower head), the toilet edge uncaulked, the hot water line not connected in the vanity and no trim on the wall-floor edge or around the door. He has since written up an termination agreement with an ending amount of $2850 for the first bathroom (exceeding the proposal amount). He's also added several stipulations and said if we don't take it, he will file a mechanics lien on our property. He did not include a notice of cancellation and we are submitting one now via certified mail. Where does this leave us? Can he still take out a lien?
ReplyDeleteYes. Any contractor who does work on your property at your direction has lien rights. What you do about his invoice depends on (1) what your contract says and (2) who breached the contract. A material breach of contract would give your contractor a claim to lost profits. See my blog post at https://garywmoselle.blogspot.com/2016/09/cant-i-just-fire-my-contractor.html.
ReplyDeletePrimary issue: Who committed the first breach of contract. If the contractor committed the first material breach (by taking 6 weeks on bathroom one), you had the right to terminate bathroom 2. if you committed the first material breach, your contractor has a claim to lost profits. Resolving this issue will burn through many thousands in legal fees. Better by far to reach some mutually satisfactory solution through good sense and compromise. In your favor: From your account, I doubt the contract complies with either California or federal law. My suggestion: Make a good-faith offer to compromise the contractor's claim. Explain that if compromise fails, you plan to file for mandatory arbitration with the CSLB.
http://www.cslb.ca.gov/Resources/GuidesAndPublications/MandatoryArbitrationGuide.pdf
That should end the matter.
We live in Virginia. We signed a contract for a bathroom remodel. The contractor gave himself 10 weeks and then gave himself 9 weeks because the shower bench needed to be corrected. After 19 weeks, the bathroom is no where near being completed. (No walls, ceiling, no door, vanity, sinks, faucets, drains, closet, lighting, toilet. All we have is a very poorly partially tiled shower with tiles 3/4” off the wall. We ended up telling the contractor we did not want them to finish due to very poor quality and no end in sight. We were unaware the shower tiles could not be finished because the cement board is bowed. 3 contractors who looked at the shower stated the framing is probably poorly constructed as well. We had hoped we were about even with payments but now we have to pull most of the bathroom out and start over. We feel there are many breaches and know there are many DPOR violations. There is no “right to Rescind” clause. Can we demand a refund for the money we already paid? Will the omission prevent the contractor from suing us for loss of profits? Thank you.
ReplyDeleteMy recommendation: Make a fair offer to the contractor, i.e. pay for materials used but request a refund of the cost of labor. Explain that if you can't resolve this promptly, you're going to file a complaint with the Board for Contractors, Professional and Occupational Regulation, (804) 367-8504. Two VA statutes are relevant: First: Under Virginia Code Annotated § 54.1-1115, contracts for work done in Virginia are not enforceable by unlicensed contractors. Second: 18 Virginia Administrative Code § 50-22-260(B)(14) prohibits licensed contractors from abandoning of a project for 30 days. Under (B)(15), unjustified failure to complete work contracted for is a prohibited act. The law is on your side. If DPOR can't help resolve this, take pictures, document everything that happened and use VA Small Claims Court to recover up to $5,000. Citing failure to give the federal 3-day notice isn't likely to help in a case like this. It's a federal remedy. But Virginia law (Administrative Code § 50-22-260) requires multiple notices and disclosures in residential contracts. Virginia courts will enforce those standards. Without those notices and disclosures, your contractor won't get traction in any Virginia court.
DeleteA salesperson for a company called Community Builders came to our home Saturday and presented a bathtub remodeling job. We live in Oklahoma. I signed a contract for work to be done with the understanding that I would need to check on some refinishing work before I could fully commit to the work. I gave him an $850 check for a down payment. He did NOT discuss or give me ANY forms for rescinding the contract. I thought he was organizing a folder to leave with me which contained a copy of the work we discussed and contained the work contract (Which as far as I know, did not have anything about the federal right to rescind), but as he left, he took the folder with him. The folder was sitting in front of us on the kitchen counter while we finished our discussion, but now, I cannot find the folder anywhere. I have confirmed with him that he "accidentally" took ALL the information with him - He did not even leave the Company's address. I have since looked the address up online, so I assume that will be the correct address to mail my intention to rescind to. I have decided that the work he presented to us is not going to be adequate for my needs, but I have no idea of how to rescind the agreement, especially without having the contract in front of me. He also said he would e-mail me the picture of what we were planning when he got home, but I have not received any e-mail at this time (one day later). He e-mailed this to me while I was writing this, but I still want to rescind. I am concerned because I may not have the actual address that is on the forms (contract) that I signed? What happens if I mail my intention to back out and they then say I mailed it to the wrong place?
ReplyDeleteAnything you do to indicate you're backing out of the deal is good enough: An email, phone call, letter, etc. Anything works. Under federal law, you have three days to rescind, starting on the day you receive the rescission form. Because you have not received the 3-day notice yet, the three days hasn't started running. But there's no reason to delay. I would send an email (1) rescinding the deal and (2) explaining where to send the refund check. If you don't get a refund in 10 days, plan to file suit in small claims court.
DeleteA general contractor in Texas came to my residence after a bad hail storm. Offered no charge deductable total amount would be per insurance claim scope of work.
ReplyDeleteI signed contract not knowing how much a roof replacement would cost to begin with, and as such his contract states price is insurance claim replacement cost value plus 10% overhead and 10% profit. No 3-day cancellation was mentioned verbally or on contract. Inn small font, however, the contract states "This agreement becomes permanent and non-cancelable after contractor gets approval for roof replacement by insurance company", which insurance did approve claim.
My question is it seems the contract is void. Is the contract still enforceable even with the last part in small font?
Based on your summary, I doubt that anyone would try to enforce the contract you signed. If the contract was negotiated and signed at a place other than the store or office of the contractor, the Texas Home Solicitation Sales Act (Texas Business & Commercial Code § 601.001 to § 601.205) requires that duplicate cancellation forms be attached to the contract. To be legal, these forms must be in at least 10-point bold type. Failure to comply with the Act (1) voids the contract under § 601.201 and (2) gives you the right to collect actual damages plus attorney fees and court costs if suit is necessary.
ReplyDeleteIf your home qualifies as a homestead, Texas Property Code § 41.007(a) requires that a notice (“IMPORTANT NOTICE”) be included in contracts for building or remodeling residential property. Failure to include the notice is a deceptive act or practice under § 17.46 of the Texas Business and Commerce Code. You could bring suit under the Texas Deceptive Trade Practices-Consumer Protection Act.
You’ve got some big levers if the contractor starts making demands. But avoiding suit is a better choice. If the contractor is willing to be reasonable, suggest a compromise fair to both sides.
Mr. Moselle,
DeleteYour blog has been a tremendous help in understanding construction contracts and state law. Thank you for your quick response and pointing me toward the resources needed to hopefully remedy my situation.
Mr. Moselle,
DeleteYour blog has been a tremendous help in understanding construction contracts and state law. Thank you for your quick response and pointing me toward the resources needed to hopefully remedy my situation.
Hello, my brother lives in MD, and had a contractor provide an estimate to replace the roof at his home. Total estimate was $8k and half deposit. They signed a contract, which was a piece of paper, handwritten on an invoice slip (work to be done); there was no fineprint or any mention of cancellation terms. Deposit was paid on 9/14/19. My brother called to cancel on 9/17/19. Contractor stated materials were purchased and that he had to deliver them per contract, but he would write up another contract to terminate the original one and both parties agree to not move forward with the roof job. On 9/18/19, my brother refused the delivery of the materials. Contractor did bring another contract (hand-written on yellow legal paper) that said:
ReplyDelete- Relinquish contractor from any and all responsibility for above stated roofing contract
- My brother broke legal binding contract on 9/18/19
- In return of my brother relinquishing contractor from any and all responsibility for the above stated contract, contractor relinquish my brother from the remaining balance on said contract of $4,000. My brother is free to hire whomever he wish to complete the job.
- Material was picked up and delivered at my brother's address, but delivery was refused on 9/18/19
- Both parties agree that this will conclude our contract concerning any and all business dealings concerning said roof.
Both pieces of paper had my brother's name and address, but only the contractor's name and city/state/zip. The contractor said he used the deposit to purchase the materials. When we asked what store he purchased the materials, he wouldn't specify besides what county he purchased from. And when we asked for the receipt for the materials, the contractor said there's no receipt because where he got the materials from, they do not provide or there's no receipt.
Is my brother covered by the three-day right to cancel? If so, he's entitled to a refund of his deposit, correct? I understand if materials were purchased, we should pay for the materials, but the contractor would not provide a receipt for the purchase. Instead the contractor offered to sell the materials for us and give us the money. On 9/19/19 the contractor said he has a potential job that could use the materials but he's waiting to hear back from the homeowner. On 9/20/19, the contractor said he was still waiting to hear back. Please advise on what action(s) my brother can take now. He would like his deposit refunded. Thank you.
Maryland has very detailed contract requirements for home improvement work: Maryland Business Regulation Code Annotated § 8-101, § 8-102 and § 8-103 puts nearly every home repair or home improvement project under the Home Improvement Law. Maryland Business Regulation Code Annotated § 8-501 lists notices and disclosures required in home improvement contracts. Section 8-617 limits advance payments to one-third of the home improvement contract price. Section 8-605 prohibits abandonment and deviation from the terms of a home improvement contract without consent of the owner. Sections 8-607 and 8-608 prohibit false promises, misrepresentations and fraud in home improvement contracts. Section 8-620 authorizes Maryland Home Improvement Commission to collect a civil penalty of $5,000 for violation of the Home Improvement Law. Section 8-623 makes violation a misdemeanor punishable by a fine of $1,000 and 6 months in jail. Code of Maryland Regulations § 09.08.01.26 requires three specific disclosures in home improvement contracts: (1) Formal mediation of disputes, (2) The Guaranty Fund, and (3) Performance bonds.
DeleteFrom your summary of the facts, the roofing contract your brother signed did not meet any of these standards and is void. Nothing further is required. Your brother has no obligation to pay for materials ordered. Suggest to the contractor that a full refund is due. If not received promptly, you plan to file a complaint with the Maryland Home Improvement Commission, 500 North Calvert Street, Baltimore, Maryland 21202-3651, 410-230-6309. Your brother should have his deposit back without delay.
Thank you so much for your reply. I will pass this along to him. To date, my brother has not heard back from the contractor whether he was able to sell the materials for him. If he does end up filing a compliant, the bad thing is he does not have an address for the contractor as his business card doesn't include one (just name/phone) and the two written contracts do not include an address either (besides city/state/zip). I will tell him not to do cash deposits anymore. What are the chances this will work against my brother?
DeleteAnna, my response assumed the "contractor" was licensed. If not licensed, your brother's best best will be small claims court. The North Carolina Licensing Board offers a search of licensed contractors and will follow up on info you provide about unlicensed contractors. Your brother may be able to trace the "contractor" through payment, such as a cancelled check or charge card receipt.
ReplyDeleteHi Gary, If a contractor provides the notice of cancellation form that is required by state statute, does he meet his legal obligations? Or must he provide the Federal cancellation form in addition to any state required form? Thank you.
ReplyDeleteThe federal 3-day cancellation notice is always required when any improvement to a primary residence provides a lien on that property. Since all states grant mechanics' lien rights for improvements to private property, the federal notice is always required. The only exception is a secondary residence, such as a vacation home. In that case, the federal 3-day cancellation notice is not required. Many states also require a 3-day notice of cancellation on residential jobs, in some cases even on secondary residences such as vacation homes. Some states require a 3-day cancellation notice on any sale made in a residence, even if the sale doesn't involve construction. The advantage of state 3-day cancellation notices is that the remedy for breach is available in state court. No need to file suit in federal court. But many states waive the requirement for a state 3-day cancellation notice if the contract includes the federal notice required by Truth in Lending law. Some states require the state notice even if a contract includes the federal notice. This isn't a simple issue. But Construction Contract Writer collects all the relevant info so your contracts comply with both state and federal law.
ReplyDeleteHi Gary, Here's an interesting question from California. A contract was signed in the home on 7/21, only one copy (the carbon) of the 3-day right to cancel was provided showing it needed to be mailed by midnight on 7/24. Workers arrived (on 7/22) very early the morning following signing of the contract and began the work, prior to the 3-day cancellation period. What are the repercussions to a contractor who bypasses the 3 day rescission right? What options does the homeowner have?
ReplyDeleteThere’s risk in starting work before the 3-day cancellation period has expired. 12 Code of Federal Regulation Section 226.15(d) identifies responsibility of both the contractor (“creditor”) and the owner (“consumer”) if a job is cancelled within the three-day period:
ReplyDelete(1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void, and the consumer shall not be liable for any amount, including any finance charge.
(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.
(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph 2 above. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer's option, tender of property may be made at the location of the property or at the consumer's residence. Tender of money must be made at the creditor's designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer's tender, the consumer may keep it without further obligation
Thank you. We understand the risks. The issue is that the contractor strong-armed the consumer (my mother) into beginning the work the very next morning (we learned from the city that the permit had not been pulled until 2 hours after the work began). I am now trying to understand how to hold the contractor accountable for not providing the 3 days. Had the 3 days been in effect, we would have had an opportunity to review the contract with her and would have advised her to cancel it. She never had the chance to discuss it with anyone.
DeleteAssuming your mother cancelled within 3 days, any lien on the property is void and the contract is unenforceable. My recommendation: Explain the law to the contractor. Suggest that the contractor get the advice of counsel. If the contractor doesn’t comply with the law promptly, you plan to complain to the CSLB and file suit in federal court. That should settle the matter promptly.
ReplyDeleteHi I live in Illinois. I signed a contract in my home with a contractor to replace trim in my home. The cost of replacing the trim was $15853.00 I gave a deposit of $3963.25. The contract was signed on 9-19-19. I paid the deposit on my Discover card. I sent him a text on 9-21-19 explaining that I wanted to cancel my contract with him. He did respond that it was late and we could talk tomorrow. I followed up the following day with an email, to which he replied he was not going to be refunding me my deposit. I never received any right of rescission which I too informed him of. He said he was going to keep the money for all the leg work and research he put in before signing the contract. Long story short I tried to dispute it with Discover and they said it can not be disputed as it was a signed contract and I canceled it. What are my rights? Is it worth the cost to get an attorney?
ReplyDeleteIf this home is your primary residence and if you cancelled within three business days, 12 Code of Federal Regulation Section 226.15(d) describes your right to a full refund:
Delete(1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void, and the consumer shall not be liable for any amount, including any finance charge.
(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.
(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer's option, tender of property may be made at the location of the property or at the consumer's residence. Tender of money must be made at the creditor's designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer's tender, the consumer may keep it without further obligation.
Your right to a refund is clear under both Illinois and federal law. Collecting may not be easy. My suggestions: (1) Explain your right to a full refund under federal law. (2) Advise that you plan to file suit in small claims court and initiate a complaint with the Illinois Attorney General’s Office if a refund isn’t received in 10 days. (3) Suggest that failure to make a full refund within 10 days after written demand is an unlawful act or practice under The Consumer Fraud and Deceptive Business Practices Act, 815 Illinois Compiled Statutes § 505/2Q(c). Punishment can result in a suspension of the right to do business and a fine of up to $50,000. (§ 505/7(c)) In addition, anyone who suffers a loss as a result of an unlawful act or practice under the Act can bring suit to recover that loss plus punitive damages, attorney fees and court costs. § 505/10a.
This comment has been removed by a blog administrator.
ReplyDeleteHi Gary, I'm a homeowner in California. I entered into a built-in closet installation contract with a closet installer. His employee (authorized sales representative) negotiated prices and signed the contract in its signature box labeled as "Authorized Signature (Contractor)".
ReplyDeleteThey did not inform me nor provide me with any federal notice (which, btw, I just learned about only through your blog!) but the sales contract form has a 'Notice of Cancellation' line stating exactly this: "Either party may cancel this transaction, without penalty or obligation, within 3 business days from the date as signed below. Any notice of cancellation must be signed, dated and delivered in writing (to the business address)".
The sales person signed the contract 5 days prior to taking my signature. (I signed the contract 5 days later because we were still finalizing prices and discounts up until then)
Now, on the 3rd business day after I had signed the contract and had scheduled the installation job date, salesperson's boss called and left a voice message stating that there are discounts in the price which were not authorized - (although that is not true since the salesperson did call his boss in front of me and spoke with him directly about all the options and seasonal discounts they are currently advertising and got a final figure from his boss to handwrite it on the contract before securing my signature). His voice message states that either I agree to an increased price or he will cancel the contract. Can he do that?
I would like to keep the contract stay in effect just as of the final price we had agreed upon in the contract.
What's my remedy?
You're right on the two key issues. (1) The right to cancel statement does not comply with federal law. (2) You had a valid contract on the third business day after signing. But check the contract. Many consumer agreements bind the vendor only after approval by a company officer or director. If you see that language in the contract, better to renegotiate the agreement. If there's no such language in the contract and if the contractor won't do the work at the first price quoted, explain that you're going to either (1) have the work done by others and sue in small claims court for any difference in price, or (2) file a complaint with the California State License Board. I expect that will resolve the issue.
ReplyDeleteHowdy (from Texas)! Apologies that you get to repeat yourself so much - I've read through most of the Q&A, but think I still have some queries that aren't covered. I'm plagued by indecision because it's gotten hostile. I've spoken with 3 lawyers; 2 claim I'm not covered by the 3-day right, and one says I am.
ReplyDeleteBackground: I hired a contractor & paid a deposit 4 days before work was supposed to start. Didn't start. Unconcerned at first, but with COVID it was suddenly 30 days later, then longer. I wasn't comfortable with them working under shut down, but apparently wasn't going to get my deposit back if they had to wait 6mo.
Contract and negotiations had zero statements about cancellation or non-refundable deposit. I would have been allowed to provide the deposit when he was on site the following week, but he said if I gave it then, he could purchase materials and be ready. Had there been a ‘you are bound by this no matter what’ clause, or anything other than what I took to be 2 people agreeing to be good people, I would have made different choices.
Then I lost my job. I asked him for my deposit back due to unforeseen change, and he refused. Said he'd put in too much work on the estimate (didn't agree to pay for that), and he’ll either start or delay, but not refund. He’s gotten abusive and is gaslighting, and now I’m scared to even be in his presence, much less trapped in my home for the month he’s working here.
How do judges/lawyers tend to respond to the 3-day right being used? We have a lot of 'good old boys' who sometimes will decide that choosing to use a law like this is ridiculous and unfair and give legal fees to the other guy.
What is the responsibility/override of the verbal contract if I'm able to claim that our paper contract is void?
What does the AG do regarding recovery? Is there a possibility I will have to lawyer up to get my money back after filing with them?
What about the FTC exemption ‘does not include a transaction in which the buyer has initiated the contact and specifically requested the seller to visit the buyer's home for the purpose of repairing or performing maintenance upon the buyer's personal property’? Texas does not have that phrasing in our version of the law. It is aesthetic work, but due to a previous contractor who was bad at his job, there is a repair aspect to part of it.
Can he ask for material costs? Can he charge for time that he spent ‘thinking’ about or ordering materials? In my original cancellation letter I offered to pay for unreturnable materials, but asked that they be brought to me with original receipts. Am I still obligated to that? What about the work on the estimate? That was part of his claim for entitlement to the money.
Basically, I’m curious where my weaknesses are. How can this come back to bite me even worse than allowing a dude who is being an intimidating bully to be at my home for a month? Obviously, if the work had been completed on time, I would have to figure out how to survive without those funds – but I’d currently like the option of not getting further involved.
Thank you for existing!
I live in Virginia and signed a contract to get my windows replaced and then mail the cancellation letter the next day because me and my wife did want to pay the intrest.
ReplyDeleteRaleigh general contractor
If you mailed the cancellation letter the next day, the contract is cancelled. Your rights are spelled out in 12 Code of Federal Regulation Section 226.15(d): Within 20 calendar days after receipt of your letter, the contractor has to return any deposit and cancel any lien placed on your home. My experience: Authorized window replacement companies avoid disputes with their clients to maintain good relations with their suppliers. If you have trouble getting a refund, take up the issue with the window manufacturer.
DeleteTexas law provides plenty of options. Texas Business & Commercial Code § 601.001 to § 601.205. Section 601.052 of the Act requires that the contract include a notice of the three-day right to cancel. Section 601.053 requires that duplicate Notice of Cancellation forms be attached to the contract. Omitting the cancellation form (1) voids the contract under § 601.201 and (2) gives you the right to collect actual damages plus attorney's fees and court costs under § 601.202. Section 601.152 requires that Contractor mention the right to cancel at the time the contract is signed. My conclusion: The law is heavily on your side in this dispute. Lay out your case. Show that you're serious about getting a refund. I expect a quick resolution.
ReplyDeleteI live in Minnesota and I signed a contract for roof to be done through insurance I was told I had some days to cancel but never got a written copy of the contract, in between the claim we had some issues and were not able to afford the deductible so I told the representative I could not make it and needed no cancel, he said we couldn’t that the contract stated that I had to then pay 30% of the cost plus for the services they did which was only taking pictures, we had a meeting with them in which we were treated like kids talked down the entire time and told we couldn’t cancel our contract I found this online and I am trying to figure out if it applies to my contract as I never got a copy of it thank youhttps://www.ag.state.mn.us/Consumer/Publications/CoolingOffPeriod.asp
ReplyDelete12 Code of Federal Regulations § 226.15 requires that every contract which results in a lien on the principal residence of an owner include a right of rescission - the right to back out of the deal. Since every private (as opposed to public works) construction contract can result in mechanics' lien on the property, this federal right of rescission is required on nearly every home improvement and custom home job - even if there is no loan on the project. This federal right of rescission expires at midnight on the third business day after signing the contract. Saturday is considered a business day. Minn. Stat. § 325G.08 provides a similar 3-day right to cancel but is waived if the federal cancellation notice is delivered. If you received neither the federal written notice nor the Minnesota written notice, the contract is void and you're entitled to a full refund.
ReplyDeleteI am a consumer in North Carolina and I signed a reconstruction contract, but the contract does not have a 3 day cancellation clause. I have an insurance claim due to a bathroom leak which caused water damage and mold. The contractor worked with my adjust or and I told the contractor that I wanted to get two more estimates on my project and he replied that I owe him $4,500.00 as if he completed the project for all his work with my insurance adjuster. Is this money owed to him and was told when iI signed the contract that he would send me an updated contract because things were off, but I never received it did the contract provide me away out. What should I do? Is this contract binding,?
ReplyDelete12 Code of Federal Regulations § 226.15 requires that every contract which results in a lien on the principal residence of an owner include a right of rescission - the right to back out of the deal. Since every private (as opposed to public works) construction contract can result in mechanics' lien on the property, this federal right of rescission is required on nearly every home improvement and custom home job - even if there is no loan on the project. This federal right of rescission expires at midnight on the third business day after signing the contract. But if a contractor failed to provide the the federal 3-day right-to-cancel form, you have three years to cancel. Even if this is not your primary residence, North Carolina General Statutes § 14-401.13 (c)(1)b gives you three days to cancel the contract. My recommendation: advise your contractor that you have cancelled the contract and have no further obligation under both state and federal law. To avoid suit, your contractor should refund any advance payment made on this job. Once your contractor understands what the law requires, I expect you'll have no further problem.
ReplyDeleteI am in Texas. We recently had huge storms and my roof is leaking. I called a roofer and he came out to inspect. I signed something with him because I was panicking about the leak and wanted it fixed right away. He never gave me a copy of what I signed. Now I realize that I should have got more than one roofing estimate and want to be able to cancel whatever I signed with the guy who came out in case someone else is cheaper. Can I?
ReplyDeleteYes. Both Texas and federal law have you covered. Assuming the roof repairs are to your primary residence:
ReplyDelete1. 12 Code of Federal Regulations § 226.15 requires that every contract which results in a lien on the principal residence of an owner include a right of rescission - the right to back out of the deal. Since every private (as opposed to public works) construction contract can result in mechanics' lien on the property, this federal right of rescission is required on nearly every home improvement and home repair job - even if there is no loan on the project. This federal right of rescission expires at midnight on the third business day after signing the contract. Saturday is considered a business day. You have three days to cancel any agreement for home repairs or improvements. If you don’t receive two copies of the cancellation form required by law, you have three years to cancel the agreement.
2. Texas Property Code § 53.255 requires that the general contractor deliver a disclosure statement before a contract is signed for building or re[airing the home of an owner. Texas law attaches no penalty for failure to make these disclosures. For example, liens and any deed of trust on the property will be valid even if these disclosures are omitted.
3. The Texas Residential Construction Liability Act (RCLA), Texas Property Code § 27.001 to § 27.007 requires certain disclosures in contracts for construction, repair or alteration of a residential property with four units or less. Failure to include the required statement can entitle the owner to recover a $500 penalty from the contractor.
4. If this is an insured loss valued at over $1,000, Texas law requires that you receive the notice in Texas Business and Commerce Code § 2702.
My suggestion: Send an email or call the contractor. Explain that you’re backing out of the deal under Texas and federal law and want a full and prompt refund of any money advanced.
We are Ohio residents. We received and accepted a bid from a contractor to install a concrete patio. We paid a 20% deposit and once we did that he was pretty much done with us. The bid is for a “new pour of 5 inches, 18 by 18 feet pad and 36 inch by 15 feet walkway. All proper prep and structural components included. Use 6000 psi mix, install expansion joint.” We were told the work would be done by his sub contractor. What we got from the concrete sub-contractor: 4 inches of 4000 psi mix poured directly over excavated, unprepared, bare ground into the area framed by 2 by 4 wood forms. I found out about the concrete mix by calling the supplier. The concrete subcontractor advised it was not necessary to attach the new patio to an existing cement slab. They also decided no stone or gravel was going to be used. We were not advised of any changes to the original contract. The contractor did not inspect the excavated area or check the job once it was poured. I contacted our local Better Business Bureau and made a complaint. The contractor responded by offering a price adjustment. We accepted but asked him to provide documentation stating he paid the subcontractor. He refuses. The concrete sub-contractor wants us to pay them but we have no contract with them. We also were never advised of our 3 day right to cancel. We are concerned about the threat of a mechanics lien and don’t know how to proceed.
ReplyDeleteOhio's Home Solicitation Act (HSA), Ohio Revised Code Annotated, § 1345.21 to 1345.28, gives owners the right to cancel residential construction and home improvement contracts negotiated at any place other than the contractor's retail store. This right to cancel expires on midnight of the third day after the contract was signed. The notice of the right to cancel and the cancellation form must be included in the contract. Failure to provide both oral and written notice of the right to cancel:
ReplyDelete(1) Gives the owner the right to cancel at any time, even after work has started, and
(2) Is considered a deceptive act or practice under Ohio's Consumer Sales Protection Act (Ohio Revised Code § 1345.02, § 1345.03 and § 1345.09).
The remedies for violation of Ohio's CSPA include the right to collect three times any damages suffered plus attorney's fees.
You have no obligation to pay the contractor until you receive lien releases signed by both the sub and the concrete supplier.
My recommendation: Advise the contractor he's committed a deceptive act under Ohio consumer protection law and that you have no further obligation until he complies fully with Ohio law. If you can't negotiate a reasonable settlement, consider filing a complaint with the Ohio Attorney General: (800)282-0515
The sub and the concrete supplier each have lien rights that can be enforced by court action -- takes months. But you have no other direct obligation to either. Ohio law give you plenty of leverage. Drive a hard bargain but try to settle this without legal action. The legal fees would likely exceed the amount in question.
ReplyDeleteYour right to cancel under Ohio law extends to the entire contract, including subs and suppliers. But you may still be liable under lien law to subs and suppliers. That will require legal action. In any law suit, Ohio's CSPA gives you the right to collect three times any damages (wrong concrete PSI, wrong concrete thickness) plus your attorney fees. The effect of that will be to immunize you against suit by the contractor.
ReplyDeleteGary, may I ask for a few clarifications on a few things?
ReplyDeleteMy first question is in reference to your statement
1) Gives the owner the right to cancel at any time, even after work has started.
What if the work is finished?
2) Is considered a deceptive act or practice under Ohio's Consumer Sales Protection Act (Ohio Revised Code § 1345.02, § 1345.03 and § 1345.09).
The remedies for violation of Ohio's CSPA include the right to collect three times any damages suffered plus attorney's fees.
Are the “damages” the entire $3388.00 contract price?
3) You have no obligation to pay the contractor until you receive lien releases signed by both the sub and the concrete supplier.
Does this mean we wait until the subcontractor actually files a Mechanics Lien Or are you referring to some other type of lien release?
4) The subcontractor wants to settle and so do we, but the general contract will not respond to the any of the sub’s texts or phone calls nor will he respond to us. Again, the general contractor has his money, the subcontractor has said he had only a work order, never saw the dollar amount for the actual concrete work. We know that isn’t true because of a comment made by the sub’s operations manager to the foreman. This comment was overheard by my husband and evidence that the sub changed the specs of the job to cover his expenses. Sadly, the comment is considered hearsay. Your comments and guidance are appreciated!
Responses to your questions:
ReplyDelete1) Ohio law says "after work has started." I interpret that to include anything done after work has started. Others could disagree.
2. Your "loss" is an issue of proof: What it would cost to put you in the condition promised under the contract. Expert testimony is normally required to prove the "loss".
3. Ohio law expects a lien release to be exchanged for payment. This lien release has to be signed by the sub for the sub's work but is normally provided by the prime contractor. I would not pay either until lien releases are offered in exchange for payment.
4. You've got a dispute between the sub and the prime contractors. Let then thrash it out. When you've worked out the amount of the settlement, write a check payable to both the prime AND the sub. Neither can negotiate the check without agreement of the other. Write on the back of the check, "This check is full and final payment for [identify the job].
Hello Gary,
ReplyDeleteI am based out of NJ. I had a contractor out to remodel 3 bathrooms and a kitchen, and paid about half of the total amount. Only 1 bathroom was poorly done, and we never got to the punch list portion for this portion of work. While the contract had a suggested timeframe, he was a month over the timeframe by the time the first bathroom was "done".
As the work was taking too long, we had our lawyer assist in terminating the contract with a letter, stating that he was in breach due to surpassing the timeframe. The contractor is using COVID as a cover to justify the delays. However, he did draft up the termination agreement, adding $2000 to the proposal amount of the first bathroom as a last minute cash grab. He stated if we do not pay that he will file a Notice of Unpaid Balance, then file a construction lien. We did make a good faith offer to compromise to knock down the amount owed to half, and he said he would knock the amount owed to $1500 as a compromise. While this is less than the original termination amount, it is still more than we would want to pay for no work to show for it.
As he was already ahead in money (we paid for half of the total work to be done, while only 1/5 of the work was done), is he justified in threatening us with a lien for money I do not believe he is owed?
Our contract never had a 3 day right to cancel clause, and my wife who initially handled the paperwork did not sign the contract. Is settlement our only option to avoid a lien, and at the contractors whim as to the amount of settlement cash to agree to? Or could we leverage an unsigned contract and Gen Z to fight off a lien should there be one filed against us?
Hi Danny
ReplyDeleteI’m going to assume your contract is a NJ home improvement contract under New Jersey Administrative Code § 13:45A-16.1 to 16.2 and that work was done on your primary residence. Before offering to compromise this dispute, I recommend checking the contractor’s standing to make a claim.
1. New Jersey Administrative Code § 13:45A-17.3 requires that everyone doing home improvement work in New Jersey be registered with the State unless specifically exempted. If you haven’t checked that registration already, I would advise doing that now: https://newjersey.mylicense.com/verification/
2. All home improvement contracts for more than $500 have to include all the disclosures in New Jersey Statutes Annotated § 56:8-151. Failure to make any of these disclosures is a violation of New Jersey's Consumer Fraud Act. Penalties for violation can include a refund of all money collected (New Jersey Statutes Annotated § 56:8-2.11) or treble damages plus legal fees (New Jersey Statutes Annotated § 56:8-19).
3. If you did not receive the federal Reg Z notice, you have three years to cancel the agreement and claim a refund. See my February 8, 2010 blog post.
If your contractor and contract fall short of these standards, I recommend notifying the contractor that you plan to file a complaint with the NJ Dept of Consumer Affairs: https://njconsumeraffairs.state.nj.us/file-a-complaint/. That should help resolve the issue. No contractor wants to be assessed penalties under the NJ Consumer Fraud Act.
Assuming your contract and contractor have met NJ and federal standards, the issue is breach of contract or termination of the agreement or both. Your rights and obligations depend on facts of the case and language in your contract. Your legal counsel can advise on these issues. I wouldn’t be too concerned about the contractor’s threat to file a lien claim. Heavy penalties apply to lien holders who make exaggerated lien claims. Typically, lien claims are resolved quite promptly with both sides given an opportunity to present evidence and state their case.
Hey Gary, I found you while looking for a solution to our problem. I have a rental mobile home in Louisiana that needed a new roof. When I was in town October 2020 I met with a roofer who at the time got me to sign a contract ( I thought it was a form to allow them to communicate with my insurance). There is no price on it and no 3 day cancellation clause. After dealing with them for a few weeks it was clear to me they were only in this for the insurance money and would not give me a total price for the job. Due to how their contract was worded it left a lot of room for me to have to pay if insurance didn't cover the total cost or if more damage was found. I found another roofer in January and had them complete the roof. The original roofer has now sent a letter demanding 30% of the replacement value of the roof or the insurance checks. Would I still be covered under the 3 day cool of period since nothing was attached or mentioned at the time of signing? It is not my primary residence but I am hoping I can get out of this contract without having to pay. Any help would be appreciated!
ReplyDeleteThe federal 3-day right to cancel doesn’t apply on this project if it’s not your primary residence. But Louisiana has plenty of law that might help. The right to collect for home improvement work in Louisiana is governed by Louisiana Revised Statutes § 37:2175.1 to § 37:2175.6. You can look those statutes up on the web. Roofing contracts that may be covered at least in part by insurance have to comply with Louisiana Revised Statutes § 37:2175.1(A)(6). Based on facts in your question, I doubt the contract you signed complies with Louisiana law. For most home improvement work, Louisiana contractors need a certificate of registration. A contractor who is not registered has no right to “file a statement of claim or a statement of lien or privilege”. See § 37:2175.6. You can check license status at the Louisiana State License Board web site. If the contract doesn’t comply with Louisiana law and if the contractor is not registered, you have no obligation to pay the 30% claimed.
ReplyDeleteHey Gary, in Florida, does the 3-day right to cancel have to include two copies of the cancellation form that can be returned to the contractor? Thanks!
ReplyDeleteYes. 12 Code of Federal Regulations § 226.15 requires that every contract which results in a lien on the principal residence of an owner include a right of rescission - the right to back out of the deal. Since every private construction project in Florida can result in a construction lien on the property, this federal right of rescission is required on nearly every home improvement and custom home. 12 Code of Federal Regulation § 226.15(b) requires that each owner receive two copies of the notice of right to cancel under Regulation Z. If there are two adults living in a home, it's safe to assume that each is an owner.
ReplyDeleteGary, a couple of follow up questions (this is for a roofing company that is collecting through insurance funds):
ReplyDelete1. Do both owners have to sign the contract, or is one owner enough to be binding? I signed the contract and did not date it. My wife was not asked to sign at all, but we both had to sign the check(along with our mortgage company) to turn over to the roofing company.
2. In the contract, there were no "forms," only statements; "You may cancel this contract, without cause or expense, within 3 business days when signed in your home." "RIGHT OF CANCELLATION PERSUANT TO FEDERAL REGULATION AND THE SECTIONS 713.001-713.37, FLORIDA STATUTES, YOU, THE BUYER, MAY CANCEL THIS TRANSACTION AT ANYTIME PRIOR TO MIDNIGHT OF THE THIRD BUSI-NESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT."
Does this satisfy the 12 Code of Federal Regulations § 226.15 and 12 Code of Federal Regulations § 226.159(b)?
There was no attached "Notice of cancellation form" as indicated in the statement that was printed on the contract.
Thank you for your help!
1. If only one owner signs the contract, only that owner would be liable under the agreement. If only one owner receives the notice of right to cancel, the second owner has three years to rescind the contract.
ReplyDelete2. Florida Statutes 713.001 to 713.37 relates to liens. Florida law does not provide a 3-day right to rescind. The federal 3-day right to rescind applies if the project is your principal residence. From your question, I doubt the roofer's notice complies with federal law. But see my blog post of November 19, 2017 on bad faith rescission.
My wife and I signed a contract for re-piping our house without reading what we had signed. We had called a plumber to fix a few simple problems (slow draining kitchen sink, a dripping bathroom sink faucet, and replacing a couple of bathroom shutoff valves), but they talked us into re-piping the house. We've been taking care of our ailing dog and thus, we have been getting very little sleep for several days. I'm not one who normally signs a contract without reading it (my wife who is originally from Thailand was just following my lead). And, I'm not one who normally gets something replaced or fixed if it's not broken. We signed an iPad which was just a blank screen. Later that night, I thought about what we had done and got up the next morning to see what they sent me in email. I saw most of what we signed for and I replied that I was cancelling the contract. I also called them, but since this was a Saturday and I didn't think a plumber's office would be open, I left them a message saying that I was cancelling the contract. We had to make a 20% ($1,311) down payment via my wife’s credit card which the credit card company and the plumbing company said we wouldn't get back since my wife’s signature was on a form stating that the deposit is non-refundable.
ReplyDeleteOne lawyer I talked with said it's a Federal law that I could cancel within 3 days and that sleep deprivation can cause you to do things you normally wouldn't do. However, about a month later, another lawyer with that group said the law didn't apply to our situation.
I contacted lawyer with another law firm who at first said that the law didn’t apply to me, but after I sent him your article, he said it probably would apply. However, he said for the total price of the contract ($6,500) it would not be worth going to trial since taking them to court for a trial would cost about $5,000. And, for now I’m just out $1,311. I sure would like to get them because they are using some deceptive practices. They found us, an old couple, and had us sign an iPad of which I later found they had cut and pasted my signature to another part of the so-called contract which I hadn’t seen in their emails. In fact, what they sent via email didn’t include what my wife’s signature was on. These documents were obtained from the credit card company who was in communication with the plumbing company about our dispute of the charge.
So, we had no printed document that you mentioned stating we could cancel or how to cancel the contract within three days. Are we in the right to cancel and should we get our deposit back?
1. If by "our house" you mean your primary residence, your 3-day right to cancel is guaranteed by federal law.
Delete2. Calling the plumber the next day and leaving a message may not have been enough to cancel the agreement. 12 Code of Federal Regulations § 226.15 requires a "written" notice of cancellation. But if you did not receive a blank notice of the right to rescission from the contractor, you have three years to cancel the agreement.
3. You don't mention the state where you live. Many states also provide a 3-day right to cancel home improvement agreements.
4. You're entitled to a full refund of the $1,311 paid whether under state or federal law.
5. I agree with your legal counsel. It's impractical to sue for $1,311. But there are other good remedies.
My recommendation: Send your contractor a letter (1) Cancelling the contract; (2) Demanding a refund of the $1,311 paid; (3) Setting a deadline of 10 days for a response. If the deadline is not met, explain that you will (1) File suit in small claims court to collect the full $1,311 plus fees plus cost; (2) File a complaint with the state board that regulates home improvement and home improvement contractors. Many states license home improvement contractors and subcontractors. Nearly all states license plumbers. Other states have construction dispute resolution services designed to settle issues like this. Search for the contractors license board or department of consumer affairs in your state. If suit is necessary, search on the Web for small claims court procedures in your state. My guess: You'll be paid very promptly when the contractor understands that you're serious about collecting.
Hi Gary,
ReplyDeleteI so hope you can help me. I live in Illinois. Earlier this year we sustained storm dage to our roof and siding. Another neighbor recommended a roofer so we called them and they do siding too so we talked to them about doing all of the repairs. They worked with our insurance adjuster and were able to get 2 full sides of the house and the roof covered for replacement. We were working on getting the other two sides approved because our existing siding was discontinued, and we got a random message one day that the price on roof shingles was going up on Monday so we needed to pick a shingle and sign a form so they could order and do the work. The form includes the roof replacement and the scope shows the two sides as well. The roof has been replaced and paid for. Since then it's clear that this contractor is only looking for the insurance payout. We would like to go with another contractor to complete the work. There is no termination clause in the agreement signed, and we were not advised of any termination procedures. I advised the contractor that we wanted to cancel the agreement and not move forward with the siding. They responded that the siding had been ordered already so they're doing the two sides but we don't have to move forward with the other two. No money has exchanged hands and we've paid no deposit. Are we clear to insist that the agreement is void and they will not be completing any further work on our home? Are we liable for the cost of materials if they really were ordered? Thank you so much!
Your contractor may not understand Illinois law: The Illinois Home Repair and Remodeling Act (815 Illinois Compiled Statutes § 513/1 to 513/999) applies to nearly all work done on existing residential buildings with 6 units or less. One section of that Act, 815 Illinois Compiled Statutes § 513/18, sets standards for repair of casualty losses after a natural catastrophe affecting more than one home. If you were notified by an insurer that any part of your loss was not covered by insurance, § 513/18(e) gives you the right to cancel the contract. This notice of right to cancel in § 513/18(f) must appear in the contract in bold type. Two copies of the cancellation form in § 513/18(g) had to be attached to the contract. From your summary, I doubt that you have any liability to the contractor. The Act explains how to cancel: “A person who has entered into a written contract with a contractor offering home repair or remodeling services to provide goods or services to be paid from the proceeds of a property and casualty insurance policy may cancel the contract prior to midnight on the earlier of the fifth business day after the insured has received written notice from the insurer that all or any part of the claim or contract is not a covered loss under the insurance policy or the thirtieth business day after receipt of a properly executed proof of loss by the insurer from the insured. Cancellation is evidenced by the insured giving written notice of cancellation to the contractor offering home repair or remodeling services at the address stated in the contract. Notice of cancellation, if given by mail, is effective upon deposit into the United States mail, postage prepaid and properly addressed to the contractor. Notice of cancellation may be given by delivering or mailing a signed and dated copy of the written notice of cancellation to the contractor's business address as stated in the contract. Notice of cancellation shall include a copy of the written notice from the insurer to the effect that all or part of the claim is not a covered loss under the insurance policy. Notice of cancellation need not take a particular form and is sufficient if it indicates, by any form of written expression, the intention of the insured not to be bound by the contract.”
ReplyDeleteHello Gary,
ReplyDeleteI live In New Jersey and this is my primary residence. My boiler broke this past Dec 23rd. (During the cold snap we had) I got a plumbing company out on Christmas Eve to fix it. Unfortunately the company could not fix it. I paid the plumber $400 fee just to come out for an emergency. On Christmas day they came out again and said he need to replace the whole boiler. I paid the plumber $400 fee just to come out for an emergency. After a back and forth, I signed a contract to replace it. I was going to use a State funded program to get it partially paid for (NJNG Save Green Program) and the rest I would of been financed thru a bank. I filled out the States form on Christmas Eve online. The contract also stated the same in their summary in their agreement. (That the job would be funded by the State program and the bank loan) Now, I had to wait until the state approved the application. The state offices didn't reopen until the 27th and I didn't hear from them until the 28th. (More than 3 days pass the cancellation notice). Meanwhile I called another plumber that came in and offered the same job without going thru the NJ state program (offered a better finance deal ) and could do it immediately. So I gave the second company the job and emailed the other plumber I no longer needed him. I couldn't wait for the states program application to be approved. (It’s still freezing cold during this time)
I tried to explain to the 1st company that I cannot wait longer for the approval from the state to come thru. The original plumber now wants to charge me processing fees/administrative fees,restocking fee and the original techs labor and repair cost from Christmas Eve (even though he didn't fix the boiler) for breaching the contact even though the contract states it would of been paid by the state program and the rest by a bank loan. (I never applied for the original plumbers bank loan)
I explained to the original plumber that the since the state didn't approve my application within the 3 day window, I shouldn't pay anything else. He disagrees.
And for the record the 3 day cancellation clause is in the original contact and I had no clue it was there. Now I do, but didn't think canceling a contract without exchanging any money would of been a big deal. Now I know better.
Any suggestions? Advise?
Thanks,
Jr
Thanks for the question. I’m going to assume this work was on your primary residence. If so, New Jersey Administrative Code § 13:45A-16.1 to 16.2 (Home Improvement Practices) and New Jersey Administrative Code § 13:45A-17.1 to 17.14 (Home Improvement Contractor Registration) require a written agreement with specific notices and disclosures. Failure to comply with the code is a violation of New Jersey's Consumer Fraud Act. Penalties for violation can include a refund of all money collected (New Jersey Statutes Annotated § 56:8-2.11) or treble damages plus legal fees (New Jersey Statutes Annotated § 56:8-19). I don’t recommend paying the first contractor until you have checked the following:
DeleteDid the agreement you signed include the notices and disclosures required by New Jersey Administrative Code § 13:45A-17.13 and New Jersey Statutes Annotated § 56:8-151? (1) The legal name, business address, and registration number of the contractor; (2) A copy of the certificate of commercial general liability insurance required of a contractor pursuant to section 7 [New Jersey Statutes Annotated section 56:9-142] and the telephone number of the insurance company issuing the certificate; (3) The total price or other consideration to be paid by the owner, including any finance charges; (4) A conspicuous notice of the right to cancel printed in at least 10-point bold-faced type; (5) The toll-free telephone number of the New Jersey Department of Law and Public Safety (New Jersey Administrative Code § 13:45A-17.11-f).
Did you receive two copies of the federal notice of right to rescind? This “Reg Z” notice is required even if you received the New Jersey 3-day notice. If you did not receive this Reg Z notice, you have three years to cancel the contract under federal law.
My recommendation: If you see any problem with any of the issues listed above, inform the first contractor that you have no obligation to pay. Explain the reason. Then make it clear that you are entitled to a prompt refund of money paid. If not received in 5 days, you intend to both (1) file suit and ask for attorney fees (under New Jersey Statutes Annotated § 56:8-19) and (2) file a complaint with the New Jersey Department of Law and Public Safety.
Thank you Gary for your quick response and detailed information specific to my state. This is extremely helpful.
ReplyDeleteThank you again,
Jr
Hired a bath remodel company to redo my shower Oct 31/23 and put a $4500 check down. I had to unexpectedly cancel the job within the three day cancellation clause. It is now Oc 31/23 and I still don’t have my money back. I have been told several different time frames to expect the check. I was told a check was mailed out Oct 24…I didn’t get it. Then I was told a check was overnighted to me Oct 28/23….didn’t get that one either. It’s pretty clear to me that this company has no intentions of returning my money.
ReplyDeleteWhat are my options.
If you have not received a check by now, you have three options (in order of the best to the worst): (1) Contact your state license board and file a complaint. In many states, the board will notify the contractor and schedule a hearing. (2) File a complaint in small claims court. In most states this can be done on the web or through the mail. (3) File suit in federal court. The 3-day right to cancel is federal law and has to be enforced in federal court (unless your state has a similar 3-day right to cancel).
Delete