The HVAC system in Elise Theyer’s historic Norfolk, Virginia home needed an update. Elise saw an ad for ductless mini split systems and called Norfolk Air Heating and Cooling to get a bid. Norfolk Air made a sales call. They quoted a ducted system on the first floor and six mini-splits on the second floor. Elise signed their agreement on November 21, 2017.
So far, so good. But as I’ve said many times: “When the job goes bad, you better have a good contract.” In Elise’s case, Norfolk Air didn’t. Their quote omitted the notice of a buyer’s right to cancel, as required by Virginia’s Home Solicitation Sales Act (HSSA).
Problems started when Elise wasn’t satisfied with her new HVAC system. Norfolk Air did what they could to make repairs. After several attempts, Elise gave up, called another contractor and filed suit against Norfolk Air.
The question for the court: Was Norfolk Air’s sales call on Elise a “home solicitation sale” as defined by Virginia law? If it was, omitting the cancellation notice gave Elise the right to collect damages and attorney fees from Norfolk Air.
A little history: Starting in the 1950s, most states adopted home solicitation sales acts. The intent was to curb abuses common in door-to-door sales. Contracts had to include a notice of the owner’s 3-day right to cancel. Any home solicitation contract that omitted the 3-day notice could not be enforced in court. Worse, consumer protection laws labeled violating the HSSA “consumer fraud” and imposed appropriate penalties.
If you’ve worked in home improvement contracting for a while, you’re sure to see a problem here. Every home repair or improvement job requires a visit to the site. Is every one of those a “home solicitation” sale?
You Decide
Did omitting the 3-day notice give Elise the right to collect damages and attorney fees?
Many states exempt specific transactions from their home solicitation sales acts. For example, several states have what I call the “big box” exception: If the contract is signed at the place of business of the vendor, even if after an on-site visit, then it isn’t a home solicitation sale.
Virginia’s HSSA exempts sales made at the buyer's residence after "prior negotiations" elsewhere, such as at a trade show or at the vendor’s store. But there weren’t any prior negotiations in this case. Elise simply called Norfolk Air and asked for a quote.
Other states exempt from their HSSA any sales calls made after an invitation from the owner. For example, Mississippi’s HSSA excludes sales made at the owner’s home if the vendor was invited on site. By court decision, Michigan has adopted a similar exception to their HSSA.
Virginia law has no such exception. Every sales call at a residence that results in a sale must include an express notice of the buyer's right to cancel. Va. Code § 59.1-21.3(1).
What the Virginia Court Decided
Fortunately for Norfolk Air, Virginia’s Attorney General has a written opinion on point. According to the AG, it’s not a home solicitation sale if, for example, an owner calls a plumber, gets a quote on the spot and has the plumber do the work. Virginia’s HSSA is not "intended to apply to sales that are initiated by the buyer and that are conducted in the home . . .” In the case of Theuer v. Norfolk Air Heating & Cooling, Inc., the court adopted the AG's logic.
Would the same rule apply if the work were installing a new roof or remodeling a bathroom? In my opinion, that would be a stretch. Black letter law: There’s risk in omitting any contract notice required by law in your state.
So what’s a contractor to do? My answer is simple. Write bullet-proof contracts. That’s easy with Construction Contract Writer, no matter the site, no matter the type of work. The trial version is free.
I have a question about 3 day notice in North Carolina.
ReplyDeleteMy in-laws needed waterproofing for their finished basement and had a representative from what they thought was a somewhat local company (now know part of Larry Janesky's Contractor Nation) and signed contract for work to be done at time of signing within the next month. The representative did the lowkey pressure tactic that they needed to get on schedule because they were getting ready to hit their "busy season".
They wrote a check for $5000 for a deposit ($838 more than actual 30% asked to keep things even) and that check was deposited in bank before the 3 days were up if the 3 days are to be business days.
They get a call the next day saying it would not be April but "sometime in June". The company sent a letter postmarked April 28, 2021 saying again, should start somtime first of June 2021 with no specific date given.
In the meantime, my in-laws had several people tell them the way this company was going to do it would not solve their problem and only lead to having an obtrusive machine running in their finished basement.
They were referred to someone who is actually local and they decided to cancel with the Contractor Nation company and go with the local company and asked for their deposit back.
The supervisor told them it was past the 3 days and they could not get their deposit back.
Nowhere in the contract does it say the deposit is non-refundable and the 3 day notice form also does not mention anything about deposit being non-refundable.
It does state that the 3 days is from the date of the transaction (which blank was left blank or the date you received this notification (which was received and signed on day they came out). When they state on the notice that you have to do so in writing it lists the telephone number and email address first then the actual mailing address which I believe is intentional to confuse the customer and give more "runaround time" to have the three days expire.
As I have read many replies and expalnations on here it seems to me the three day notice of right to cancel is more for the protection of the contractor than for the customer because it prevents the customer from coming back years later to cancel contract and recoup all the payment.
Basically, can my in-laws get back all or some of their $5000 deposit since the company under Contractor Nation's umbrella has not performed any work and have been notified (as of May 11, 2021) that their services are no longer desired?
Does the 3 day right to cancel in North Carolina mean that any deposits put down are non-refundable if the order is canncelled past the 3 days but before any work has begun.
ReplyDeleteCancelled contract for basement waterproofing because date originally given at time of initial inspection (3/11/2021) was first of April 2021 and representative lowkeyed pressured with comment, "we're getting ready to hit our busy season so sooner we get you on the books the better".
Got 3 day right to cancel notice at initial meeting and signing of contract and signed bottom of 3 day right to cancel notice.
Cancelled contract (May 11, 2021) because could not get a specific time "in June" and found an actual local company that can do it without leaving loud obtrusive machine in my finished basement. They said they can fix it on the outside rather than the inside solution of company under Contractor Nation umbrella.
When I called to cancel the supervisor of my representative told me I could not get my $5000 deposit (which hit the bank on 3/15/2021 not 3 days after I signed) back because of the 3 day right to cancel page I signed.
From what I have read on here, the 3 day right to cancel is more of a protection for the contractor to not be challenged years later for a refund. Also, nowhere on 3 day right to cancel notce does it say deposits are non-refundable nor anywhere in the contract does it say deposits are non-refundable. As a side note, where it states to cancel within 3 days in writing the company lists their telephone number and email first before actual address to mail notice. I believe this is deliberate to confuse customer and create"runaround time" to have 3 days expire.
Can I get my deposit or some of it back since I cancelled after 3 days but before any actual work was started?
Does the 3 day right to cancel in North Carolina mean that any deposits put down are non-refundable if the order is canncelled past the 3 days but before any work has begun.
ReplyDeleteCancelled contract for basement waterproofing because date originally given at time of initial inspection (3/11/2021) was first of April 2021 and representative lowkeyed pressured with comment, "we're getting ready to hit our busy season so sooner we get you on the books the better".
Got 3 day right to cancel notice at initial meeting and signing of contract and signed bottom of 3 day right to cancel notice.
Cancelled contract (May 11, 2021) because could not get a specific time "in June" and found an actual local company that can do it without leaving loud obtrusive machine in my finished basement. They said they can fix it on the outside rather than the inside solution of company under Contractor Nation umbrella.
When I called to cancel the supervisor of my representative told me I could not get my $5000 deposit (which hit the bank on 3/15/2021 not 3 days after I signed) back because of the 3 day right to cancel page I signed.
From what I have read on here, the 3 day right to cancel is more of a protection for the contractor to not be challenged years later for a refund. Also, nowhere on 3 day right to cancel notce does it say deposits are non-refundable nor anywhere in the contract does it say deposits are non-refundable. As a side note, where it states to cancel within 3 days in writing the company lists their telephone number and email first before actual address to mail notice. I believe this is deliberate to confuse customer and create"runaround time" to have 3 days expire.
Can I get my deposit or some of it back since I cancelled after 3 days but before any actual work was started?
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. iF each owner did not receive two copies of the three-day notice (properly filled out with the last date to cancel), your in-laws have three years to cancel. On cancellation, the contractor has to make a full refund. See my blog post of February 8, 2010.
ReplyDelete12 Code of Federal Regulation § 226.15. Right of rescission.
(b) Notice of right to rescind. In any transaction or occurrence subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind (one copy to each if the notice is delivered in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act). The notice shall identify the transaction or occurrence and clearly and conspicuously disclose the following:
(1) The retention or acquisition of a security interest in the consumer's principal dwelling.
(2) The consumer's right to rescind, as described in paragraph (a)(1) of this section.
(3) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor's place of business.
(4) The effects of rescission, as described in paragraph (d) of this section.
(5) The date the rescission period expires.
If you cancel this transaction, the security interest is also cancelled. Within 20 calendar days after we receive your notice, we must take the steps necessary to reflect the fact that the security interest on your home has been cancelled, and we must return to you any money or property you have given us or to anyone else in connection with this transaction.
You may keep any money or property we have given you until we have done the things mentioned above, but you must then offer to return the money or property. If it is impractical or unfair for you to return the property, you must offer its reasonable value. You may offer to return the property at your home or at the location of the property. Money must be returned to the address below. If we do not take possession of the money or property within 20 calendar days of your offer, you may keep it without further obligation.
Thank you for your quick response and sorry about the duplicate posts - I had a glitch on my end that made it seem like it did not go through.
DeleteFollow up question: I forgot to mention that the contract was done electronically and he emailed the copy to me to print out for my in-laws but did not say anyting about printing 4 copies of the 3 day right to cancel.
When he left, no contract was left with my in-laws and definitely not four copies of the 3 day right to cancel notice. They have the copy I printed off my computer that I took to them after the meeting. Also, only the husband signed the contract and his name is not on the deed to the house.
Given the fact that 4 copies were not given of the 3 day right to cancel and the contract (and 3 day right to cancel notice) was signed electronically by ONLY the husband and he is not legally a owner of the house, would this not make the contract void and therefore the deposit should be refunded despite it being passed the 3 days?
Thank you again for your assistance.
Question 1: To my knowledge, no court has ruled on how many copies of an electronic document must be delivered to meet the requirements in 12 Code of Federal Regulation § 226.15. My guess is that one electronic copy would be enough.
DeleteQuestion 2: One signature by each side is enough to make a contract. But only the signing party would be bound to contract terms.
Question 3: The Reg-Z notice is required if the home is your in-laws primary residence. Ownership of residence isn't an issue for Reg-Z purposes. A home improvement contract could still be valid even if the home were rented.
Hint: Check the Reg Z notice. Note the two paragraphs:
Paragraph 1: You have a legal right under federal law to cancel this transaction, without cost, within three business days from whichever of the following events occurs last:
(1) The date of the transaction, which is _________________________________, or
(2) The date you receive your Truth in Lending disclosures, or
(3) The date you receive this notice of your right to cancel
Paragraph 2: If you cancel by mail or telegram, you must send the notice no later than midnight of _______________________ (midnight of the third business day following the latest of the three events listed above).
If the blanks in those two paragraphs were not filled in by the vendor, the Reg-Z
notice is not valid. If that is true, your in-laws have three years to cancel the contract.
As a practical matter, North Carolina Small Claims Court is your best resource. You can file claims for up to $10,000. From your comments, and assuming NC Small Claims Court will enforce federal law, I see no legitimate defense to a claim for a full refund.
Here is exactly the notice of right to cancel sent in the email:
ReplyDeleteNotice of Right to Cancel
You are entering into a contract. If that contract is a result of, or in connection with a salesman's direct contact with, or call to you at your residence without your soliciting the contract or call, then you have a legal right to void the contract or sale by notifying us within three business days from whichever of the following events occurs last:
1. The date of the transaction, which is: _________________________ or
2. The date you received this notice of cancellation.
How to Cancel
If you decide to cancel this transaction, you may do so by notifying us in writing at:
Compnay name, phone number, email then physical address (filled out but I left it out for privacy)
You may use any written statement that is signed and dated by you and states your intentions to cancel, or you may use this notice by dating and signing below. Keep one copy of the notice because it contains important information about your rights.
I wish to cancel.
______________________________________________________________________________________
Owner's Signature Date
______________________________________________________________________________________
Owner's Signature Date
The undersigned acknowledges receipt of the two copies of the Notice of Right to Cancel.
_______________________________________________________________________________________
Owner's signature Date
All blanks were not filled in by vendor and only blank filled in was electronic signature of husband for the statement "The undersigned acknowledges receipt of the two copies of the Notice of Right to Cancel."
I did not iclude that for privacy reasons.
So as I understand your reply, the blanks were not filled in by vedor so the Reg-Z notice is not valid and my in-laws have 3 years to cancel the contract.
Thank you again for your assistance.
12 Code of Federal Regulation § 226.15 is clear. To be valid, the last day to cancel has to be in the Reg Z notice. But note that courts in some states recognize a doctrine of "bad faith cancellation". See my blog post of November 19, 2017. That shouldn't be an issue in this dispute. Work never got started.
ReplyDelete