The Maine Home Construction Contract Act and its Potential Impact on Your Home Construction or Improvement Project
Spring is finally here, bringing a close to another hard Maine winter and (hopefully) the start of some sunny and warm weather. Oftentimes, spring also signifies the beginning of something else for many people: home improvement season.
Whether you are a homeowner looking to make some repairs or updates to your house, or you’re a contractor looking to sell your services to less-than-handy homeowners, you should be familiar with a set of laws called the “Maine Home Construction Contracts Act” (the “MHCCA”) (10 M.R.S. § 1486-1490). Many people are surprised to learn that agreements between homeowners and contractors for home construction and improvement projects—even those of relatively modest scope—are governed by some rather strict statutory requirements.
The first question to consider before undertaking a new project is, obviously, whether the MHCCA will even apply to your situation. The statute provides that it applies to any “home construction contract” for $3,000 or more in either labor or materials. The definition of “home construction contract” is broader than you may think: the statute defines it as “a contract to build, remodel or repair a residence, including not only structural work but also electrical, plumbing and heating work; carpeting; window replacements; and other nonstructural work.”
Assuming the MHCCA does apply to your project, the next step is ensuring that you comply with its requirements. In general terms, the MHCCA requires a written contract signed by both the contractor and the homeowner (or the lessee, if a rental property is involved). The contract must contain at least the following information:
- The names, address, and phone number of the contractor and the homeowner;
- The location of the property where the project is being done;
- The estimated dates of commencement and substantial completion for the project;
- The total contract price, including all costs to be incurred as part of the project (or, if the project is being done on a “cost-plus” formula, the agreed upon price and the estimated cost of labor and materials);
- The method of payment, with the down payment being no more than 1/3 of the total price;
- A general description of the work to be performed and the materials to be used;
- A warranty that provides the following: “In addition to any additional warranties agreed to by the parties, the contractor warrants that the work will be free from faulty materials; constructed according to the standards of the building code applicable for this location; constructed in a skillful manner and fit for habitation or appropriate use. The warranty rights and remedies set forth in the Maine Uniform Commercial Code apply to this contract”;
- A statement regarding dispute resolution, which allows the parties to resolve any disputes either through the use of the small claims process or through one of three alternative dispute resolution methods, with the statement containing at least the following information: “If a dispute arises concerning the provisions of this contract or the performance by the parties that may not be resolved through a small claims action, then the parties agree to settle this dispute by jointly paying for one of the following (check only one):
- Binding arbitration under the Maine Uniform Arbitration Act, in which the parties agree to accept as final the arbitrator’s decision;
- Nonbinding arbitration, with the parties free to reject the arbitrator’s decision and to seek a solution through other means, including a lawsuit; or
- Mediation, in which the parties negotiate through a neutral mediator in an effort to resolve their differences in advance of filing a lawsuit”;
- A statement concerning change orders, which must state: “Any alteration or deviation from the above contractual specifications that results in a revision of the contract price will be executed only upon the parties entering into a written change order”;
- If the contract is part of a door-to-door sale situation, a description of the consumer’s right to avoid the contract;
- If the contract includes installation of insulation in an existing home, certain disclosures as provided by other sets of statutes;
- If the standard pertains to new construction or an addition, a statement of the minimum energy efficiency building standards and whether the construction or addition will meet or exceed those standards;
- A copy of the Attorney General’s consumer protection information about home construction and repairs, which includes information about contractors who have been successfully sued by the State of Maine, must be included as an addendum to the contract; and
- A clear and conspicuous notice that states that consumers are strongly advised to visit the Attorney General’s publicly available website to gather information about enforcing their rights.
The MHCCA also provides some specific requirements concerning change orders. In short, change orders must: be in writing; signed by both parties; explain all changes to the original contract that will result in a change to the contract price; must state the original contract price; and must state the revised contract price. If those requirements are met, the change order will become a part of the parties’ overall contract, with all work under the original contract to be performed under the same terms and conditions except as expressly changed by the change order.
Contractors can potentially face some pretty serious consequences for failing to comply with the act. Each violation constitutes a civil violation that can be pursued by the State, which subjects the contractor to a penalty of between $100 to $1,000. In order to avoid that fine, the contractor must prove at trial that it is more likely than not that “the violation was unintentional and a bona fide error, notwithstanding the maintenance of procedures reasonably adopted to avoid any such error.” In addition, homeowners can file a lawsuit against contractors for violating the statute. Any violation of the MHCCA constitutes prima facie evidence of a violation of the Unfair Trade Practices Act. The practical effect of that is that the homeowner would be entitled to recover his or her court costs and reasonable attorneys’ fees incurred in brining the lawsuit against the contractor, even if the homeowner wins just a nominal amount (e.g., $1.00). Homeowners, on the other hand, are not subject to any penalties or legal liabilities for failing to obtain a contract that complies with the MHCCA. In other words, the onus is solely on the contractor to see that the parties’ contract complies with all of the statute’s requirements.
Hopefully, homeowners and contractors will familiarize themselves with the MHCCA and ensure compliance therewith prior to beginning projects. Doing so will increase the likelihood that both parties are aware of their respective rights and obligations under the contract, and hopefully decrease the risk of any major disputes arising later on down the road.
These materials have been prepared by Rudman Winchell for educational purposes only. They should not be considered legal advice. The transmission of this information to you is not intended to create a lawyer-client relationship. Readers should not act upon this information without seeking professional counsel. You should not send any confidential or private information to Rudman Winchell until a formal attorney-client relationship has been established, in writing.