The Illinois Home Repair and Remodeling Act
The Illinois Home Repair and Remodeling Act
Working on construction projects can be challenging to ensure a smooth process from the negotiating of the terms and scope of work to managing the trades to final completion. However, one of the best tools that a contractor can have is a well drafted contract that clearly lays out what the contractor is to do and how and when the contractor will be paid. This is even more important when working on residential projects which contracts are governed by the Illinois Home Repair and Remodeling Act (815 ILCS 513/1, et seq) (the “HRRA”). Enacted in 2000, the HRRA is an attempt by the Illinois legislature promote fair and honest practices in the construction, remodeling and repair business. The HRRA contains numerous requirement which are specific to work on residential projects which affect all contractors whether they are remodeling a kitchen or rehabilitating an entire home and failure to follow them can be disastrous for the contractor’s bottom line. Contractors must be familiar with the HRRA requirements it sets forth before entering into any such agreements.
What kind of construction work does the Home Repair and Remodeling Act govern?
The Illinois Home Repair and Remodeling Act (815 ILCS 513/1 et seq.), (the “HRRA”) applies to repair or remodeling work to be performed over the amount of $500 on a residence. The phrase “Repair and remodeling” is broadly defined and includes fixing, replacing, altering, converting, modernizing, improving or making of an addition to a real property primarily designed or used as a residence. Of particular importance, however, is the word “residence” which is defined as a single-family home or dwelling or a multiple-family home or dwelling containing six or fewer apartments, condominiums, town houses, or dwelling units.
What provisions should a written contract include under the HRRA?
Pursuant to the HRRA, a written contract is required for all repair or remodeling work for over $1,000 performed on a residence. The contract should be provided for signature to the customer prior to initiating the home repair or remodeling work at the premises. Two of the main contract provisions the HRRA requires are (1) the total cost of the project, including parts and materials as well as any charge for estimate; and (2) the business name and address of the person engaged in the business of home repair or remodeling. The contract should also include the start and completion dates along with a clause permitting the owner to terminate the contract and instructions on how to do so if the contract is signed at the customer’s home. Although not required under the HRRA, a contractor can and should include terms to protect itself such as a payment schedule as well as default provisions that provide for interest or attorney’s fees in the event the customer fails to pay. The HRRA also requires that the contractor maintain public damage and general liability insurance for the duration of the project.
Furthermore, if the contract contains provisions that requires the consumer to either (a) submit all contract disputes to binding arbitration in place of hearing in court; or (b) waive consumer’s right to a trial by jury, then contractor must advise the consumer of such provisions before accepting and executing the contract. Otherwise, the binding arbitration clause or the jury trial waiver clause should be void.
The Consumer Rights Brochure
Illinois lawmakers also recognize that must consumers have only a rudimentary understanding of construction agreements and construction work. In order to address this, the HRRA also requires that, prior to the execution of any home repair and remodeling contract, the owner should be provided with a copy of a pamphlet entitled “Home Repair: Know Your Consumer Rights”. This short brochure, published by Illinois Attorney General’s office, contains basic information on what the contract should include and offers other tips for homeowners. This brochure must be provided to the customer before the contract is signed and the customer should also sign and return the acknowledgment of receipt in the pamphlet for the contractor to keep in its files. The HRRA only requires the receipt for contracts over $1,000 but it is good practice for contractors to make this a routine for all residential work. You can download the brochure here.
Other Statutory Requirements
In addition to the HRRA, the Illinois Mechanics Lien Act (770 ILCS 60/1, et seq.) (the “Lien Act”), also contains protections for consumers where the subject project is a single-family owner occupied home. Section 5 of the Lien Act requires that the contractor give the homeowner the following statement before the first payment is made:
“THE LAW REQUIRES THAT THE CONTRACTOR SHALL SUBMIT A SWORN STATEMENT OF PERSONS FURNISHING LABOR, SERVICES, MATERIAL, FIXTURES, APPARATUS OR MACHINERY, FORMS OR FORM WORK BEFORE ANY PAYMENTS ARE REQUIRED TO BE MADE TO THE CONTRACTOR.”
It is good business practice to include this provision in all residential construction projects and to provide a sworn statement in exchange for the first payment.
What if the HRRA is violated?
An aggrieved homeowner can report the contractor to the Illinois Attorney General’s Office or State’s Attorney for a violation of the HRRA and they may bring an action against the contractor in order to restrain and prevent any pattern or practice violation. The contractor could face fines or potentially a suspension of business. Furthermore, the homeowner can also file a civil action against the through provisions of the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq.) and seek money damages from the contractor. These types of claims are often asserted as a counterclaim against contractors who file lawsuits or mechanics lien foreclosure actions against non-paying customers. However, even if the contractor did not completely follow the requirements of the HRRA, all is not automatically lost and the owner still needs to prove that he or she sustained actual damages as result of any alleged violations. In fact in interpreting the HRRA, Illinois courts have been reluctant to excuse an owner from paying its contractor on an otherwise successful project just because an agreement was not in writing. To avoid any risk, contractors should adhere to the HRRA.
Furthermore, contractors need to be especially careful in light of the that some municipalities have the ability to levy fines of their own against contractors who violate the HRRA, such as through Section 2-25-090 of the City of Chicago Municipal Code. A contractor who works on a small project and does not provide the brochure or a written contract could be fined and have its entire profit and possibly more wiped out.
Forewarned is Forearmed
In conclusion, contractors who work on residential projects need to be aware of the requirements of the HRRA and its pitfalls. Contractors should always have a written agreement for all of their projects, not only residential projects, so the parties are clear on what the terms are and what is expected from the other. However, a violation of the HRRA can be costly for a contractor (as well as a consumer who deals with unscrupulous builder). It is always good practice to review your contracts and procedures on residential projects with an experienced Illinois construction law attorney to avoid headache and non-payment as you work on a project.
If you have questions, please call experienced construction litigation attorney
Mark Grzymala at 847-920-7286 now.
By: Mark B. Grzymala, Attorney and President and Paulina Grunwald, Paralegal
Grzymala Law Offices, P.C.