Remodeling and Home Improvement Contractor Law: What You Need To Know

Remodeling projects are not just big investments, they can be big risks for both the homeowner and the contractor. Home improvement contractor law does not exist as a separate set of laws. Rather, home improvement contractors are covered by many fields of law including contracts, property, product liability, worker’s compensation, and personal injury.

Here are some fields that are included in home improvement contractor law and how they might impact your remodeling project:

Administrative Law

You might deal with administrative law on a daily basis, and not really know it. Among the three branches of government is the executive branch. In a state, the head of the executive branch is the governor and in a city, the head of the executive branch is the mayor. The head of the executive branch has many department heads who report to him or her. These departments and how they are operated make up the part of home improvement contractor law called “administrative law.”

For example, the motor vehicle department, public works department, and natural resources department use both regulations and adjudications to implement and enforce the law. Of relevance to general contractors, the building department uses regulations, inspections, and hearings to enforce building and development laws.

A few ways that administrative law could come into play during your home improvement project include:

  • Licensing: Building contractors must be licensed by the state to engage in any construction project. Unlicensed contractors could be fined or even jailed, depending on the state.
  • Plan approval: To obtain a building permit, your home improvement plans must be reviewed and approved by the building department. If your contractor begins your project without a building permit, you may receive a stop-work order. This will freeze all construction until approval and may even result in some of the work having to be re-done.
  • Building inspections: Building inspectors will inspect the construction site to make sure that the construction complies with the building code and matches the plans that were approved. Any non-compliant construction may have to be torn down and rebuilt. Building inspectors can also require those non-compliant elements, like unsafe wiring, be pulled out and replaced.
  • Certificate of Occupation: After the project is completed, it must be inspected one final time. Under home improvement contractor laws and regulations, a remodel that does not meet or exceed the building code cannot be legally occupied.

Contract Law

Another field of law that is included in home improvement contractor law is contract law. A contract is an agreement that becomes legally enforceable if it meets certain criteria including:

  1. Mutual assent: Both parties to the agreement have agreed to be bound by it and acknowledge its terms.
  2. Consideration: Both parties have something they are supposed to do or refrain from doing in accordance with the agreement. In other words, a gift (“I will give this to you”) is not a contract, whereas an agreement to give a gift (“I will give this to you if you paint my house”) could be.

A home improvement project could include many contracts including:

  • The homeowner and the general contractor.
  • The general contractor and the subcontractors, like the roofing contractor.
  • The contractors and the suppliers.

If a contractor fails to perform the tasks that were agreed upon, the contractor has breached the contract. A breach of contract is resolved through a lawsuit against the contractor. The damages for breach of contract are usually measured by the parties’ expectations had contract performance occurred.

For example, if a homeowner contracts for a bathroom renovation and the contractor fails to deliver, the contractor could be sued for the cost of putting in exactly what was in the contract. The damages could include the cost of removing or re-doing the breaching contractor’s work.

If a contractor abandons a job, the contract is breached. But in this case, there is an alternative to filing a breach of contract lawsuit. When a job is not completed by a “bonded” contractor, a customer can file a claim with the surety that issued the bond. A bond is like an insurance policy but any payouts must be repaid by the contractor rather than being borne by the surety.

This means that the surety pays the customer when the contractor fails to complete a job and the contractor repays the surety for the amount paid out. This ensures that the customer is not left in the lurch after paying for a job but not getting anything in return.

Property Law

Property law can come into your remodeling project if you are building near your property line, have covenants, conditions, or restrictions on your land, or hold land subject to an easement. However, in most of these situations, your contractor would rely on you to obtain an accurate survey of your land and the building department to flag any plans that impact other homeowners’ rights.

On the other hand, if you obtain an accurate survey and a building permit, but the contractor makes a mistake while working on your project that infringes another’s property rights, you might end up in court with both your neighbor and your contractor.

For example, suppose your remodeling project includes a shed built on a concrete pad. If your survey is correct, but your concrete contractor places your concrete pad over your property line, your neighbor might hire real estate lawyers to file a lawsuit against you for trespass and you might file a lawsuit against your concrete contractor for negligence.

In this case, your damages against the concrete contractor would be based on the damages you owe your neighbor for trespass. So, while your case might not exactly arise under property law, your case will be impacted by the interplay of property law and home improvement contractor law.

Product Liability Law

Product liability is an area of law that is used when a person is injured by a defective product. If a contractor installs a defective product, the contractor might be liable as part of the stream of commerce that the defective product traveled in.

Product defects fall into three categories recognized by law:

  1. Design defect: A design defect is a defect that is inherent in a product. Because the product is defective, the product has no safe uses. One example of a building product that has a design defect is asbestos insulation. Because of the hazard that asbestos insulation poses, it has no safe use in home construction or remodeling.
  2. Manufacturing defect: A manufacturing defect occurs when a product can be built safely, but the factory or supplier manufactured it in an unsafe way. For example, if steel structural supports are manufactured at the wrong temperature, they might be weaker or more brittle than their specification suggests. As a result, the manufacturing defect might make the steel supports dangerous for use.
  3. Warning defect: A warning defect occurs when a product has hazardous uses but no one in the commercial chain warns users against the hazards. Thus, an HVAC system might pose a fire and asphyxiation hazard when the gas line is incorrectly installed. If HVAC contractors install the system and fail to provide the homeowner with a copy of the manufacturer’s warnings, the HVAC contractor may have contributed to a warning defect.

Product liability cases fall in the intersection between personal injury law and home improvement contractor law. When a personal injury lawyer files a product liability case, the lawyer will likely want to include every entity involved in supplying the product, including the manufacturer, distributor, retailer, and installer. The theory is that they are all liable under product liability law since they made money off the defective product and they can figure out how to allocate the damages among themselves rather than forcing the injured person to do it.

Workers Compensation Law

Workers compensation is a system that has been adopted by every state in the U.S. Under worker’s compensation law, on-the-job injuries to employees are automatically covered by worker’s compensation insurance but, in exchange, employees waive the right to sue their employer for the injuries.

Construction, particularly roofing, is an especially dangerous job. By requiring contractors to buy workers compensation insurance, construction workers are able to avoid paying out-of-pocket for any work injures.

Instead, when a construction site accident occurs, the worker reports the accident to a supervisor, and the supervisor notifies the worker’s compensation insurer. When workers compensation insurance works correctly, the injured worker would typically hire a legal counsel to make sure the compensation paid is correctly calculated or battle against the insurance company if the claim is denied.

Worker’s compensation is intended to cover all out-of-pocket medical expenses and provide partial wage replacement. These benefits are supposed to make sure that the worker is adequately compensated during the time the injury heals.

However, worker’s compensation law does not require the insurer to pay for injuries that were not caused by the employment. Thus, if the medical records show that the injury was not caused by the employees but rather by an accident at home, the worker’s compensation insurer can deny the claim.

Personal Injury Law

Personal injury law becomes intertwined with home improvement contractor law when the homeowner or a bystander is injured in an accident at the construction site. For example, if a ladder is not reasonably secured and strikes the homeowner’s neighbor or the homeowner’s child when it falls, the contractor may be liable for the injuries in a lawsuit filed by a construction accident attorney.

To establish liability, the injured person would have to show that the contractor failed to meet the standards for reasonable care under the circumstances. If the contractor failed to adhere to industry standards or construction best practices, the contractor might be liable for construction site injuries.

Another situation where personal injury law intersects with home improvement contractor law is when a repair is defective and the homeowner’s guest is injured. For example, if a landlord hires commercial building contractors to repair a stair railing and but the contractor failed to repair the railing correctly. If a tenant falls and suffers an injury because of the failed repair, a premises liability attorney would likely file a lawsuit against the landlord who, in turn, would file a lawsuit against the contractor for negligence.

Negligence can also be used when work fails to meet reasonable standards and the work causes financial injury rather than personal injury. For example, if a structure collapses and damages electronics and furniture inside, a lawyer could file a lawsuit against the contractor for negligence. In this case, the damages amount to the value of the property damaged in the collapse.

Banking Law

Now for some more positive aspects of home improvement contractor law. Home improvement can increase the value of your home. This means that the credit you can access through your home will increase as well.

A first mortgage, or purchase money mortgage, is used to pay the seller when you buy a new home. When you hire a contractor to build a home improvement, you have a few options for paying the contractor:

  • You can save up and pay cash.
  • You can charge it to your credit card.
  • You can borrow against the equity in your home with a home equity loan or home equity line of credit.

However, once your home improvement is completed, you will realize many benefits. First, your home value will go up as will your resale price. This could mean that you will make more profit even after you pay off your mortgage and any loans for the home improvement.

Second, much of the profit you make from the sale from a primary residence is tax-free. This being the case, investing in home improvement can be one of the safest places to save your money.

Third, you can refinance your home after the home improvement has been completed and the increased value of the home will unlock more equity that you can borrow against. This means that you can use home improvement to improve your financial position.

Criminal Law

Although it does not happen frequently, home improvement contractor law can include criminal law in a few ways:

  • Misleading customers by promising something and not delivering can lead to criminal charges of fraud if the contractor knew the promises would not be fulfilled. Similarly, claiming to be a licensed contractor when, in fact, a contractor is not can lead to charges of fraud.
  • A charge of theft by deception can arise if a contractor provides lower quality products than promised or represents that a job included something that was not performed.
  • Reckless endangerment or similar crime could be charged if someone is injured as a result of a job that is so poorly done that it is reckless.
  • In extreme situations, a contractor might even be charged with homicide if the contractor behaves in a reckless or deliberate way that disregards risk to people. For example, if a contractor cuts corners and, as a result, causes the death of someone, a charge of manslaughter might be justified.

Americans are litigious. Americans spend twice as much filing and fighting lawsuits as they spend on purchasing cars. As a result, anything that goes wrong on a home improvement job could result in a lawsuit against the contractor. Whether it arises because of the contract, boundary lines, or personal injury, the customer has many options for making sure that any wrongs are righted.