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Important
Notice
The contractor's bond and the qualifying individual's bond
are scheduled to be increased to $12,500 on January 1, 2007
California Legislative Updates
New Contract Laws Take Effect January 1, 2006
In early October, Governor Arnold Schwarzenegger signed into law a bill that
modifies the requirements for both Home Improvement and Service and Repair contracts
written in California. Assembly Bill (AB) 316 makes the requirements easier to understand
for both the contractor and consumer.
New Home Improvement Contract Requirements Now In Effect
New home improvement contract requirements went into effect January 1, 2006.
The changes are designed to make contracts more informative to consumers and easier
for both the contractor and consumer to understand. The new requirements create
a contract document that notifies consumers of their rights and their contractor’s
responsibilities. Following are some of the most significant changes for home improvement
contracts:
- The contract must include a list and description of all documents required
to be incorporated into the document
- The contract must specify whether or not the contractor is exempt from workers’
compensation insurance requirements
- Finance charges must be listed separately from the contract total and under
a specific heading
- The contract must specify the three-day and seven-day “right to cancel"
begins when the buyer receives a copy of the written agreement
- Requires statement that the contractor must provide Lien Release notices
to the consumer on request after payment is made in the contract
- "Agreed Consideration for the Work" is now called the "Contract Amount"
The same legislation also:
- Raises the down payment for swimming pool construction to $1,000 or 10 percent
of the contract amount, whichever is less -the same as for other home improvement
contracts
- Provides a new notice about general liability insurance that replaces the
previous notice required under the old law
- Allows for development of a “Service and Repair Contract” for projects that
are $750 or less, when the buyer initiates contact
Under the guidelines, the consumer’s right to cancel ends when work begins
New Service and Repair Contract Provisions Effective January 1, 2006
Legislation now in effect has created a new contract for "emergency" home repair
jobs and allows jobs to be started sooner because the right to rescind the contract
expires when the work begins. Very specific rules must be followed when using a
service and repair contract. If the contract and situation do not conform to all
of the requirements, the contractor must use a standard home improvement contract
for home improvement work. The requirements include the following:
- The contract amount must be $750 dollars or less
- The prospective buyer (homeowner or tenant) must have initiated contact
with the contractor to request the work
- The contractor does not sell the buyer goods or services beyond what is
reasonably necessary to take care of the particular problem for which the buyer
contacted the contractor in the first place
- No payment is due, or accepted by the contractor, until the work is completed
- if all the requirements above are not met, the contract for home improvement
projects covered in Section 7159 of the Business and Professions Code shall
apply
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