According to its statement of policy, The Illinois Home Repair and Remodeling Act ("Home Repair Act") is intended to improve communications and create accurate representations between persons engaged in the business of making home repairs or remodeling and their consumers in order to increase consumer confidence, reduce the likelihood of disputes, and promote fair and honest practices in that business in this State.1 While the Home Repair Act intends to improve communications between contractors and homeowners, there are several instances where the Home Repair Act does not effectively communicate its requirements to contractors. This article focuses on three grey areas of the Home Repair Act and provides practice tips on how to properly advise a contractor doing work in one of these grey areas.
The Home Repair Act applies in cases of a home repair or remodeling project in excess of $1,000. The Home Repair Act requires that a contractor: (i) provide the homeowner with a written contract or work order identifying the total cost, including parts and labor, "with reasonable particularity", (ii) provide the homeowner with a copy of a brochure created by the Illinois Attorney General entitled "Home Repair: Know Your Consumer Rights", (iii) obtain a signed acknowledgment from the homeowner that he or she has received the consumer rights brochure.2 For contractors whose net worth is less than $1,000,000, the Home Repair Act sets minimum requirements for liability insurance.3
The penalties for non-compliance with the Act are severe. If a contractor knowingly violates the Home Repair Act, the violation is considered a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.4 Whether the contractor violates the Home Repair Act, either knowingly or unknowingly, the contractor is barred from pursuing any legal or equitable remedy against the homeowner.5 Put another way, if a contractor does not provide a homeowner with a Consumer Rights Brochure6, the contractor has no remedy in the event a homeowner refuses to pay the contractor for the work he performed. Accordingly, those representing contractors should be prepared to counsel their clients on Home Repair Act compliance.
Contractors often perform home repair and remodeling on an emergency basis. If a home is damaged by a fire, if a basement floods due to heavy rainfall, or if a tree falls on to a roof due to high winds, the homeowner is not likely to put the repair out to a competitive bid, hire a construction manager, and set up a construction escrow account at his or her local bank. Instead, the homeowner contacts his or her insurance company and gets in touch with a contractor who can repair the damage as soon as possible.
Contractors who respond to these circumstances are confronted with a difficult proposition. Prior to the start of work, the Home Repair Act requires the contractor to provide a written contract or work order that identifies the total cost "with reasonable particularity". Yet, a contractor responding to emergency situations described above will generally have no idea what exact repairs are required (nor how much those repairs will cost) until the work starts and the contractor is able to assess the actual damage.
A contractor cannot use the emergency nature of his work as a defense for non-compliance with the Home Repair Act. There is simply no statutory exception for emergencies and no Illinois court has recognized such an exception. Instead, the appellate court has stated that there is no exception under the Act for projects billed on a time and material basis, or for projects that become unpredictable in scope and nature.7
A review of the Home Repair Act’s legislative history shows that the Illinois General Assembly expressly intended to regulate contractors who perform emergency work. During floor debate, Representative Fritchey, a sponsor of the Home Repair Act, stated that the purpose of the Act was to "prevent *** the fly by night people, *** the people that come and prey on seniors, that come and prey on homeowners after disasters, after tragedies whose homes are in need of repair."8
Accordingly, the contractor must do its best to provide a written contract or work order with reasonably particularity. If it fails to do so, it will be barred from pursuing any remedy against the homeowner, and may violate the Consumer Fraud Act in the process.
Further complicating matters, there is no definition of "reasonable particularity" in the Home Repair Act and no appellate court has provided guidance on what constitutes "reasonable particularity". Therefore, a contractor should be advised to prepare work orders and contracts with as much detail as possible.
In an emergency situation where the contractor is unsure of what the scope of his work will entail, the contractor should be advised to inform the homeowner up front and in writing of that fact, and to send updated work orders and updated written estimates so that the homeowner stays informed of the precise work the contractor must do and the cost of doing the work.9
Sending updates to the homeowner helps accomplish the Home Repair Act’s goal of improving communication between the contractor and homeowner. Sending updates also helps in creating an accurate representation of the scope and cost of the contractor’s work. And most importantly to the contractor, it may insulate it from a Home Repair Act claim.
The law is now clear that subcontractors are not subject to the requirements of the Home Repair Act.10 However, traditional subcontractors should also understand what the Home Repair Act requires and be prepared to satisfy the Act’s requirements. Since a general contractor has greater lien rights than a subcontractor11, a subcontractor may wish to be classified as a general contractor for the purposes of claiming a better position under the Illinois Mechanics’ Lien Act. Additionally, a subcontractor may want to keep an avenue open for pursuing a homeowner on a contract theory in the event the general contractor does not have the financial ability to pay the subcontractor.
For example, it is not an uncommon occurrence for a homeowner to ask a subcontractor to perform additional work on a jobsite that is not encompassed within the subcontractor’s contract with the general contractor. In those circumstances, it would be far better for the "subcontractor" to characterize his work as general contract work because then the "subcontractor" would have a contract action against the homeowner and greater lien rights than if the "subcontractor" characterized the work as subcontract work and requested a change order from the general contractor. It is for this reason that attorneys representing homeowners need to advise the owners not to deal directly with a subcontractor, but instead deal only with the general contractors.
The Home Repair Act eliminates subcontractors’ reliance upon an oral contract with the homeowner as the basis for a cause of action. Often times, a subcontractor would simply characterize extra work as part of an oral contract between the subcontractor and the homeowner. When disputes arose between the subcontractor and the homeowner, the subcontractor would bring a claim for a breach of the oral contract directly against the owner, and in addition it would file a mechanics’ lien claim against the owner.
The Home Repair Act effectively prohibits this practice by banning oral contracts for home repair and remodeling. Therefore, if a subcontractor wishes to preserve its ability to file a contract action against the homeowner for the extra work it performed at the homeowner’s request, or to gain enhanced lien rights under the Mechanics Lien Act as a general contractor, the subcontractor must be prepared to comply with the Home Repair Act: it must provide a written contract or work order identifying the total cost with reasonable particularity, it must provide the homeowner with the consumer rights brochure, and it must obtain an acknowledgement form signed by the homeowner. As a "best practice", it is advisable for a contractor to provide the brochure and acknowledgement form to a homeowner regardless of whether the contractor is a general contractor or a subcontractor on the project so as to keep these avenues open later on down the road.
Remodeling or repairing condominiums pose special problems with Home Repair Act compliance. The act defines a "residence" as follows:
"‘Residence’ means a single-family home or dwelling or a multiple-family home or dwelling containing 6 or fewer apartments, condominiums, town houses, or dwelling units, used or intended to be used by occupants as dwelling places. This Act does not apply to original construction of single-family or multi-family residences or repairs to dwellings containing more than 6 apartments or family units.’"12
The Act does not define "dwelling", "family units", or "apartments", and the appellate courts have yet to provide any guidance on the meaning of these terms. Therefore, the Home Repair Act has left an open question as to whether work performed in an individual condominium unit within a building containing 40 individual condominium units would be considered a "residence" within the meaning of Home Repair Act or whether it would be exempt from the Home Repair Act.
Likewise, the Home Repair Act does not differentiate between repairs within an individual condominium unit from repairs of a condominium’s common elements. In one of the few recorded cases interpreting the Home Repair Act, Cent. Ill. Elec. Servs., LLC, v. Slepian, the appellate court noted that it would not create exceptions to the Act that were not expressly provided.13 Accordingly, it appears that a contractor must comply with the Home Repair Act for all condominium work, even if the contractor only works on common elements. In cases of a repair of a condominium common element, the Home Repair Act creates special compliance problems. The Home Repair Act requires that the contractor give the customer the consumer rights brochure.14 Accordingly, if the contractor provides the condominium association who hired the contractor a copy of the consumer rights brochure, the contractor is likely in compliance with the Home Repair Act.
The compliance issue arises from the Attestation Form that contractors are required to keep. The Home Repair Act requires the consumer (not the customer) to sign an Attestation Form stating "I, the homeowner, have received from the contractor a copy of the pamphlet entitled ‘Home Repair: Know Your Consumer Rights.’" In the case of a condominium common element, the consumer, the customer, and the homeowner may not mean the same thing, nor are they even the same person(s). Since a condominium association is typically not a homeowner, the proper person(s) who must sign the Attestation Form is not an easy question to answer. Is the contractor required to obtain the signature of each and every "homeowner" in the condominium association before beginning work on a common element? If the contractor simply obtains the signature of a director of the association, has that contractor violated the Home Repair Act?
Getting the correct answers to these questions is very important to the contractor. If the contractor answers these questions incorrectly, the contractor is completely foreclosed from pursuing any legal or equitable remedy in court. If the contractor knowingly gets the answer wrong, the contractor commits consumer fraud. Unfortunately, there is absolutely no guidance from the appellate court on this issue.
In the case of a large condominium complex, like the new Trump Tower, it would seem absurd that the appellate court or the Home Repair Act would require a contractor to go to each and every unit owner, provide each unit owner with a copy of the consumer rights brochure, and obtain a signed attestation form from each unit owner before that contractor could start its work. However, until such time as the court or the legislature clarifies exactly how the Home Repair Act’s compliance should be obtained, a contractor completing work in a condominium should understand the inherent risk involved. When working on condominiums, as it stands now, a condominium association may later raise the failure to comply with the Home Repair Act as a defense to payment.
The Home Repair Act has placed an enormous burden on contractors and provides for severe consequences if the contractor fails to meet that burden. For attorneys advising home repair and home remodeling contractors, the Home Repair Act leaves many unanswered questions and its lack of clarity creates many compliance problems. As a best practice, it is advisable for a contractor to provide every homeowner involved in its project with a copy of the consumer rights brochure and accurate, updated work orders as often as possible- regardless of whether the contractor is a general contractor or a subcontractor. If the contractor fails to do so, it runs the risk of not getting paid for the work that it performed.
1 815 ILCS 513/5
2 815 ILCS 513/15 and 20.
3 815 ILCS 513/25.
4 815 ILCS 505/2Z. See also Kunkel v. PK Dependable Constr., LLC, 2009 Ill. LEXIS 44 (Docket No. 5-07-0684) (Ill.App.Ct. 5th Dist. Feb. 13, 2009) (noting the Consumer Fraud Act applies to knowing violations of the Home Repair Act, not unintentional violations).
5 Smith v. Bogard, 377 Ill.App.3d 842 (1st Dist. 2007).
6 A copy of the brochure may be obtained from the Attorney General’s website at: http://ag.state.il.us/consumers/homerep0505c.pdf
7 Cent. Ill. Elec. Servs., L.L.C. v. Slepian, 358 Ill. App. 3d 545, 559 (5th Dist. 2003).
8 91st Gen. Assem. House Proceedings, May 20, 1999, at 17 (statement of Rep. Fritchey).
9 Cent. Ill. Elec. Servs., LLC v. Slepian, 358 Ill.App. 3d 545, 560 (5th Dist. 2003). "Nothing in the Act precludes a contractor from providing an updated estimate or work order as the circumstances may warrant."
10 MD Elec. Contrs., Inc. v. Abrams, 369 Ill. App. 3d 309, 314-15 (2nd Dist. 2006).
11 Compare 770 ILCS 60/7 (outlining the requirements for a valid general contractor’s lien) with 770 ILCS 60/21 and 24 (outlining the requirements for a valid subcontractor’s lien)
12 815 ILCS 513/10
13 Cent. Ill. Elec. Servs., L.L.C. v. Slepian, 358 Ill. App. 3d 545, 559 (5th Dist. 2003).
14 815 ILCS 513/20
James L. Ryan is an associate at the law firm of Roberts & Caruso. He concentrates in commercial litigation, probate, and construction law. He represents both home-owners and contractors in cases involving the application of the Home Repair and Remodeling Act.