2009 State Legislature Adopts New Consumer Notices
See Public Act 09-18, Disclosures by New Home Construction Contractors and Home Improvement Contractors. Effective July 1, 2009.
The HBA supported this bill, which provides more effective notice to consumers and levels the playing field for all builders and remodelers. The bill was proposed by a legislator early in the session and immediately caught the eye of a large bi-partisan group of supporters. The HBA jumped in to make sure this train stayed on a reasonable path.
It addresses an issue where some builders set up new LLCs for each new home, properly register that LLC, and effectively deny any opportunity to consumers to investigate prior claims against the contractor. Alternatively, some NHCC and HIC keep setting up new shops after running into consumer complaint issues. Notifying consumers of only the brand new LLC or other entity effectively denies consumers adequate notice.
Therefore, the new law requires new home construction contractors (NHCC) and home improvement contractors (HIC) to identify other registered NHCCs or HICs in which the principal(s) is or has been a principal in the previous five years.
Since the NHCC and HIC registration acts are structured differently (having been originally adopted decades apart), the new notice requirement is done in different ways. In summary, a NHCC can amend its existing statutory registration notice, which is required to be provided to all prospective home buyers, or provide an additional written notice complying with the new law, while a HIC should amend its contract to include the new notice provision.
To summarize the new requirement for new home construction contractors, under the amended NHCC registration statute (chapter 399a, section 20-417d), "A new home construction contractor shall (1) prior to entering into a contract with a consumer for new home construction, provide to the consumer a copy of the new home construction contractor's certificate of registration and a written notice that ... (D) discloses each corporation, limited liability company, partnership, sole proprietorship or other legal entity, which is or has been a new home construction contractor under the provisions of this chapter or a home improvement contractor under the provisions of chapter 400, in which the owner or owners of the new home construction contractor providing the written notice required by this section are or have been a shareholder, member, partner or owner during the previous five years, ... (underlined language is new law).
While the new law requires that written notice of other applicable NHCC and HIC entities be provided to consumers, the legislation did not amend the written statutory registration notice in the statute itself (i.e., section 20-417d(c)). Presumably, therefore, the new written notice can be a separate document. We recommend that all home builders comply with this new law by either amending the existing statutory registration notice you currently provide to consumers (see the 2006 changes to the New Home Construction Contractor registration notice, adopted by Public Act 06-73, which became effective on May 30, 2006) or provide to consumers a separate written notice that states substantially the following (check with your attorney for the best way to proceed). The notice should be in all capital letters in at least 10 point bold-face type (see section 20-417d). We also recommend that you obtain a copy signed by each consumer acknowledging receipt of this new notice or institute some other practice as proof of providing the notice:
"PURSUANT TO PUBLIC ACT 09-18, THE SHAREHOLDERS, MEMBERS, PARTNERS OR OWNERS OF ___________________________________ (the NHCC) IS OR HAS BEEN A SHAREHOLDER, MEMBER, PARTNER OR OWNER OF THE FOLLOWING NEW HOME CONSTRUCTION CONTRACTOR(S) OR HOME IMPROVEMENT CONTRACTOR(S) DURING THE PREVIOUS FIVE YEARS:
RECEIPT ACKNOWLEDGED BY CONSUMER:
Consumer Signature Date
To summarize the new requirement for home improvement contractors, under the amended HIC registration statute (chapter 400, section 20-429), "(a) No home improvement contract shall be valid or enforceable against an owner unless it: (1) Is in writing, (2) is signed by the owner and the contractor, (3) contains the entire agreement between the owner and the contractor, (4) contains the date of the transaction, (5) contains the name and address of the contractor and the contractor's registration number, (6) contains a notice of the owner's cancellation rights in accordance with the provisions of chapter 740, (7) contains a starting date and completion date, [and] (8) is entered into by a registered salesman or registered contractor, and (9) includes a provision disclosing each corporation, limited liability company, partnership, sole proprietorship or other legal entity, which is or has been a home improvement contractor pursuant to the provisions of this chapter or a new home construction contractor pursuant to the provisions of chapter 399a, in which the owner or owners of the home improvement contractor are or have been a shareholder, member, partner, or owner during the previous five years. ... (underlined language is new law).
The HIC provision requires the new notice to be included in the HIC's contract. If the contract is worded correctly such that attachments are included in the agreement, you may be able to attach the new written notice to your existing contracts. Check with your attorney as to the best way to proceed. The contract provision would read substantially as follows:
"Pursuant to Public Act 09-18, the shareholders, members, partners or owners of ___________________________________ (the HIC) is or has been a shareholder, member, partner or owner of the following new home construction contractor(s) or home improvement contractor(s) during the previous five years: