December 2020

Changes to Home Improvement Contract Requirements in Effect January 1, 2021: New “5-Day Right to Cancel” Requirement for Contracts with Senior Citizens, New Construction Categories Added to “Home Improvement” Type Work and New License Classification for Residential Remodeling Contractors.

As most contractors are aware, contracts for home improvement work must comply with unique requirements set forth in the Business and Professions Code (“BPC”).[1] BPC section 7159 identifies the requirements for home improvement contracts exceeding $500.

1. Right to Cancel Home Improvement Contracts Extended for Individuals 65 Years of Age or Older from Three to Five Business Days.

The changes effective January 1, 2021 (AB 2471) do not remove any existing home improvement contract requirements.  All home improvement contracts entered into on or after January 1, 2021, however, must now include a “Five-Day Right to Cancel” notice in lieu of a “Three-Day Right to Cancel” notice if the home improvement contract is with a senior citizen.  The language of the “Five-Day Right to Cancel” is nearly identical to the “Three-Day Right to Cancel” and can be found in BPC section 7159(e)(6). This same requirement was added to service and repair contracts entered into on or after January 1, 2021. See BPC § 7159.10(e)(12)(A). The home improvement contract laws were further amended to define the term “senior citizen” as an individual who is 65 years of age or older. See BPC § 7150(b).

2. Rebuilding of Homes Destroyed by Natural Disasters (Proclaimed as State of Emergency) Are Now Subject to Home Improvement Contract Requirements.

The definition of “home improvement” is expanded in the new year. The term “home improvement” continues to include repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property, which includes (but is not limited to) the construction, erection, replacement, or improvement of driveways, swimming pools, spas, hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements of the structures or land which is adjacent to a dwelling house. It also continues to include installation of home improvement goods or furnishing of home improvement services such as carpeting, texture coating, fencing, air conditioning or heating equipment, and termite extermination.

The changes effective January 1, 2021 (SB 1189), expand the definition of “home improvement” to also include the “reconstruction, restoration, or rebuilding of a residential property that is damaged or destroyed by a natural disaster for which a state of emergency is proclaimed by the Governor pursuant to Section 8625 of the Government Code, or for which an emergency or major disaster is declared by the President of the United States.” BPC § 7151. This means that work which would typically fall under “new residential construction”[2] and not “home improvement,” will now be subject to the home improvement contracting laws if the rebuilding or reconstruction is to a residential property destroyed by national disaster under a state of emergency proclamation. As California residents are aware, during 2020 (and the preceding years), the Governor of California proclaimed a state of emergency due to numerous wildfires burning statewide, a natural disaster which caused damage to and destruction of thousands of structures, including residential property.  Pursuant to this new statute amendment, the rebuilding of these homes (i.e., ground up construction) would be subject to home improvement contract requirements.[3

3. New License Classification for Residential Remodeling Contractors

SB 1189 also amended BPC sections 7055 and 7057.5 to create a new license classification for a “residential remodeling contractor” whose principal business is projects that make improvements to, on, or in an existing residential wood frame structure that require the use of at least 3 unrelated building trades or crafts for a single contract. The statute provides a nonexclusive list of trades or crafts in this regard.  A residential remodeling contractor is prohibited from taking a contract for a project unless the contract includes 3 or more unrelated trades or crafts, including fire protection, unless the contractor holds the appropriate license classification or subcontracts with an appropriately licensed contractor.  A residential remodeling contractor is also prohibited from make structural changes to load bearing portions of an existing structure and from contracting to install, replace, substantially alter, or extend electrical, mechanical, or plumbing systems or their component parts, or the mechanisms or devices that are part of those systems, unless the residential remodeling contractor holds the appropriate license classification or subcontractors with an appropriately licensed subcontractor.[4]

Contractors should make it part of their practice to routinely review any updates to the home improvement contracting laws, confirm that their contracts are in compliance and keep up to date on changes to license laws. Our team at Gibbs Giden Locher Turner Senet & Wittbrodt LLP has experience in reviewing and drafting home improvement contracts and analyzing related home improvement licensing issues. If you need assistance in updating your contracts to comply with home improvement contract requirements or have questions about the license law, Gibbs Giden can help.

[1] The home improvement contracting requirements are codified in the California Business and Professions Code, Division 3 Professions and Vocations Generally, Chapter 9 Contractors, Division 10 Home Improvement Contracts.

[2] See Civil Code §§ 895, 896, 938.

[3] Additionally, certain home improvement contracting provisions were amended to update pronouns and punctuation, but no other substantive changes were made. See BPC § 7159, changes from “he or she” to “they,” “his or hers” to “their;” and BPC §§ 7169, 7170, updated punctuation.

[4] The purpose of this new law is to help protect victims of disasters rebuild their homes with contractors who are properly prepared to undertake the project safely, correctly, and efficiently.

For more information contact:

Michele A. Ellison

mellison@gibbsgiden.com

(310) 734-3336

Michele Ellison is spearheading the newest Gibbs Giden office in San Jose, where she practices and represents clients in the areas of business, commercial and construction litigation. Ms. Ellison has experience representing general contractors, subcontractors, material suppliers and public agencies in a wide range of business, commercial and construction negotiations and disputes. Her primary emphasis is in construction litigation for both public and private projects involving delay and disruption claims, mechanics lien foreclosure and stop notice enforcement actions.  Ms. Ellison participates in legal matters throughout the entire course of the case, from the initial pleading stage, discovery, law and motion work, case management and motion hearings, pre-trial preparation and through trial, and has obtained favorable settlements and results. In the commercial practice area, she has experience in securing preliminary remedies, specifically, writs of attachment, and enforcing judgments. Ms. Ellison also has experience with contractors licensing issues, including home improvement contract and licensure requirements.

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