For those of you familiar with the Ohio Consumer Sales Practice Act (“OCSPA”), R.C. 1345.02, et. al. you will recall that the OCSPA applies only to “consumer transactions.” “Consumer transactions” is broadly defined in the OCSPA (R.C. 1345.01(A)) as “a sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are primarily personal, family, or household, or solicitation to supply any of these things.” However, the statutory definition of “consumer transaction” also contains several exclusions:
“‘Consumer transaction’ does not include transactions between persons, defined in section 4905.03 and 5725.01 of the Revised Code, and their customers, except for transactions involving a loan made pursuant to section 1321.35 to 1321.48 of the Revised Code and transactions in connection with residential mortgages between loan officers, mortgage brokers, or nonbank mortgage lenders and their customers; transactions involving a home construction service contract as defined in section 4722.01 of the Revised Code; transactions between certified public accountants or public accountants and their clients; transactions between attorneys, physicians, or dentists and their clients or patients; and transactions between veterinarians and their patients that pertain to medical treatment but not ancillary services.” Id.
The focus of today’s blog is on one of the particular exceptions to the definition of “consumer transaction” in the OCSPA — the “home construction service contract as defined in section 4722.01 of the Revised Code.” Id.
Chapter 4722 is home to Ohio’s Home Construction Service Suppliers Act (“HCSSA”). In 2012, the General Assembly amended the OCSPA to exempt certain home construction service contracts from its provisions, but at the same time it created the Home Construction Service Suppliers Act. The HCSSA is similar to the OCSPA in that it prohibits certain deceptive acts in connection with work relating to home construction service, it requires the service contractor to perform its construction work in a “workmanlike manner,” and it provides the home owner with a cause of action to rescind the contract or recover damages and be awarded attorneys’ fees if the service supplier knowingly commits an act that violates the statute.
But exactly who is covered by the HCSSA? The statute applies to “home construction service contracts” and to “home construction service suppliers.” Both of these terms have very specific definitions in R.C. 4722.01 (and if you do not meet these definitions, then be aware that the OCSPA may still apply to you).
“(B) ‘Home construction service’ means the construction of a residential building. ‘Home construction service’ does not include construction performed on a structure that contains four or more dwelling units, except for work on an individual dwelling unit within that structure, or construction performed on the common area of a condominium property.
(C) ‘Home construction service contract’ means a contract between an owner and a supplier to perform home construction services, including services rendered based on a cost-plus contract, for an amount exceeding twenty-five thousand dollars.
(D) ‘Home construction service supplier’ or ‘supplier’ means a person who contracts with an owner to provide home construction services for compensation and who maintains in force a general liability insurance policy in an amount of not less than two hundred fifty thousand dollars.
(E) ‘Owner’ means the person who contracts with a home construction service supplier. ‘Owner’ may include the owner of the property, a tenant who occupies the dwelling unit on which the home construction service is performed, or a person the owner authorizes to act on the owner’s behalf to contract for a home construction service, and any other person who contracts for a home construction service.” (Emphasis added).
Thus, under these definitions, a home constructive service supplier who enters into a contract with an owner to provide construction work on a residential building that costs in excess of $25,000 may be subject to the requirements of the HCSSA. The statute specifically requires that a written contract must be signed for any work in excess of $25,000, and that this written contract contain certain specific terms and conditions found in R.C. 4722.02(A), including total estimated costs, when the project will start and be completed, and a copy of the supplier’s certificate of insurance. In addition, the statute provides that:
“(B)(1) If the total amount of reasonably unforeseen, but necessary, excess costs of a home construction service at any time exceeds five thousand dollars over the course of the entire home construction contract, prior to performing the work related to the excess costs, the home construction service supplier shall provide an owner with a notice that contains a written or oral estimate, depending on which type the owner has designated in the contract.
(2) To determine the type of notice an owner requires when the costs of a home construction service exceed the estimate provided in the contract, the contract shall include a statement in substantially the following language:
IF AT ANY TIME A HOME CONSTRUCTION SERVICE REQUIRES EXTRA COSTS ABOVE THE COST SPECIFIED OR ESTIMATED IN THE CONTRACT THAT WERE REASONABLY UNFORESEEN, BUT NECESSARY, AND THE TOTAL OF ALL EXTRA COSTS TO DATE EXCEEDS FIVE THOUSAND DOLLARS OVER THE COURSE OF THE ENTIRE HOME CONSTRUCTION CONTRACT, YOU HAVE A RIGHT TO AN ESTIMATE OF THOSE EXCESS COSTS BEFORE THE HOME CONSTRUCTION SERVICE SUPPLIER BEGINS WORK RELATED TO THOSE COSTS. INITIAL YOUR CHOICE OF THE TYPE OF ESTIMATE YOU REQUIRE:
. . . . written estimate . . . . oral estimate.” R.C. 4722.02 (emphasis added).
Failure to enter into a written contract that complies with the requirements of the statute or that does not include the required “excess costs” language in it are prohibited acts. R.C. 4722.03(A)(1) and (2). Additional prohibited acts are found in R.C. 4722.03(A), and these include:
“(A)(3)(c) Represent[ing] that repairs or work have been performed when such is not the fact;
(A)(3)(d) Fail[ing] to perform the home construction service in a workmanlike manner [which is defined as “construction that meets or exceeds the minimum quantifiable standards promulgated by the Ohio home builders association” R.C. 4722.01(G)];
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(A)(4) Mak[ing] the performance of any home construction service contingent upon an owner’s waiver of any rights this chapter provides;
(A)(5) Represent[ing] that repairs, services, or work is necessary to comply with the residential building code when such is not the fact;
(A)(6) Represent[ing] that an items of goods or any part thereof that is being inspected or diagnosed for a home construction service is in a dangerous condition, or that its continued use may be harmful, when such is not the fact;
(A)(7) Intentionally understat[ing] or intentionally misstat[ing] the estimated cost of the home construction service;
(A)(8) Intentionally misrepresent[ing] any aspect of the transaction or the nature or the quality of the work or materials;
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(A)(11) Represent[ing] that repairs or services must be performed away from the property on which the home construction service is being performed when that is not the fact.”
If the supplier engages any of these prohibited acts, then not only may the Attorney General investigate the supplier and bring a civil action against the supplier, but also the owner may bring a lawsuit against the supplier as provided in R.C. 4722.08. The owner may seek to “rescind the transaction or recover the owner’s actual economic damages plus an amount not exceeding five thousand dollars in noneconomic damages.” Id. at 4722.08(A). The owner may also seek “a declaratory judgment, an injunction, or other appropriate relief.” Id. at 4722.08(C).
The statute further provides that the court may award to the home owner a reasonable attorney’s fee, if the home construction service supplier “has knowingly committed an act or practice that violates this chapter.” R.C. 4722.08(D)(2). Remember, to “knowingly” commit an act that violates the statute generally only means the supplier knows that it acted or failed to act in a certain way, not that the supplier realizes that its act violates the statute.
Finally, the statute provides that “[n]othing in this section shall preclude an owner from also proceeding with a cause of action under any other theory of law.” R.C. 4722.08(F). Thus, a home owner is not limited to just a claim under the HCSSA but can bring multiple causes of action against the construction service suppler, including, for example, breach of contract, breach of warranty, or negligence.
Note that the HCSSA does carve out exceptions for “cost-plus contracts.” A “cost-plus contract” is defined as a “contract entered into between an owner and a home construction service supplier under which payment to the supplier is based on the cost of a product plus the supplier’s rate for labor to install the product plus an agreed percentage of profit or a stipulated fee.” R.C. 4722.01(A). A service supplier who enters into a “cost-plus contract” does not have to comply with the requirements regarding what must be included in the service contract as provided in R.C. 4722.02(A) and (B), nor does the service supplier have to comply with any of the requirements regarding “excess costs.” See, R.C. 4722.02(C) and 4722.03(B).
So, if you are a provider of home construction services, be aware of Ohio’s special laws that apply to the services you provide. Depending on the services you provide and their costs and if you meet the appropriate definitions, you may be subject to either the OCSPA or the HCSSA, both of which impose numerous obligations on you and the services you provide and which give substantial rights to home owners to seek damages and even recover their attorney’s fees if you knowingly violate the statute.