Posted In: Real Estate & Real Estate & Construction
By James T. Dixon on January 18, 2022
Ohio’s residential homebuilders and remodelers set themselves up to lose disputes even before projects begin because their contract forms do not comply with Ohio law. Based on the experience of the attorneys in Brouse McDowell’s Construction Practice Group, very few small contractors have compliant forms.
Residential construction is governed by a handful of Ohio statutes and a body of common law developed by Ohio’s courts. Statutes include the Residential Contractor Right to Cure Act, the Home Solicitation Sales Act, the Home Construction Service Suppliers Act, and the Consumer Sales Practices Act. Key common law decisions include those that read a nonwaivable duty of workmanlike construction into every construction contract.
These laws provide benefits while also imposing burdens, though most of what they provide is a burden. Under the Right to Cure Act, if a contractor includes the right language in its contract, then the homeowner must give the contractor the opportunity to address deficiencies before that homeowner files suit or commences arbitration. Under the Home Solicitation Sales Act, the contract form must in many circumstances, include language advising the homeowner of a right to cancel within three days.
The Home Construction Service Suppliers Act provides that contracts must be in writing and must include some very specific terminology. It also limits down payments to ten percent unless the payment is used for special order items. In 2012, the Ohio legislature passed this act to relieve contractors engaged in residential construction projects of up to three units from the burdens of the Consumer Sales Practices Act. There is still some question as to whether residential remodelers also benefit from this. The Consumer Sales Practices Act is particularly tough on contractors because it provides for an award to the homeowner of treble damages if that homeowner prevails. Additionally, its list of unfair, deceptive, and unconscionable actions is lengthy and continually changing.
Achieving legal compliance is just the initial goal when preparing contract forms. There are also great advantages to be had. Primary among these is the ability to direct disputes to mediation and arbitration. Homebuilders and remodelers should avoid placing their fate in the hands of judges and juries who are not familiar with their industry.
Most small residential contractors and remodelers use contract forms of their own making that focus more on the details of the work than on legal compliance. Standard forms are available from many Home Builder Associations and from The American Institute of Architects. Even these standard forms however, must be modified to bring them into compliance with Ohio law. Builders and remodelers who have not recently had their custom or standard forms reviewed for compliance should do so promptly. This is a regular assignment handled by Brouse’s attorneys, who also have compliant custom forms available as a starting point. This is truly a situation where an ounce of prevention equals a pound of cure.
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