OHIO HOME CONSTRUCTION SERVICE SUPPLIER S ACT I. HISTORY OF THE OHIO CONSUMER SALES PRACTICES ACT ( CSPA )

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1 OHIO HOME CONSTRUCTION SERVICE SUPPLIER S ACT I. HISTORY OF THE OHIO CONSUMER SALES PRACTICES ACT ( CSPA ) A. The CSPA was enacted in 1972 to protect consumers from deceptive, unfair or unconscionable acts when purchasing goods, services, a franchise, or an intangible, for personal, family, or household purposes. B. It does not matter if the Seller actually intended to deceive the consumer, the Seller can still be liable even if it had good intentions. C. The Act is designed to prohibit unfair, deceptive or unconscionable acts or practices by sellers engaged in consumer transactions. If a consumer alleges that a seller has engaged in deceptive practices, Ohio courts have consistently construed the applicable provisions of the Act as only requiring proof that the conduct complained of has the likelihood of inducing in the mind of the consumer a belief which is not in accord with the facts. D. The CSPA was not intended to apply to the sale of real estate because real estate is not a good. E. By 1978, attorney s fees were added to the Act. The legislature became concerned about the relatively few consumer cases that were being filed under the Act. Accordingly, in 1978, recognizing that most consumer claims would be for very small sums incurred by consumers who cannot afford to retain counsel to pursue them, the General Assembly amended the statute in several respects, effective August 11, 1978 to also provide for the recovery of attorneys fees. F. In 2005, the Ohio Administrative Code Section 109: (C)(2) was added so that the definition of service under the Act would include the construction of a single-family dwelling. G. In 2006, the Ohio Supreme Court opened the flood gates for consumers and radically expanded the damages a consumer could recover under the CSPA by deciding that a consumer could recover emotional distress claims and punitive or punishment damages as well as treble damages for a violation of the Act. Based upon that decision, a suppler under the Act can be severely punished for a violation of the Act. H. In response in 2007, the legislature amended the Act, to limit the amount of emotion distress damages a consumer could recover to $5000 and precluded the possibility of recovering punitive damages. I. The CSPA still allows the recovery of treble damages and attorney s fees. 1

2 II. REQUIREMENTS OF THE NEW HOME CONSTRUCTION SERVICES SUPPLIER S ACT. Provide home construction services (construction or remodeling of a residential building). Maintain a general liability insurance policy in an amount not less than $250,000. Enter into a written contract between the owner and the builder in excess of $25,000. If you comply with the new Act, you are exempt from the CSPA. III. CONTRACT REQUIREMENTS. The contract shall include all agreements and conditions related to the home construction service, including all of the following: 1. The supplier s name, physical business address, business telephone number, and taxpayer identification number; 2. The owner s name, address, and telephone number; 3. The address or location of the property where the home construction service is to be performed; 4. A general description of the home construction service, including the goods and services to be furnished as part of the service; 5. The anticipated date or time period the home construction service is to begin and the anticipated date or time period to be completed; 6. The total estimated cost of the home construction service; 7. Any cost of installation, delivery, or other cost that the total estimated cost does not cover; 8. A copy of the supplier s certificate of insurance showing general liability coverage in an amount of not less than $250,000; 9. The dated signatures of the owner and the supplier; and 10. A statement in substantially the following language: 2

3 EXCESS COSTS IF AT ANY TIME A HOME CONSTRUCTION SERVICES 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 HAVFE 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 IV. BUILDER CONDUCT. A. Excess Costs. If excess costs not stated in the contract exceed $5,000 over the course of the contract, the builder must provide notice to the owner that contains a written or oral estimate of excess costs before performing the work related to the excess costs. This does not apply to a cost-plus contract. B. Failure to disclose. Prior to the owner's acceptance of any goods or work related to an excess cost, a builder must disclose that in failing to approve an excess cost, completion of the work may not be possible and a charge may be imposed for any disassembly, reassembly, or partially completed work, which shall be directly related to the actual labor or parts involved. C. Charge for any excess cost. A builder shall not charge for any excess costs that the owner has not approved. D. Misrepresentation. A builder shall not represent that repairs or work have been performed when such is not the fact. E. Workmanlike Manner. A builder must perform the home construction service in a workmanlike manner (build to standards adopted by the Ohio Home Builders Association). F. Parts. A builder must provide to the owner, within a reasonable time and upon the owner's request, any replaced parts, unless the parts are to be rebuilt or sold by the builder, or returned to the manufacturer in connection with a warranted repair or service, and the intended reuse or return is made known to the owner prior to commencing any repair or services. 3

4 G. Refunds for Goods or Services. A builder must provide a full refund within a reasonable time period for any goods or services that the builder has failed to deliver in accordance with the terms and conditions of the contract and for which the builder has received payment. H. Itemized Receipt. A builder must provide to the owner, within a reasonable time and upon the owner's request, a written, itemized receipt for any item of goods that is left with, or turned over to, the home construction service supplier for repair or services. The receipt shall include all of the following: (a) (b) (c) The identity of the person who will perform the repair or services; The name and dated signature of the person or representative who actually accepts the goods; A description, including make and model number or other features that will reasonably identify the goods that are turned over, and the repair or services that are to be performed. I. Waiver of Rights. A builder shall not make the performance of any home construction service contingent upon an owner's waiver of any rights under this law. J. Residential Building Code. A builder shall not represent to an owner that repairs, services, or work is necessary to comply with the residential building code when such is not the fact. K. Dangerous Condition. A builder shall not represent that an item 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. L. Estimated Cost. A builder shall not intentionally understate or intentionally misstate the estimated cost of the home construction service. M. Quality of work or materials. A builder shall not intentionally misrepresent any aspect of the transaction or the nature or the quality of the work or materials. N. Signed Documents. A builder must provide an owner with a copy of the document within a reasonable time period after an owner signs or initials any document. 4

5 O. Warranty Disclaimer. A builder must disclose to the owner prior to the commencement of any repair or service that any part of the repair or service that will be performed by a person other than the builder or employee of the builder that the contract disclaims any warranty of the repair or service that the other person performs. P. Offsite Repairs. A builder shall not represent 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. Q. Down Payments. A builder cannot take more than a 10% down payment of the contract price before the contract begins. This does not apply to a cost-plus contract. R. Special Order Items. A builder can take as a down payment not more than 75% of the total cost of any special order item that is otherwise not returnable or usable before the contract begins. This does not apply to a cost-plus contract. S. Construction Loans. A builder may accept payments from a construction loan in connection with a home construction service contract. V. PENALTIES FOR VIOLATING THE ACT. The Act provides the Attorney General with very broad powers to investigate violations of the Act, and if the Attorney General finds that the Supplier violated any provision of the Act, the Attorney General can do any of the following: 1. Obtain a declaratory judgment that the action or practice of the Supplier has been violated; 2. Obtain a temporary restraining order/injunction, under a preponderance of the evidence that the Supplier has violated or may have violated the Act; 3. Impose a civil penalty of not more than $5,000 for each day of violation of a temporary restraining order or injunction; 4. Subject the Supplier to a fine of $25,000 for each violation of the Act. 5. The statute of limitations for the Attorney General s action is two years after the occurrence of the violation. The act, though, does not modify in any respect, the statute of limitations for a homeowner to bring an action in its own name; The owner may also bring its own action to rescind the contract, seek reimbursement of its own damages, plus an amount not to exceed $5,000 in non-economic damages, plus reasonable attorney s fees. 5

6 In addition, the Supplier may also sue for its own attorney s fees if the owner has brought or maintained an action that is groundless, and the owner filed or maintained the action in bad faith. VI. MISCELLANEOUS. A. Minimum Quantifiable Standards B. Arbitration C. Ohio Home Solicitation Sales Act Right to cancel for three business days. Notice must be given to consumer. Stephen R. Hunt, Esq. Aronoff, Rosen & Hunt 2200 U.S. Bank Tower 425 Walnut St. Cincinnati, Ohio / November 6, 2012\nc\P:\NChromik_Letters\SRH\Seminar\OHIO HOME CONSTRUCTION SERVICE SUPPLIER.doc 6