The Ohio Consumer Sales Practices Act (CSPA) is a consumer protection law designed to shield consumers from unfair and deceptive business practices. A critical component of the CSPA is the Home Sales Solicitation Act (HSSA), which imposes specific requirements on contractors working with consumers on home improvement projects.

Key Requirement: The Notice of Right to Cancel

One of the key obligations under the HSSA is the Notice of Right to Cancel. Contractors are required to provide this notice to the consumer at the time the contract is signed. The notice informs the consumer of their right to cancel the contract until midnight of the third business day after signing.

While the best practice for contractors is to provide the Notice and wait three days before beginning any work, this is not always practical. Nevertheless, contractors must be aware of the significant consequences of non-compliance:

  • Indefinite Right to Cancel: If the contractor fails to provide the Notice, the consumer’s right to cancel the contract becomes indefinite. The consumer can cancel the contract at any time, demand a full refund, and keep any goods or services already provided.
  • Legal Penalties: Additionally, the consumer may sue for treble damages (three times the actual damages), non-economic damages up to $5,000, and attorney’s fees. In some cases, contractors may also be held personally liable.

Exceptions to the Notice Requirement

There are certain situations where contractors are not required to provide the Notice of Right to Cancel. These exceptions include:

  1. Business Transactions: If the “consumer” is not a true consumer under the CSPA (e.g., transactions related to business purposes, such as services for house flippers or landlords).
  2. Bona Fide Emergency: If the work is performed in response to a legitimate emergency, and the consumer provides written declaration of the emergency.
  3. Mail or Telephone Transactions: If the transaction was initiated entirely by mail or phone with no in-person contact prior to completion.
  4. Fixed Location Contractors: If the consumer initiates the transaction with a contractor who has a fixed business location in Ohio where services are regularly offered for sale.

Best Practices for Contractors

To avoid legal pitfalls, contractors should establish clear procedures for contracting with consumers. Best practice remains to provide the Notice of Right to Cancel, wait the required three days, and then begin work. This approach will ensure compliance with the HSSA.

Expansion of the Home Construction Service Suppliers Act (HCSSA)

On September 19, 2024, Ohio expanded the Home Construction Service Suppliers Act (HCSSA) to include not just new home construction but also home repairs, renovations, remodeling, and improvements valued over $25,000. Previously, the HCSSA applied only to new home construction.

What Does This Mean for Contractors?

The recent changes to the HCSSA have several key implications for contractors:

  • No More Treble Damages: Contractors performing home improvement projects over $25,000 will no longer face the risk of treble damages (triple damages) under the CSPA.
  • New Contract Requirements: Contractors must ensure their contracts include the following:
    • Detailed description of services and materials
    • Estimated start and completion dates
    • Total cost and any potential additional costs
    • Proof of liability insurance with a minimum of $250,000 coverage
    • Change order language: If additional work or unforeseen costs over $5,000 arise, the contractor must provide a written or oral estimate to the homeowner. Contractors must clearly explain any price increases and give homeowners the option to choose how they receive the estimate.

Compliance Steps for Contractors

Contractors must update their contracts to comply with the HCSSA requirements. This includes ensuring that contracts contain all the required information, providing proof of insurance, and establishing a clear process for handling change orders. Contractors who fail to comply with the HCSSA may be liable for contract rescission, non-economic damages up to $5,000, and attorney’s fees.

It’s highly recommended that contractors consult with legal counsel to ensure their contracts are fully compliant with both the HSSA and the expanded HCSSA.

Conclusion

Contractors must stay informed about the changes to the Home Sales Solicitation Act and Home Construction Service Suppliers Act. By implementing best practices such as providing the Notice of Right to Cancel and adhering to the requisite contract requirements, contractors can minimize their liability. As always, consulting with legal counsel is crucial to ensure compliance and avoid costly mistakes.

Contact your FGKS attorney today to ensure you are in full compliance with the HSSA and HCSSA regulations.

Original Publish Date: December 16, 2024

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