SB-981- New Guidelines For Water Treatment Device Installation Under Home Improvement Contracts
- You initiated the contract the value of contracted work is $750 or less payment is due on completion. You may cancel by emailing, mailing, faxing, or delivering a written notice to the contractor at the contractor’s place of business. The cancellation notice must include your name, address, and the date you received your copy of the contract. If you send the notice by mail, it takes effect when deposited in the mail.
Both you and the contractor have certain duties and rights after the cancelation occurs.
The contractor must refund any consideration you’ve provided under the contract, be it funds, goods, or evidence of debt, within 10 days of the cancelation notice. You have every right to hold on to any goods they had delivered until you get your full refund.
If the contractor has refunded you, you must return their goods, upon demand, within 20 days of cancellation. The contractor must collect them from your address at no cost to you, but you must take reasonable care of these objects while they are in your custody. The goods become your property with no obligation on your part should the contractor not ask for them within the 20 days.
In case of a service and repair contract, the contractor is not entitled to any reimbursement if you cancel within the allowable timeframe. What’s more, the contractor must restore your property to the condition it was in before any alterations occurred.
Exceptions to your cancellation rights
There are certain exceptions to your right to cancel a home improvement contract after receiving a signed and dated copy.
For example, you don’t have this right if you were the one who sought the goods and services, or the work was part of emergency repairs necessary for the immediate protection of you, your family, or your property.
If you already sold or encumbered your property, and your buyer was not involved in the water treatment contract or the associated loan agreement, you may also lose the right to cancel.
You may waive your cancellation rights yourself, by providing a separate, signed and dated statement to the same effect, along with a description of the emergency that requires immediate remedy.
If you are financing your project
You may choose to finance your water treatment unit and its installation rather than paying for it upfront. That said, your contractor cannot force you to obtain a loan for all or a portion of the work. Likewise, contractors may not oblige you to accept their financing, their assistance in obtaining it, or their referral to anyone who may arrange it. Contracts that include clauses to the contrary are unenforceable, unless:
- The third party, if any, agrees to make the loan or financing arrangement
- You agree to accept it
- You do not cancel the loan or financing transaction within the allowable rescission period
- Unless the above conditions are met, the contractor cannot tell you that the contract is enforceable or that it places you under any obligation. The law also forbids them to deliver you any goods or perform any services, other than preliminary measures such as obtaining building permits, if no mechanic’s lien can be claimed on the work.
Installment contracts may be canceled within 3 business days if you and the contractor explicitly understood that you would need a loan to pay for the work, and you weren’t able to get one after a reasonable effort.
Work during the rescission period
The new bill allows a contractor to install your water treatment device, under a home improvement contract, within your right-to-cancel period. That said, if you use your right to cancel, the contractor must remove the device and restore your property to its original state within 20 days.
SB-1087 - New Guidelines For PACE Assessment Contracts
Another important piece of legislation, Senate Bill 1087 (SB-1087), imposed new, strict guidelines on Property Assessed Clean Energy (PACE) financing.
The program, which gives eligible homeowners access to financing for energy efficiency upgrades, has led some borrowers to assume debt they cannot afford. The new bill aims to protect the most vulnerable homeowners from being pressured into accepting financing that is beyond their means. Some features of the new bill include tougher screening measures and mandatory training for PACE solicitors, as well as more stringent qualification criteria for homeowners and their properties.
Solicitor enrollment criteria
The new bill requires a rigorous assessment of PACE administrator, solicitor and solicitor agent candidates.
PACE administrator applicants must be investigated by the commissioner of the Department of Business Oversight (DBO) as a precondition of obtaining their license. PACE administrators, in turn, must establish an enrolment process for PACE solicitors and their agents - the salespeople who sell PACE financing. The minimum enrolment criteria for these individuals is to maintain their license and registration as a home improvement salesperson in good standing with the California Contractors’ State License Board (CSLB) unless they are exempt from the licensing requirements.
PACE administrators may cancel a solicitor candidate’s enrolment in the program if their background check returns any of the following:
- A pattern of consumer complaints regarding dishonesty, misrepresentations, and omissions
- A likelihood that the solicitor candidate will solicit assessment contracts in a non compliant manner
- A pattern of poor reception and response to property owner complaints regarding the solicitor
- PACE program administrators must promote and assess the compliance of solicitors and agents with the law, and have a process for canceling the enrolment of those who disregard the law.
Per the new bill, PACE solicitors must also receive training and pass a test before enrolment. The training curriculum must introduce candidates to the PACE programs, assessment contracts, and disclosure, and expose them to subjects such as ethics, fraud prevention, consumer protection, nondiscrimination, and senior financial abuse.
The new bill ensures that the DBO stays informed of the PACE solicitation in the state by requiring the commissioner to be notified of each new solicitor’s enrolment or removal from the program.
Qualification criteria for the property
A key feature of PACE financing is that it gets attached to the property rather than the owner. This means that the obligation to repay the loan gets passed on to future owners of the property. Going forward under the new legislation, properties used to secure PACE assessment contracts must meet the following criteria: all property taxes for the subject property are current, with no more than one late payment in either:
- The past three years or since the current owner acquired the property
- The subject property has no recorded and outstanding involuntary liens over $1,000
- The subject property has no current notices of default that have not been rescinded
- The property owner has not been a party to any bankruptcy proceedings OR has been discharged or dismissed from one within the last 2-7 Years of the application date, and has had no debt payments over 30 days overdue within 12 months of the application date, excluding medical debt
- On the application date, the owner is current on mortgage debt on the subject property and hasn’t had more than one late payment, and no Payments more than 30 days overdue within 12 months of the application date
- The subject property is within the geographical boundaries of the PACE program
- The measures to be installed are eligible under the applicable PACE program
- The assessment amount is less than 15% of the market value of the property, up to the first $700,000 inclusive of the existing assessments, and is for less than 10% of the remaining value of the property above $700,000
- The total PACE assessments and the outstanding mortgage do not exceed 97% of the property’s market value
- The term of the assessment contract shall not exceed the estimated useful life of the measure for which most of the funds disbursed under the said contract were used
- PACE administrator must check whether additional assessments on the same property have been authorized by the owner; if they have been, the amount of all PACE assessments shall comply with the above criteria on assessment amounts
Qualification criteria for the owner
Before releasing funding and recording the assessment contract, the administrator of a PACE program must also perform a background check to determine the owner’s ability to repay their obligations. This verification is based on the owner’s income, assets, and current debt. Notably, the equity of the property that secures the assessment is not considered in this assessment.
In calculating the property owner’s ability to repay, the program administrator must establish that the owner’s income is sufficient to meet the PACE payment inclusive of interest, any housing payments, existing debts, and basic household living expenses. These criteria may be waived in some cases of an emergency or immediate necessity to fund a heating, ventilation, and air-conditioning system, or another system that regulates the temperature of a home.
Unless the owner intentionally misrepresents their circumstances, the program administrator will be liable for paying the difference between their determination of the owner’s ability to pay their PACE obligations and the actual amount financed to the owner.
Enforceability and validity of a PACE assessment contract
Perhaps the most critical clause of the new bill relates to the performance of improvement work - other than permitting and other preliminary measures - when the owner is misinformed about, unwilling, or unable to obtain PACE financing.
SB-1087 makes it unlawful for a contractor to commence work, deliver property, or perform services under a home improvement contract, and the contract itself becomes unenforceable, if:
1. The property owner entered the contract believing that the PACE program would cover the work,
2. The property owner cancels the PACE financing within the prescribed timeframe or gets their PACE financing application declined.
By starting work in violation of this clause, contractors lose their right to compensation for their efforts including any considerations already obtained and become liable for restoring the owner’s property to its original condition.
The owner, in turn, must surrender items belonging to the contractor, at the contractor’s expense, given that their removal doesn’t damage the owner’s property. The owner may keep the items without obligation should the contractor not retrieve them within 90 days of the contract’s execution.
Certain conditions allow the property owner to waive their right to rescind the home improvement contract. Should the owner waive this right and then get rejected for PACE funding or cancel it, the home improvement contract will remain in force.
While we hope that you find this digest useful, please note that the information above is presented for educational purposes only and does not amount to legal advice. If you have questions or concerns about your legal rights and responsibilities relating to home improvement contracts, please consult an attorney.
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