Page 33 - BusinessWest August 4, 2021

Confusion Is Building
State Should Clarify Home Improvement Contractor Law
IBy Ryan Barry and Sean Buxton n Massachusetts, most contractors who
provide home-improvement and renova-
tion services are subject to Chapter 142A of the General Laws, commonly called the Home
the owner and contractor agree on the price for the work, and the price doesn’t change unless there are changes in the scope of work or unfore- seen conditions affecting the work.
fee is “total amount agreed to be paid.” Contracts for cost-plus projects cannot comply with this requirement — the “total amount agreed to be paid” is unknown when the contract is signed, leading most contractors and observers to con- clude that cost-plus contracts are illegal under the law.
However, it is unclear whether cost-plus with GMP contracts comply with the law. On one hand, the parties don’t know what the total cost of the project will be, but on the other, they know it won’t exceed a certain number. There are no Massachusetts cases that provide insight on this issue, and the state agency that oversees the
law — the Office of Consumer Affairs and Busi- ness Regulation (OCABR) — has not issued any guidance.
Penalties for violating the Home Improvement Contractor Law can be severe. A violation of the law, including a failure to state the total price in the contract, automatically qualifies as an unfair and deceptive business practice, which could expose the contractor to a lawsuit for three times the homeowner’s damages plus attorney’s fees. Because of these severe penalties and the uncer- tainty regarding cost-plus with GMP contracts,
Contractor
Continued on page 36
RYAN BARRY
“The penalties are too
severe — and the potential
benefits too great — for the
law to remain unclear on
this type of contract.” SEAN BUXTON
• With ‘cost-plus’ projects, the owner agrees to pay the contractor the cost of its labor and materials, plus a percentage of those costs to cover the contractor’s over- head and profit.
• The third com- mon compensation method — ‘cost-plus with a guaranteed
Improvement Contractor Law (new home builders and some trades are exempt from this law). One ambiguous requirement of that law is preventing homeowners and contractors from taking advantage of a beneficial method for pricing home-improvement projects, and the state should step in to provide clarity.
In the construction industry, there are three common methods for calculating the contrac- tor’s compensation:
• With ‘fixed-fee’ or ‘stipulated-sum’ projects,
maximum price (GMP)’ — is a hybrid of the first two. The owner agrees to pay the contractor the cost of its labor and materials plus a markup, but the contractor guarantees that the total cost will not exceed a certain number (again, unless there are changes in scope or unforeseen conditions affecting the work).
The law requires home-improvement con- tracts to state “the total amount agreed to be paid for the work.” Contracts for fixed-fee projects
can comply with this requirement — the fixed
It’s Not Just the Numbers
Patrick Leary, CPA, Partner Douglas Theobald, CPA, Partner Springfield | Hartford | Boston
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