Contractors and Coronavirus: Refunds of Down Payments

 person using dewalt cordless impact driver on brown boardWith various federal, state, and local government officials in western Pennsylvania recommending social distancing due to coronavirus, contractors and homeowners may be wondering if they should go forth with projects that are already under contract. At the moment, the decision is up to the parties whether to proceed. However, in the event that either side decides not to move forward with a project, there are certain factors under the Pennsylvania Home Improvement Consumer Protection Act, (“HICPA”) to be considered.

HICPA Considerations

1.  HICPA requires that all qualifying home improvement contracts state the date that they are entered;

2.  HICPA requires that all qualifying home improvement contracts provide an approximate start and end date;

3.  HICPA requires that all qualifying home improvement contracts state the estimated total cost and the amount of the down payment (if any);

4.  In most cases, HICPA prohibits down payments in excess of one-third of the amount of the estimated contract price;

5.  Most importantly, HICPA requires contractors to refund the amount paid for a home improvement within ten days of receiving notice by certified mail that the homeowner wants a refund. To qualify for the refund, at least forty-five days must have passed since the starting date specified in the contract and no “substantial portion” of the contracted work must have started.

HICPA does take into account force majeure, which generally means that circumstances outside of the contractor’s control cause a delay. However, force majeure under HICPA generally only offers a defense to a criminal charge of fraud under HICPA. It does not provide an excuse to fail to refund a down payment when a homeowner demands a refund more than forty-five days after the project was supposed to begin.

In other words, if a contractor makes the decision to follow social distancing recommendations and a homeowner does not want to wait to proceed with a contract, the contractor may be required to refund the down payment. Similarly, if a homeowner decides to not allow the contractor to enter the property, even if the contractor is willing to proceed, a refund of the down payment may be required. If the parties merely want to postpone the contract, they are free to amend the estimated starting date.

The attorneys at the Lynch Law Group possess substantial experience representing both contractors and homeowners in HICPA situations and we are available to assist as the far-reaching consequences of coronavirus social distancing disrupt every-day life.

Visit our COVID-19 Hub for additional information from our team to assist your business in responding to the COVID-19 crisis:

Author:
David C. Weber concentrates his practice on a range of complex commercial litigation matters, including construction, insurance bad faith litigation and employment issues. He can be reached at (724) 776-8000 or dweber@lynchlaw-group.com.
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