An Educated Consumer May Be Your Best Customer

by R. Russell O’Rourke, Esq

(provided that you follow the consumer laws carefully)


An “educated consumer” (your homebuyer or homeowner, depending on whether you are a builder or remodeler) is someone who truly understands the deal that they are making with you.  Generally speaking, this means that you should have a thorough written agreement so that there are no misunderstandings, but SHOULD is not sufficient when you consider Ohio Consumer laws.  If you are dealing with a consumer as defined in Ohio Revised Code 1345.01 (a person agreeing to buy your labor and/or materials that are intended to be used primarily for their “personal, family or household” purposes), you ALWAYS need a signed contract.

Fortunately, for larger projects—those over $25,000—there is an exemption from some of the Consumer Sales Practices Act (CSPA), unfortunately, not all of the Act and even then, only if you comply with the statutory provision allowing the exemption. The portion of the CSPA that is likely not exempt is the Home Solicitation Sales (HSSA) contained in ORC 1345.21-.28 of the CSPA—there are no reported court of appeals cases on interaction of the HCSSA (below) and the HSSA.  You must comply with the HSSA if you sign the contract anywhere but at your “place of business,” unless the buyer initiated the contact with you for the purposes of negotiating the written contract, and you have a “business establishment”—not simply your home office—at a fixed location in Ohio where the “goods or services involved in the transaction are regularly offered or exhibited for sale.”  The other relevant exclusion from the HSSA is where the consumer contacted you and the consumer had a bona fide emergency endangering persons or property, if the consumer gives you a signed statement in their handwriting describing the emergency which also acknowledges and waives the 3-day right to cancel.  The failure to comply with the HSSA is itself an “Unfair or Deceptive Act,” subject to the damages discussed below.

The exemption for projects over $25,000 is the Home Construction Service Suppliers Act (HCSSA) ORC 4722.01-.08.  Although there are no reported court of appeals cases concerning this issue either, it appears that to use the exemption you must comply with its provisions, specifically, ORC 4722.02 which requires that for all covered contracts, except “costplus” contracts—ORC 4722.01(A)—you must have a written contract that contains all the things that you would expect to be in a contract, plus a few extras, including:  your company’s name address, phone number and taxpayer ID;  the owner’s name, address and phone number; the address of the property being improved; a description of the work to be performed; the anticipated date of commencement and completion of the project; the estimated cost of the project with a prescribed statement regarding extra costs; any other cost including installation and delivery that the estimated cost does not cover; your signature and theirs; AND A COPY OF YOUR CERTIFICATE OF INSURANCE SHOWING GENERAL LIABILITY COVERAGE OF AT LEAST $250,000.

Homeowners are regularly using the contractor’s failure to meet these requirements to eliminate the protections of the HCSSA pushing builders and remodelers back to the heavy penalties of the CSPA.  Penalties under the CSPA, including failure to comply with the HSSA, permit the consumer to cancel the contract—even if you have fully performed—(in remodeling, unless you can return the property to its original condition, they get to keep the improvements), or recover three times their actual damages, plus attorneys’ fees.  The consumer’s 3-day right to cancel starts when they have received the Notice of the Right to Cancel and the proper Notice of Cancellation form.

The real issue in the HSSA is that your contract MUST give the consumer notice of their right to “cancel the contract before midnight on the third business day after the contract is signed.”  In addition, ORC 1345.23 requires that you are to include, “a completed form, in duplicate, captioned ‘notice of cancellation’, [which] shall be attached to the contract signed by the buyer and be easily detachable, and shall contain in ten-point, boldface type….”  The Notice of Cancellation form must be “substantially” the form provided by the statute.  There is no good reason to deviate from the form, so if you are going to create your own contracts, Google “1345.23” and copy the Notice directly from the statute.

Because the consequences can be so costly, you should talk to your construction attorney to assure that your contracts and forms follow the current law (the most recent changes were made to the consumer laws in 2012) and to establish a mandatory procedure for all sales made to consumers.