Saturday, April 12, 2008

The Home Repair & Remodeling Act

On April 3, 2008, the Illinois Supreme Court finally released its highly anticipated opinion in the case MD Electrical Contractors, Inc. v. Abrams. Well, maybe it wasn't too highly anticipated by the legal community at large, but I argued the case in front of the Supreme Court back in September, so after more than seven months without hearing a word from them, it was at least highly anticipated by me and my client.

The good news is that the Supreme Court affirmed the 2nd Dist., so I won the case...for now. (Click here for the full opinion.) The bad news is that Justice Freeman's dissent, while not binding, outlines a course of action that the circuit court could follow on remand to make an eventual victory back at trial very difficult.

For those unfamiliar with the Act, it requires "all persons" who perform home repairs or remodeling which cost more than $1,000 to have a written contract with the homeowner. The Act also requires contractors to hand out a Consumer Rights Brochure to the homeowners. The Act provides for enforcement through the Attorney General's or State's Attorneys' offices and violations of the Act are also considered violations of the Consumer Fraud and Deceptive Business Practices Act.

The issue of this case was whether the Act applies to sub-contractors. My client was an electrical sub-contractor who performed services well in excess of the $1,000 limit on a very large remodeling project in Naperville, but didn't have a written contract with the homeowners, or hand them the brochure. When my client did not get paid, we sued under a quantum meruit theory to recover for the work performed. The homeowners moved to dismiss on the theory that my client did not comply with the Act, the trial court agreed, and the case was dismissed.

The 2nd Dist. Appellate Court found that the purpose of the Act was to protect homeowners from unscrupulous contractors. The Court found that the legislature could not have intended the Act to apply to sub-contractors because that would force homeowners to have to sit down and contract with potentially dozens of different companies on a large project, instead of just dealing with the general contractor

The Supreme Court affirmed. The Court noted that the use of general and subcontractors is a common business practice in the home repair injustry. Generals have always contracted directly with the homeowners. Subcontractors never deal directly with the homeowners. The Court anticipated that if the Act were to apply to subcontractors, and if homeowners were required to negotiate and contract with each individual subcontractor, it would throw the system into upheaval because homeowners generally do not have the experience necessary to coordinate a large project. For instance, should the drywall guys hang the sheet rock before or after the plumbers run the pipes? And dozens of other questions of that nature.

So, the Court held that the Home Repair and Remodeling Act does not apply to sub-contractors because that is the way that the current general contractor/subcontractor system has evolved.

Makes sense, doesn't it?


Anonymous said...

Good for people to know.

PND said...

Do you think that the Act would apply to a "Home" owned by an LLC and rented out? Or is it just applicable to a home owned by a person?

Michael W. Huseman said...

I just had a similar issue in DuPage County. The house was owned by individuals, but it was an investment property. They didn't live there.

I argued it was the "Home" Repair Act, not the "Investment Property" Act, etc. But the court didn't buy it. Motion to dismiss my complaint was granted.

It would be a little stronger argument with an LLC in title, but you'd probably get the same result.