BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2007-2008 Regular Session
AB 244 A
Assemblymember Nakanishi B
As Amended June 13, 2007
Hearing Date: July 10, 2007 2
Business and Professions Code 4
ADM:jd 4
SUBJECT
Contractors: Home Improvement Contracts: Service and Repair
Contracts
DESCRIPTION
This bill would clarify current law that a contractor, as
defined, who furnishes a specified bond covering full
performance and payment with respect to a home improvement
or service and repair contract would be exempt from
providing certain specified information in the contract.
This bill would provide that, for purposes of a criminal
action against a licensed or unlicensed contractor or his
or her agent or salesperson, for an unlawful home
improvement or service and repair contract, the action must
be brought within two or fours years, respectively, from
the date of the contract or, if the contract is not reduced
to writing, from the date the buyer makes the first payment
to the contractor.
(This analysis reflects author's amendments to be offered
in committee.)
BACKGROUND
Under the Business and Professions Code (B&P), the
Contractors State License Board (CSLB) licenses and
regulates home improvement and service and repair
contractors. The Home Improvement Act (HIA), within the
B&P Code, governs the conduct of home improvement and
(more)
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service and repair contractors and their agents and
salespersons, and the provisions of contracts they enter
into with consumers. The HIA applies to both licensed and
unlicensed contractors and to both written and oral
contracts. The HIA provides for criminal actions against
licensed and unlicensed contractors if the action is
brought within specified limitations periods. The CSLB
asserts that current law is unclear as to when the
limitations periods begin to run if the contract is an oral
contract. This bill seeks to clarify the limitations
periods for criminal actions for violations of an oral home
improvement or service and repair contract. The bill would
also make clarifying amendments to the HIA.
CHANGES TO EXISTING LAW
Existing law generally provides for the licensing and
regulation of contractors, including home improvement
contractors, by the CSLB. (Business and Professions Code
(B&P) Section 7000 et seq.)
Existing law , the HIA, governs the conduct of home
improvement and service and repair contractors and
salespersons, and the provisions of contracts they enter
into. (B&P Code Section 7150.1 et seq.)
Existing law requires that a home improvement contract be
in writing, signed by the parties prior to the commencement
of any work, and contain specified information, notices,
and disclosures, including, among others:
A notice that the owner has the right to require the
contractor to have a performance and payment bond.
If a downpayment will be charged, the details of the
downpayment and a statement that the downpayment may not
exceed $1,000 or 10% of the contract price, whichever is
less.
If progress payments will be charged, the details of the
progress payments and a specified statement regarding
progress payments.
A specified notice regarding mechanics' liens.
(B&P Code Sections 7159 and 7159.5.)
Existing law , among other things, exempts a contractor who
furnishes a performance and payment bond, lien and
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completion bond, or a bond equivalent or joint control (an
escrow company manages the disbursement of funds to the
contractor as work is completed) approved by the CSLB from
the downpayment, progress payment, and mechanics' lien
notices. (B&P Code Section 7159.5.)
Existing law defines "home improvement contract" to mean an
agreement, whether oral or written, between a contractor
(or salesperson) and an owner or a tenant for the
performance of a home improvement, as defined. (B&P Code
Sections 7151.2 and 7159.)
Existing law defines "home improvement" to mean the
repairing, remodeling, altering, converting, or modernizing
of, or adding to residential property, as specified. The
definition also includes the installation of home
improvement goods or the furnishing of home improvement
services, as defined. (B&P Code Section 7151.)
Existing law defines "service and repair contract" to mean
an agreement between a contractor (or salesperson) and a
homeowner or tenant for the performance of a home
improvement, as defined, that conforms to the following
requirements: (1) the contract amount is $750 or less; (2)
the prospective buyer initiated contact with the contractor
to request the work; (3) the contractor does not sell the
buyer goods or services beyond those reasonably necessary
to take care of the particular problem; and (4) no payment
is due, or accepted by the contractor, until the work is
completed. (B&P Code Section 7159.10.)
Existing law provides that a violation of the HIA by a
licensed contractor, unlicensed contractor, or his or her
agent or salesperson is cause for discipline. (B&P Code
Sections 7155.6, 7156, 7159, 7159.11.)
Existing law provides that a violation of specified
provisions of the HIA by a licensed contractor, unlicensed
contractor, or his or her agent or salesperson is a
misdemeanor punishable by a fine of $100 to $5,000, or
imprisonment in the county jail for up to one year, or by
both. (B&P Code Sections 7159.5 and 7159.14.)
Existing law provides that an indictment or information, or
criminal complaint may be brought against an unlicensed
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home improvement contractor, and must be brought within
four years of the date the buyer signs the contract, or in
the case of a licensed contractor, within two years of the
date the buyer signs the contract. (Id.)
This bill would provide that a contractor who furnishes a
performance or payment bond, lien or completion bond, or a
bond equivalent or joint control approved by the CSLB
covering full performance and payment would be exempt from
providing, as part of a home improvement or service and
repair contract, statements regarding downpayment, progress
payments, or mechanics' liens.
This bill would provide that an indictment or information
or criminal complaint against an unlicensed contractor or
his or her agent or salesperson, for a violation, as
specified, of Sections 7159.5(b) or 7159.14(b) must be
brought within four years of either the date of the
contract or, if the contract is not reduced to writing, the
date the buyer makes the first payment.
This bill would provide that an indictment or information
or criminal complaint against a licensed contractor or his
or her agent or salesperson, for a violation, as specified,
of Sections 7159.5(b) or 7159.14(b) must be brought within
two years of either the date of the contract or, if the
contract is not reduced to writing, the date the buyer
makes the first payment.
COMMENT
1. Stated need for the bill
The sponsor, CSLB, writes:
Clean-up legislation is necessary because a loophole
[exists in the B&P Code with respect to] the statute
of limitations relating to an oral agreement. [A]
violation [of current law] is a misdemeanor; however,
prosecutors are reluctant to criminally [prosecute]
unlicensed contractors who have entered into oral
contracts for [violations of the law] unless the
investigation is performed within one year from the
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date of the oral contract. Prosecutors have one year
from the act or omission to criminally charge
misdemeanor violations unless otherwise specified by
law. [This bill would] provide prosecutors the
ability to criminally charge misdemeanor violations
[of the law] by unlicensed individuals whether the
contract is oral or in written form.
Complaints against unlicensed contractors are seldom
filed until a problem arises with the workmanship or
the project has been abandoned, often long after the
contract was made. A one-year statute of limitations
is insufficient to investigate and refer criminal
actions against unlicensed contractors who enter into
oral contracts. This loophole creates an incentive
for unlicensed individuals to enter into oral home
improvement contracts because the one-year statute of
limitations often precludes criminal prosecution.
[This bill would] close the loophole and provide the
same statute of limitations for oral home improvement
contracts as exists for written home improvement
contracts. The date of an oral contract would be
based upon the date the first payment is made.
Unlicensed individuals who violate this law could be
criminally charged within four years from the date of
the oral contract, the same statute of limitations
that exists for a written home improvement contract.
[The bill would] clarify that a contractor providing a
[specified bond] covering full performance and payment
is exempt from having to include the otherwise
required statements regarding downpayment, progress
payments, Mechanics' Lien Warning on a home
improvement contract because these types of bonds
provide a financial guarantee for the consumer that
the work will be completed per the contract.
2. Bill is intended as a clarifying measure
Current law provides for a two-year or four-year statute
of limitations for a criminal action against a licensed
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or an unlicensed contractor, respectively, for entering
into an unlawful home improvement or service and repair
contract. The CSLB asserts that current law is unclear
as to the date from which the applicable statute of
limitations runs for an oral contract. The CSLB asserts
that this bill would clarify this by providing that the
statute of limitations on an oral contract would begin to
run from the date the buyer makes the first payment to
the contractor.
The CSLB also asserts that the bill would clarify
existing law, which provides that a contractor who
furnishes a specified bond covering full performance and
payment with respect to a home improvement or service and
repair contract would be exempt from providing certain
information regarding downpayments, progress payments,
and mechanics' liens in the contract.
3. Department of Consumer Affairs (DOC) is neutral on the
bill
The DOC writes that it is neutral on the bill. It also
writes that the bill's provisions "will provide consumers
with greater protection against unlicensed contractors."
4. Author's amendments
On page 15, delete lines 28-40
On page 15, insert after line 27:
An indictment or information against a person who is
not licensed but who is required to be licensed under
this chapter shall be brought, or a criminal complaint
filed, for a violation of this section, in accordance
with paragraph (4) of subdivision (d) of Section 802
of the Penal Code, within four years from the date of
the contract, or, if the contract is not reduced to
writing, from the date the buyer makes the first
payment to the contractor.
On page 16, delete lines 1-2
On page 17, delete lines 26-40
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On page 17, insert after line 25:
An indictment or information against a person who is
licensed under this chapter shall be brought, or a
criminal complaint filed, for a violation of this
section, in accordance with paragraph (4) of
subdivision (d) of Section 802 of the Penal Code,
within two years from the date of the contract, or, if
the contract is not reduced to writing, from the date
the buyer makes the first payment to the contractor.
Support: CA Building Industry Assoc.; Engineering
Contractors' Assoc.; CA Fence Contractors' Assoc.;
Marin Builders' Exchange; Flasher/Barricade Assoc.;
CA Chapter of the American Fence Contractors'
Assoc.; Western Electrical Contractors Assoc., Inc.
Opposition: None Known
HISTORY
Source: Contractors State License Board
Related Pending Legislation: None Known
Prior Legislation: SB 30 (Figueroa, Chapter 566, Statutes
of 2004) revised and
recast the provisions governing home
improvement contracts and required a home
improvement contract to contain specified
information, notices, and disclosures.
AB 316 (Nakanishi, Chapter 385, Statutes of
2005) extensively revised and updated the
Home Improvement Act.
Prior Vote: Assembly Business and Professions Committee
(Ayes 10, Noes 0)
Assembly Judiciary Committee (Ayes 10, Noes 0)
Assembly Floor (Ayes 74, Noes 0)
Senate Business, Professions, and Economic
Development Committee (Ayes 8, Noes 0)
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