Contractors find opportunity in remodeling but face a different set of legal constraints.

Contractors find opportunity in remodeling but face a different set of legal constraints

With the amount of new construction shrinking contractors are increasingly competing for renovation jobs, especially in the home market. But even though contractors may be able to transfer skills from new construction to remodeling projects, laws covering their work differ depending on whether the contractor is servicing a developer or a homeowner.

"The State of California has determined that when remodeling, consumers can be protected," said Mike Leeson, executive vice president at American Building Contractors Association of Los Angeles. The reason the law protects them is that since they do renovations infrequently they are not knowledgeable enough to protect themselves.

When a contractor or subcontractor begins a renovation job he is required to give the consumer a form notifying him that he has three days to cancel a contract, "and most contractors [who normally do new construction projects] don't know that," said Leeson.

This applies "unless the contract is signed in the office of the contractor," added Anita Boillin of Pacific Western Builders of Cypress, a contractor who specializes in remodeling projects.

The law also prohibits them to take more than 10 percent of the total fee or $1,000 as down payment, said North Hollywood-based attorney Sam Abdulaziz.

In taking payments contractors also are forbidden to receive a larger percentage of fees than the amount of work completed, he said.

Also, the date a job begins and is completed must be stated in a contract when homeowners remodel, "and that is not required by law in any other contract," Abdulaziz noted. The reason, "in business people can protect themselves," he added.

With continuing layoffs in the construction industry, another issue is unlicensed workers competing for remodeling jobs illegally. When an individual works for a developer he is not required to have a license, when dealing with a homeowner directly he must have a license, Abdulaziz said.

When reselling home fixtures, subcontractors must be registered and they are not necessarily always licensed, he added.

Additionally, a home improvement contractor is required to give the consumer a "notice to owner form" explaining laws regarding the payment of suppliers. For example according to California construction laws "anyone who improves property has a lien on the property for the value of the improvement," Abdulaziz said.

"If you pay me [the contractor] and I don't pay my supplier, he can sue you," even if you have paid me, he said. This law forces the homeowner to look out for himself in terms of not getting ahead of the payment schedule.

According to a pamphlet published by the National Association of Home Builders in Washington D.C., depending on local laws, a homeowner may ask contractors and suppliers to waive the right to have a lien on the property.

Another solution is to place payments in an escrow account until the work has been completed by subcontractors who should prove that suppliers have already been paid, the group notes.

Contractors who demolish homes for remodeling purposes need also to be aware of asbestos and rules that apply to handling and removal of hazardous material.

The use of asbestos, which has fire-retardant qualities, was banned by the Environmental Protection Agency because of its cancer-causing potential. Asbestos can exist in a building's floor and roofing tiles, insulation and adhesives.

If contractors plan to remove 100 square feet or more of asbestos-containing material, they need to notify South Coast Air Quality Management District inspectors "10 days in advance to assure proper removal and disposal procedures are followed," according to AQMD spokesmen.

To remove less than that amount, they do not need to notify AQMD. However, they "will be required to follow proper workplace practices specified in Rule 1403 or face enforcement action," according to AQMD guidelines. The guidelines note special procedures must be followed in carrying out the work, such as wetting down surfaces and using special vacuum equipment.

"Violators of the rule are subject to fines up to $25,000 and possible criminal prosecution, regardless of whether they are aware that asbestos exists," said Dr. James M. Lents, AQMD executive officer.

Lents advised that if homeowners suspect asbestos which is intact, the best thing to do is to leave it alone. If for any reason they want it removed they should not remove it themselves, although he added they are exempt from criminal prosecution.