Does your contract comply with DPOR regulations?
A well-drafted contract is essential to the operation of any business. But even when a business owner acts prudently and retains a lawyer to draft a contract form, later changes in the law may make that contract non-compliant with evolving law and regulations. For this reason, forms should be reviewed every so often.
Changes adopted in 2015 by the State Board for Contractors (a division of the Virginia Department of Professional and Occupational Regulation or “DPOR”) adopted new regulations expanding the number of specific terms that licensed contractors must include in all contracts with non-commercial customers. Failure to include any one or more of these terms in a contract could subject a contractor to administrative penalties, including fines or suspension of a contractor’s license. And if a contract is in violation of law, a consumer may well raise the illegality in any dispute that might arise, even as a means of evading the payment obligation.
Despite these regulations’ having been in effect for over three years now, we have found that many contractors have never updated their forms to bring them into compliance. Unfortunately, many contractors become aware of the regulatory requirements only after a customer dispute arises. That could come via a complaint filed with DPOR, or in the context of a law suit with the customer.
When dealing with consumers, licensed construction contractors must have written contract documents, and those documents must include at least the following information:
- When work is to begin and the estimated completion date.
- A statement of the total cost of the contract and the amounts and schedule for progress payments including a specific statement on the amount of the down payment;
- A listing of specified materials and work to be performed, which is specifically requested by the consumer;
- A “plain-language” exculpatory clause concerning events beyond the control of the contractor and a statement explaining that delays caused by such events do not constitute abandonment and are not included in calculating timeframes for payment or performance;
- A statement of assurance that the contractor will comply with all local requirements for building permits, inspections, and zoning;
- Disclosure of the cancellation rights of the parties;
- For contracts resulting from an in-person solicitation, a signed acknowledgment by the consumer that he has been provided with and read the Department of Professional and Occupational Regulation statement of protection available to him through the Board for Contractors;
- Contractor’s name, address, license number, class of license, and classifications or specialty services;
- A statement providing that any modification to the contract, which changes the cost, materials, work to be performed, or estimated completion date, must be in writing and signed by all parties; and
- Effective with all new contracts entered into after July 1, 2015, a statement notifying consumers of the existence of the Virginia Contractor Transaction Recovery Fund that includes information on how to contact the board for claim information.
Importantly, a contractor can be found in violation of the law even if he had no intent to break the law. As far as DPOR is concerned, it is the contractor’s obligation to stay abreast of the legal requirements, and in full compliance. For this reason, contractors who deal with the general public should have their form documents reviewed by their lawyers periodically.
Note that DPOR’s requirements apply only when contractors deal with consumer clientele. Commercial contracts and subcontracts are not subject to these regulations, but of course, the more complex the relationship, the more essential a complete written statement of the terms of the deal can become. A contractor may well want to have two different forms to use, one for consumer clients and one for commercial dealings. Otherwise, terms not required by law may seep into the commercial deals as well.
While the DPOR regulations make it abundantly clear how important it is for a construction contractor to keep its contract forms up to date, businesses in other lines of work will often find similar situations laying in wait for them as well. For this reason, we always recommend the proactive approach, with periodic reviews of forms, so as to prevent stepping into an unforeseen legal mess.