Information on Ohio's Consumer Laws from Attorney Daniel Myers, Myers Law, LLC, not legal advice
In its September 8, 2016 decision, a unanimous Eighth District Court of Appeals panel handed Ohio consumers a big victory. The Court held for the first time that contractor bonds are intended to protect homeowners and consumers from harm. This may seem like common sense to consumers (that’s why you protect yourself by hiring a licensed, bonded, and insured contractor, right?), but the courts had never actually decided whether homeowners could make claims directly against a contractor’s bond. The opinion of the Court can be found here.
In this case, Western Surety Company (aka CNA Surety) argued that homeowners and consumers are not allowed to make bond claims against their contractor’s bonds because the bonds only benefit the cities, not consumers. Western Surety had been able to successfully obtain judgments in its favor on that very issue from many trial courts on that very issue.
Attorney Daniel Myers represented a Cleveland consumer and argued that contractor bonds are meant to protect consumers from harm when their contractors perform substandard work. Although the bond surety won in the trial court on this issue, the appellate court sided with consumers, and reversed the decision of the lower court.
“This is a significant decision protecting consumers.” Myers said. “Had the decision gone the other way, homeowners would find themselves in a hopeless situation when their contractor botches the job.”
According to Myers, “a lot of the contractors that end up being sued operate on a shoestring–they have a truck and some tools. When they perform shoddy work, or they damage someone’s property, they can’t afford to pay for the damages out-of-pocket.” Occasionally, the contractor’s insurance will cover some of the damages. However, under a 2012 Ohio Supreme Court decision, insurance companies may not be required to pay to correct all shoddy or defective work. “If homeowners were not allowed to make claims against a contractor’s bond, and their contractor was like 99% of residential contractors, homeowners would be stuck paying the thousands or tens of thousand of dollars in costs caused by the shoddy work under threat of criminal prosecution and jail time,” said Myers. Sometimes, shoddy work rises to the level of city maintenance code violations, and homeowners can be criminally prosecuted by their city if they fail to maintain their property in a safe manner.
Under today’s decision, homeowners can now turn to the contractor’s bond to seek compensation for repair costs and harm caused to them by unscrupulous contractors. The court noted that when a bond is payable or for the use of “any person,” homeowners and consumers are included in the group of intended third-party beneficiaries of these bonds, and therefore they are allowed to make their own claims against the bond. “Consumers no longer have to wait for cities to make a decision to go after the bond–a decision cities sometimes never make. Many cities are simply too busy to seek this compensation for their residents, leaving residents to pay these substantial costs,” according to Myers.
If you have had a bad experience with a contractor or tried unsuccessfully to make a claim against the contractor’s bond, feel free to share your story with others here. For more information about this decision or how it impacts your clients or your rights, contact Dan Myers.
How does the HSSA apply to an agreement and to a buyer when he initiates the contact, and where the buyer discards the contractor’s initial quotation and writes his own contract and omits the language required by the HSSA. The buyer who acts as the construction manager invites several contractors to bid the job. Can the HSSA be used as a sword, and not the shield it was intended for?
John, thank you for your questions. While I cannot provide you any legal advice on this, I can provide my general impressions and academic opinions. Although the HSSA was not at issue in the case referred to in the blog post above, it can still apply to agreements where the buyer initiates contact when the ultimate agreement is still signed at the buyer’s home or place other than the seller’s business establishment. There are some exceptions under the statute when the buyer initiates contact, but the seller bears the burden of proving that those exceptions apply. They can be found in R.C. 1345.21(A)(1)-(7). It would be my belief that it would still apply where the buyer supplies the contract, because the law places the burden on the seller to provide the contract with the required disclosures. Was the initial quotation that the buyer “discards” intended to be the contract by the seller, and if so, did it contain the required legal notices? If the buyer tries to cancel the contract in that situation, in my mind that does not necessarily mean that the law is being used as a sword. The scenario leaves out many facts such as the amount paid, the timing of cancellation, the reason why the seller failed to provide the required language itself/himself/herself after the contract was determined, and specific facts that would show whether the HSSA applies or not. Ultimately, the contractor decides to move forward and not provide the warnings, or to say “this job isn’t for me, I’ll pass.” And ultimately, if the HSSA applies, it places the burden on the contractor to comply.
Thanks for the insight, and here are some of the answers to those questions, first, the buyer initiated the request for quotation and work by the contractor because the contractor had previously completed work for the buyer, and the buyer is an investor that had planned to flip the home, so there was no need for the cancellation notice in my opinion since it is considered a commercial transaction . Second the quotation was just that, a quotation and upon acceptance, a contract would have been drawn up by the seller, but the buyer insisted in writing the contract knowing that he would omit the language in order to try entrap the seller . Further the buyer acted as the project manager on both projects, and even pulled the permits. Which in my opinion, negates the entire act since it was enacted to protect the consumer with limited knowledge in the construction field in this instance. As for using it like a sword, the buyer has previously used the HSSA to obtain full refunds from trades that have earnestly done work for the buyer, and near completion is confronted with threats to be sued. So this is not the buyers first rodeo when it comes to obtaining work and materials free with the use of the statute that originally was meant to protect the elderly. It’s a sad state of affairs when a statute that is meant to protect the consumer, is abused, and used in essence to steal. There is no doubt that these types of statutes are needed to prevent those that prey upon the consumer, but need to be strictly construed in order to prevent abuse.
That sounds like a pretty hairy situation. I’m not familiar with the law ever being used in that capacity successfully for a commercial transaction like you describe. I think it would be different in my mind if the flipper was planning on living at the property, therefore the property was going to be their residence, even if temporarily.
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