Illinois Home Repair and Remodeling Act (HRRA) – Are Oral Home Improvement Contracts (Over $1,000) Enforceable?

can-stock-photo_csp15933599The Illinois Home Repair and Remodeling Act, 815 ILCS 513/1 et seq. (“HRRA” or the “Act”) was enacted in January 2000 to protect consumers from unscrupulous home repair contractors.    The HRRA sections that seem to spawn the most litigation are Sections 10, 15, 15.1, 20 and 30.  These sections provide:

Section 10 (815 ILCS 513/10) – “home repair and remodeling” means any improvement to residential real property including accessories like swimming pools, chimneys, garages, fences, HVAC equipment and driveways;

Section 15 (815 ILCS 513/15) – requires a contractor (“person engaging in business of home repair and remodeling”) for all contracts exceeding $1,000 to furnish the homeowner a written contract or work order with job specifics (costs, materials used, contact info for contractor, etc)

Section 15.1 (815 ILCS 513/15.1) – consumer/homeowner must be notified of contractual jury waiver or  binding arbitration clause and must be given opportunity to accept or reject the terms in writing.

 Section 20 (815 ILCS 513/20) – contractor must provide a “Home Repair: Know Your Consumer Rights” pamphlet before starting the job.  If the contract price exceeds $1,000, the homeowner and contractor must sign an acknowledgement (stating that the homeowner received the pamphlet from the contractor).  If under $1,000 – no written acknowledgement required.

Section 30 (815 ILCS 513/30) – provides that any person who suffers actual damage for a HRRA violation can sue under Section 10a of the Illinois Consumer Fraud Act (815 ILCS 505/10a) [Note – this Section was added in July 2010]

Another key HRRA section concerns insurance.  Section 25 requires contractors to have $100K/$300K bodily injury and $50K property damage insurance.  The Section also requires contractors to maintain $10K in coverage for home repair work that doesn’t conform with local building codes.  815 ILCS 513/25.

K Miller Construction Case Summary

K Miller Construction Company, Inc. v. McGinnis (38 Ill.2d 284 (2010) is the Illinois Supreme Court’s most recent discussion of the HRRA.  It involves a home improvement contract that exceeded $500,000.  The plaintiff contractor spent more than two years on the project and was owed more than $300,000 for his work.  When defendants failed to pay, plaintiff sued to foreclose a mechanics’ lien, for breach of contract and alternatively, for quantum meruit. The defendants moved to dismiss all counts on the basis that plaintiff violated the HRRA’s requirement of a written work order for projects over $1,000.  The trial court agreed and dismissed all three counts of the complaint with prejudice.  On appeal, the First District affirmed dismissal of the lien and breach of contract counts but reversed on the quantum meruit count (holding that the contractor should be able to pursue quantum meruit recovery).  The homeowner defendants appealed to the the Illinois Supreme Court.

Held: Appeals court affirmed in part and reversed in part; trial court reversed.  Plaintiff contractor can sue for both quantum meruit and breach of oral contract even where he violates the HRRA. 

Reasons: The Illinois Supreme Court held that just because a contract technically violates a statute, doesn’t mean the contract must be unenforceable – especially if the breach is not “seriously injurious to the public order”.  The Court also stated that the legislature could have (but did not) specified in the HRRA that an Act violation automatically invalidates the underlying contract.  Id. at 297.

Normally, where a statute is silent as to whether a statutory violation voids a contract, the court balances the private interest in enforcing the contract against any opposing public policies.  However, in K Miller, no balancing test was necessary because in July 2010, the Illinois legislature rewrote Section 30 of the HRRA to specifically delete the prior version’s reference to “unlawful” and to instead provide a Consumer Fraud remedy to anyone who suffers actual damage because of a contractor’s HRRA violation.

The K Miller Court found that the “new” Section 30 and its private consumer fraud cause of action was the proper remedy for an aggrieved consumer/homeowner; not a complete nullification of the contract. The Court bolstered its holding with prior caselaw that allowed contractors (who violated the HRRA) to still recover where there was substantial compliance with the HRRA.  The Court also noted that the HRRA’s legislative history revealed lawmakers were leery of consumers using HRRA violations as a pretext for not paying contractors.

Take-aways and Conclusion: This seems like a fair result.  Going forward, if a homeowner files a consumer fraud claim based on an HRRA violation, he must be able to show calculable monetary damage stemming from the HRRA violation.  Contractors and homeowners alike should also take note of the Act’s requirements – specifically the written work order, the “Know Your Rights” pamphlet and the Act’s provisions governing mandatory arbitration and contractual jury waivers.