New Law Requires Key Changes to California Contracts

Clients who are senior citizens now have 5 days to rescind an agreement. Specific wording, typeface sizes are now required.

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Attention to any integrators doing business in the state of California: a new law effective January 1, 2021 has multiple changes for home improvement contracts, including extending the standard three-day right of rescission to five days for senior citizens. If you conduct business in the state, you will need to update your contracts to reflect the new law.

The bill, AB-2471, was signed by Gov. Gavin Newsom at the end of September. It says that any persons over the age of 65 now have five days to cancel consumer contract-based transactions. Other states have previously done the same.

The bill specifically applies to “home improvement contracts” and “service or repair contracts” such as one used by an integration company. It applies to both oral and written contracts and includes “all labor, services, and materials to be furnished and performed thereunder, if the aggregate contract price specified in one or more improvement contracts, including all labor, services, and materials to be furnished by the contractor, exceeds $500.” Other contracts covered include specifically solar power assessment contracts and seminar sales contracts.

The bill and soon-to-be law was created because some senior citizens may have difficulty understanding complex financial transactions or may be vulnerable to high-pressure sales tactics, particularly if they occur in the senior’s home, and may need more time to consult with family members or others about the implications of their financial decisions. The contract must also be in the same language in which the sales presentation was given.

The new law requires a checkbox next to a statement for the senior citizen client that says: “The law requires that the contractor give you a notice explaining your right to cancel. Initial the checkbox if the contractor has given you a ‛Notice of the Five-Day Right to Cancel.’”

The law also stipulates specific wording and typeface point sizes that must be used in contracts, including:

  • The term “Home Improvement” must be used as a heading on the contract in at least 10-point boldface type.
  • In at least 12-point boldface type, the contract must state: “You are entitled to a completely filled in copy of this agreement, signed by both you and the contractor, before any work may be started.”
  • The agreement must include a heading that says “Contract Price” and it must include a heading that says “Finance Charge” if there is one.
  • There must be a heading that says specifically: “Description of the Project and Description of the Significant Materials to be Used and Equipment to be Installed,” followed by a description of the project and a description of the significant materials to be used and equipment to be installed. For swimming pools, the project description required under this paragraph also shall include a plan and scale drawing showing the shape, size, dimensions, and construction and equipment specifications.
  • There must be a heading titled “Downpayment” and in at least 12-point boldface type the words “THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.”
  • There must be a heading in the contract that says “Schedule of Progress Payments,” and then in a minimum of 12-point type a statement that says: “The schedule of progress payments must specifically describe each phase of work, including the type and amount of work or services scheduled to be supplied in each phase, along with the amount of each proposed progress payment. IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED. HOWEVER, A CONTRACTOR MAY REQUIRE A DOWNPAYMENT.”

Other required sections with headings include “Approximate Start Date” and “Note About Extra Work and Change Orders” with the following statement: “Extra Work and Change Orders become part of the contract once the order is prepared in writing and signed by the parties prior to the commencement of work covered by the new change order. The order must describe the scope of the extra work or change, the cost to be added or subtracted from the contract, and the effect the order will have on the schedule of progress payments.”

About the Author

Jason Knott
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Jason Knott:

Jason Knott is Chief Content Officer for Emerald's Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California.

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