In upholding an award of legal fees in excess of $30,000 in favor of homeowners under the Home Construction Contract Act (the “HCCA”), Maine’s Law Court recently took the “opportunity to underscore the significance of the statutory requirement that construction contracts be formalized in writing.” As I wrote about in a prior blog post, the HCCA requires contractors to formalize, in writing, any agreement to build, remodel or repair a residence for more than $3,000.
In Sweet v. Breivogel, a residential contractor failed to comply with the HCCA and paid the price. The contractor in that case failed to formalize his agreement with homeowners to construct a traditional timber frame home. Although the contractor and owners exchanged several emails regarding the project, the parties never signed a written contract. In fact, when the owners inquired about a written contract, the contractor insisted that he had never used one in over thirty years of business, and refused to provide one.
Predictably, a dispute arose between the parties regarding how much was owed on the project, and a lawsuit ensued. The contractor initiated the suit claiming he was owed more than the $601,195.75 he had already received from the owners. In response, the owners countersued for, among other things, a violation of Maine’s Unfair Trade Practices Act (the “UTPA”) based upon the contractor’s failure to comply with the HCCA.
After a trial, the Superior Court concluded that the contractor was entitled to payment for his services (notwithstanding the absence of written contract) under a theory of quantum meruit (a theory of recovery that I have explained in a prior blog post), but that the owners, in paying the contractor the amount of $601,195.75, had overpaid the contractor by $640.77. The trial court determined that the owners had been overcharged for the work of a particular subcontractor on the project.
The trial court entered judgment in favor of the owners in the amount of $640.77, plus their costs and legal fees in the amount of $33,832.43. The court reasoned that the owners’ admittedly “relatively slight loss of money”, coupled with the contractor’s clear failure to comply with the HCCA, provided for recovery of not only the owner’s actual damages, but an award of legal fees under Maine’s UTPA and HCCA.
Maine’s Law Court subsequently affirmed the award of costs and attorneys’ fees in favor of the homeowners. In doing so, the Law Court explained:
[T]he [trial] court’s judgment underscores the importance of the statutory requirement of having written contracts in home construction projects subject to the HCCA . . . . In projects of this magnitude, especially in an industry as specialized as the construction of traditional timber frame homes, the absence of a written contract can lead to unfulfilled expectations, immense confusion between homeowners and contractors, and costly litigation. It is clear from the record that [the contractor] and the [owners] did not share the same understanding of the scope and cost of this project, a failing that could have been clarified by a written agreement. However, [the contractor’s] violations of the HCCA and UTPA were properly remedied by the court. Not only must [the contractor] pay his own attorney fees, he must also pay $30,000 of the [owners’] fees, a substantial penalty for his serious violations and, in addition, he has lost his . . . claim . . . for allegedly uncompensated work.
Thus, the decision in Sweet v. Breivogel serves as good reminder that residential contractors must be sure to comply with the HCCA. A failure to do so can not only undercut claims for additional payment, but may also subject contractors to significant liability.
Perkins Thompson regularly advises contractors and homeowners about the requirements of the Home Construction Contract Act and litigates Home Construction Contract Act claims. If you would like to speak with the firm about a Home Construction Contract Act issue, you can send an email to Joe Talbot or call him directly at 207-774-2635.