Wisconsin’s Home Improvement Code Protects Homeowners When Remodeling

Wisconsin’s Home Improvement Code Protects Homeowners When Remodeling

There has been a significant increase in home remodeling projects since the pandemic began over a year ago, and many people choose to hire a contractor to assist them. Not all contractors provide written contracts with the details of the project, such as total costs, start and completion dates, and the type and quantity of materials to be used. The lack of a written agreement sometimes leads to disputes after the project begins and may lead to arguments about payment at the end of the project. Fortunately for homeowners, Wisconsin has the Home Improvement Practices administrative code sections which set forth requirements and penalties if contractors fail to follow the rules. These rules can be found in Chapter ATCP 110 of the Administrative Code. The rules require a contract, and all changes to that contract, to be in writing and signed by the contractor and the homeowner if (1) the contractor requires money up front, prior to completing the project, or (2) if the contractor solicits a homeowner’s business away from the contractor’s regular place of business, by mail or telephone, or with brochures or circulars delivered or left at someone’s home.

The requirements under the code are applicable if the project involves “Home Improvement” which the code defines as follows:

“Home improvement” means the remodeling, altering, repairing, painting, or modernizing of residential or non-commercial property, or the making of additions thereto, and includes, but is not limited to, the construction, installation, replacement, improvement, or repair of driveways, sidewalks, swimming pools, terraces, patios, landscaping, fences, porches, garages, basements and basement waterproofing, fire protection devices, heating and air conditioning equipment, water softeners, heaters and purifiers, wall-to-wall carpeting or attached or inlaid floor coverings, and other changes, repairs, or improvements made in or on, attached to, or forming a part of, the residential or non-commercial property. The term extends to the conversion of existing commercial structures into residential or non-commercial property. “Home improvement” does not include the construction of a new residence or the major renovation of an existing structure.

As you can see, home improvement is defined in very broad terms. You should note that it does not apply to construction of a new residence or the major renovation of an existing structure.

If a written contract is required under the code based on the circumstances described earlier, the contract must contain the following information:

  • The contractor’s name and address, and the name and address of the contractor’s sales representative or agent.
  • A description of the work to be done and the principal materials to be used. If the contractor promises to install specific products or materials, the contract must clearly describe those products or materials.
  • The total price, including finance charges. If the contract is for time and materials, it must clearly disclose the hourly labor charge.
  • The dates by which, or the time period within which, the contractor will begin and complete the work.
  • A description of any mortgage or security interest created in connection with the sale or financing of the home improvement.
  • All warranties that the contractor makes for labor, services, products or materials furnished in connection with the home improvement.
  • A description of every document incorporated in the home improvement contract.
  • Insurance coverage included in the home improvement contract, if any.

Additional provisions in the Home Improvement Code require the contractor to provide the customer with a written notice advising that the customer has a right to receive lien waivers. The code also requires that the contractor inform the customer of all building and construction permit requirements, and the contractor must refrain from starting work until the permits have been issued.

Should a contractor fail to comply with these code requirements, a homeowner has several potential remedies including the following:

  1. Cancel the contract;
  2. Demand return of any payments which the contractor has not yet earned;
  3. Demand delivery of all materials the homeowner already paid for;
  4. Demand an accounting of all payments that were made by the homeowner;
  5. The homeowner may be able to recover twice the amount of any damages they sustain as a result of the contractor’s violation of the Home Improvement Code;
  6. A homeowner may be able to recover actual attorneys’ fees that they incur in pursuing claims against the contractor for violations of this code.

If a homeowner is in a position where they believe they have sustained damages because a contractor failed to comply with the Home Improvement Code, it is advisable that they consult with a litigation attorney to discuss their options.

 

What is a Title Commitment?

What is a Title Commitment?

In almost every real estate transaction title work will be ordered and a title commitment will be provided to the parties to review prior to closing. A title commitment is a document that provides information pertaining to the property that is subject to the transaction. It will list out the various requirements, exceptions, and details of the title policy that will be issued for the property after closing. Since the title commitment provides valuable information pertaining to the property that a buyer may not otherwise know, it is extremely important to carefully review the title commitment before closing.

There are three sections of a title commitment that should be carefully reviewed. The first section is Schedule A. In this section, you will see information such as the type and amount of the policy, the proposed insured, the interest that the policy will cover, the current owner of the property and the legal description of the property. When reviewing this section, you will want to make sure the current owner and the seller are the same person/entity, the correct property is described and the proposed insured is listed exactly how the buyer plans on taking title. If there are any discrepancies, you will want to have the title commitment revised prior to closing and the title policy being issued.

The next section in the title commitment will be Schedule B-I. This section lists out all the requirements that must be satisfied before the title company will issue the title policy. Typically, you will see requirements such as a warranty deed transferring the property to the buyer, satisfactions of previous mortgages, etc. Additionally, if either of the parties are entities, there will likely be a requirement of documentation authorizing the entity to perform this transaction. It is important you understand both your requirements, as well as the other party’s requirements, so that all requirements are met prior to closing so that the transaction can proceed smoothly.

The last section in the title commitment that you should review is Schedule B-II. This section lists out the exceptions to coverage provided by the title policy. There are two types of exceptions that will be listed in this section. The first type is the general exceptions. These exceptions are in every title commitment and can often be removed if certain actions are taken. The other type of exceptions are the specific exceptions. These are exceptions that are specifically connected to the property in the transaction. One example of a specific exception would be a prior mortgage on the property. Assuming the mortgage would be satisfied at closing, this exception would then be removed from the title commitment. Because these exceptions can cause a lack of coverage in the future if an issue arises, it is crucial that the buyer review each exception.

Taking into consideration the importance of the title commitment in the execution of a real estate transaction, it will be helpful to seek the advice of a real estate attorney prior to closing. A real estate attorney will be able to review each section of the title commitment and determine if there are any discrepancies or items that need to be revised. Moreover, an attorney will be able to analyze each exception to the title policy and advise you on the impact each exception has on the property. Overall, seeking the help of a real estate attorney to review the title commitment prior to closing can facilitate a smooth transaction and prevent future issues that may arise as a result of an overlooked item on the title commitment.

 

Defective Home Construction? Know Your Rights and Responsibilities

Defective Home Construction? Know Your Rights and Responsibilities

Are you thinking it is time to build your new dream home or do some remodeling to your existing home?  Are you a busy homebuilder just trying to keep up?  In either case, you should be aware of a Wisconsin statute that sets out procedures for addressing defects that arise as a result of construction and remodeling projects.

Wisconsin Statute 895.07 was created for claims against contractors and suppliers related to the construction or remodeling of a dwelling.  A dwelling is defined by the statute to mean more than just a new home.  A dwelling includes other existing structures on a residential premise, such as driveways, sidewalks, swimming pools, patios, terraces, fences, porches, garages and basements.

Wisconsin law provides that prior to entering into a written contract to construct or remodel a dwelling (or as soon as possible but before starting work if the contract is oral) a contractor shall give notice to the consumer of his or her rights under Section 895.07.  The specific language to be used may be found in Wisconsin Statute 101.148.

Should defects arise as a result of the project, Section 895.07(2) requires the consumer to give the contractor written notice describing the defects complained of no later than 90 working days before commencing action, such as a lawsuit or arbitration.  This notice must include a description of evidence that the consumer knows of, including expert reports, that substantiate the nature and cause of the defects.

Within 15 working days of receiving the consumer’s notice, the contractor has one of five options for responding.  Those options include: 1) offering to repair or remedy the defect at no cost to the consumer; 2) offering to pay money to settle the claim; 3) offering a combination of repair work and money; 4) rejecting the claims in total; or 5) proposing to inspect the property.

If the contractor chooses to inspect the property, the consumer must provide access within 15 working days.  Following the inspection, the contractor has 10 working days to respond to the consumer identifying one of the remaining four options listed above that the contractor chooses.

Contractors often use a host of suppliers for dwelling construction and remodeling work.  It may be the case that one of these suppliers bears responsibility for the defects.  In that case, the contractor may assert a contribution claim against the supplier.  Section 895.07 provides a procedure for making contribution claims.  The contractor must provide notice to the supplier within five days after receiving a consumer’s claim unless the contractor has taken no action to repair the defect, performed no destructive testing, not permitted the consumer to take action to repair the defect, has not interfered with or altered the property subject to the claim, and has not precluded the supplier from offering to remedy the defect or make repairs.

As a contractor, if you failed to give the notice required by Section 101.148 and are sued for construction defects, the court must stay the legal action and order the parties to comply with the notice requirements and the procedures in Sections 101.148 and 895.07.

Whether a consumer or a contractor, we hope your construction and remodeling projects go smoothly.  However, when that is not the case our litigation team at Anderson O’Brien is here to help.

 

Contractors Beware – the Theft by Contractor Statute Imposes Stiff Penalties

Contractors Beware – the Theft by Contractor Statute Imposes Stiff Penalties

Wisconsin has codified a “Theft by Contractor” statute under Wis. Stat. § 779.02(5) which imposes stiff penalties if violated.  There are several potential penalties for violating this statute.  If such a claim is proven, a contractor could be subject to criminal prosecution, be held liable in a civil suit for money damages and in certain cases corporate officers can be held personally liable.

In general, any money provided by a project owner to a contractor is to be held in trust by that contractor until all subcontractors’ claims for labor and materials are paid.  The elements of a theft by contractor claim pursuant to Wis. Stat. § 779.02(5) include the following:  (1) the contractor acted as a prime contractor; (2) the contractor received money for the improvement of land from the owner (or a lender); (3) the contractor intentionally used the money for purposes other than the payment of bona fide claims for labor or materials; (4) the use of the money was without the owner or lender’s consent and was contrary to the contractor’s authority; (5) the contractor knew the use of the money was without consent and contrary to its authority; and (6) the contractor used the money with the intent to convert it to its own use or the use of another.

A typical example of a violation of the statute is a contractor who gets behind on his bills and ends up using money from the newest project to pay off amounts owed to suppliers or subcontractors from the last project.  This type of behavior is prohibited under the statute.  It is important to understand that the Wisconsin Supreme Court has confirmed that this statute can be violated even if the contractor obtained no benefit from the use of the money.

The consequences for being found civilly or criminally liable under this statute are severe.  Under the statute, any officer, director, member or agent responsible for the misappropriation is liable in civil court for damages including up to three (3) times the unpaid amount, and reimbursement of attorney’s fees and costs incurred by the property owner in obtaining a judgment.  Not only can significant damages be awarded, which cannot be dischargeable in bankruptcy by the contractor, there are potential criminal penalties.  Criminal prosecution will lead to bad publicity, negative internet presence and the potential loss of licenses, and loss of security clearances and access to public projects.

Therefore, it is imperative that the contractor maintain the funds for a particular project separate from other projects and only utilize those funds for a proper purpose under the statutes.  Contractors should speak with an attorney to ensure that the system they have in place for handling client funds is in compliance with the statutory requirements.  Prime contractors should be aware of the elements and consequences of a theft by contractor claim and be mindful of their disbursement practices and procedures.  It is always a good practice to maintain strict payment procedures, detailed records and documentation of lien waivers.  Additionally, property owners who believe their funds have been misused also should consult with an attorney to discuss the options they have available for recovering those funds that were improperly used.

 

County Claims on Residence for Delinquent Property Taxes

County Claims on Residence for Delinquent Property Taxes

If you own real estate in Wisconsin, you are familiar with the annual property tax bills that arrive in the mail each December.  You are also aware that you are required to pay your tax installments to the County Treasurer by January 31st and/or July 31st of each year.  When a landowner does not pay property taxes for that year, the local County Treasurer will issue the landowner a tax certificate for the delinquent taxes.

Generally, the landowner has a two-year period to pay delinquent taxes and redeem their property from the County.  After those two years have passed and a landowner has failed to pay taxes to redeem the property, the County may obtain the property by 1) recording a tax deed with the Register of Deeds, 2) foreclosing the tax certificate, or 3) foreclosing the tax liens against the property.  During each of these processes, the landowner has another chance to reclaim the property.  Under the first process, the owner may reclaim the property any time before the County Treasurer records the tax deed.  Under the second process, the owner may reclaim the property before the property is sold at a foreclosure sale.  Under the third process, the owner may reclaim the property within eight weeks after the County Treasurer publishes notice of the foreclosure of the tax liens in the newspaper.

If the owner misses any of these opportunities to reclaim the property, the County will acquire title to the property through one of the three above-described processes.  Once the County acquires the property, the County may sell the property to a willing buyer.  At this point, the owner’s very last option to reclaim their property is to purchase it back from the County.

But is that really the last chance?  If the County acquires the property by recording a tax deed, the owner has an additional three years from the date of recording to commence an action to reclaim the property.  The original owner would need to be successful in obtaining a judgment against the County, which can involve a long and costly litigation process.

So, what does this all mean for buyers who purchase unredeemed property from the county?  Buyers should be aware of the risk that the original owner has three years to commence an action to recover the possession of the property, even after the buyer purchases the property from the County.  Although the likelihood that an original owner would go through the time and expense of commencing a civil action is very low, buyers must be aware of the three-year risk and should consider the risk as they decide to purchase the property.

 

Disclosing Defects with the Real Estate Condition Report (RECR)

Disclosing Defects with the Real Estate Condition Report (RECR)

Wisconsin law has left the dark ages of caveat emptor or also known as “let the buyer beware” in the sale of residential property. The harshness of caveat emptor has been replaced by the Real Estate Condition Report or “RECR.” Basically, the RECR requires sellers to disclose their awareness of defects. What should be a simple concept is made complex by legalistic definitions. For instance, a “defect” is defined as a “condition that would have a significant adverse effect on the value of the property; that significantly impairs the health or safety of future occupants of the property; or that if not repaired, removed or replaced would significantly shorten or adversely affect the expected normal life of the premises.” It is not hard to imagine a silver-tongued lawyer arguing that just about anything is a defect under this definition. Consider the following quote:

“Houses are amazingly complex repositories. What I found, to my great surprise, is that whatever happens in the world – whatever is discovered or created or bitterly fought over – eventually ends up, in one way or another, in your house. Wars, famines, the Industrial Revolution, the Enlightenment – they are all there in your sofas and chests of drawers, tucked into the folds of your curtains, in the downy softness of your pillows, in the paint on your walls and the water in your pipes.” ― Bill Bryson, At Home: A Short History of Private Life

If Bill Bryson is right in saying that the history of the world is found within the four corners of a home, is it futile to expect a seller of a residential home to disclose defects? Not quite. In reality, the RECR is a straightforward document requiring a homeowner to check “yes, no, or N/A” to knowledge of defects concerning elements of the house, such as the roofing. 

Blindly checking “no” to all knowledge of defects is foolhardy and may violate Wisconsin law. Notably, there is also a requirement that sellers amend their RECR if defects are discoverable after completion of the RECR but before an offer is accepted. These representations are legally binding and a buyer is entitled to rely on the RECR. Often, the RECR forms the basis for a lawsuit. Any doubt about a defect should be resolved in favor of disclosure.

 

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