Missouri’s Merchandising Practices Act, which protects consumers, has recently expanded its reach with the enactment of a new statute, Mo. Rev. Stat. § 407.725, governing contractors that “repair or replace roof systems, or perform any other exterior repair, replacement, construction, or reconstruction work on residential real estate.” The new law applies to residential real estate defined as new or existing building constructed for one to four families, including detached garages, and creates the following rights and responsibilities involving owners and contractors:
- A contractor is prohibited from advertising or promising to pay or rebate all or any portion of any insurance deductible as an inducement to the sale of goods or services.
- An owner may cancel a written contract with a residential contractor to be paid under a property or casualty insurance policy prior to midnight on the fifth day after the owner receives written notice from the insurer that any part of a claim or contract is not covered by the insurance policy.
- A residential contractor must furnish, in its contract, a notice substantially conforming to language in the statute regarding an owner’s right to cancel the contract. (Please contact CECB or your attorney for more information about the notice that must be included.)
- The contractor must attach a “NOTICE OF CANCELLATION” for the owner’s use, which again must include certain statutory language and must be easily detachable for the owner. (Please again contact CECB or your attorney for additional information about the precise language that must be included in this notice.)
- The contractor must return any deposits or payments if the contract is cancelled pursuant to the statute, unless the contractor has performed “any emergency services, acknowledged by the insured in writing to be necessary to prevent damage to the premises,” in which case the contractor is entitled to payment for the reasonable value of such services. The contractor must tender the refund within ten days of proper cancellation by the owner less the value of any emergency services provided.
- A contractor cannot “represent or negotiate…on behalf of an owner…on any insurance claim in connection with the repair or replacement of roof systems, or the performance of any other exterior repair, replacement, construction, or reconstruction work.”
- A violation of Section 407.725 constitutes a violation of the Missouri Merchandising Practices Act, authorizing the owner’s ability to recover, among other things, attorneys fees.
The new statute came into effect on August 28, 2011, and it remains to be seen how the statute will be interpreted by Missouri courts under various circumstances. For instance, while the statute clearly protects owners of residential real estate as defined by the statute, it also protects “possessors.” It is not clear whether possessors encompasses tenants or any other specific parties or individuals who are not necessarily owners.
It is also not clear whether a residential contractor, in this instance, includes such parties as design professionals.The statute defines residential contractor as “a person or entity in the business of contracting or offering to contract with an owner or possessor of residential real estate to repair or replace roof systems or perform any other exterior repair, replacement, construction, or reconstruction work on residential real estate.” The legislature did not address whether the preparation of design drawings and specifications or other services offered by a design professional include repair or replacement work as contemplated by the statute.
There are many other issues that will be left to future debate among owners, contractors, and perhaps insurance carriers, including: (1) whether there is any limitation on what is intended by “any other exterior” work, i.e., does it extend to windows, doors, masonry, siding, landscaping, drainage, lighting, concrete and earthwork?; (2) whether there is any criteria for determining what are “emergency services”; (3) whether an owner has the same ability to cancel an oral contract as it does a written contract; and (4) whether and to what extent the parties may, by contract, alter the rights and responsibilities otherwise enumerated in the statute.
If you are considering entering into a contract for repair or replacement concerning a residential structure or you are or contractor who performs insurance repair work, you will need to modify your forms, contracts, and practices in accordance with the new statutory requirements. If you have any questions, or would like to further discuss this matter, please contact me or another member of our litigation practice group.