Sunday, May 1, 2011

The Pendulum Swings

by David McCarthy

Oliver Wendell Holmes
told us that the life of the law is not logic but experience

Many years ago, when your correspondent was a newspaper reporter, elderly residents in the suburbs north of Chicago were prey to a home remodeling scheme that would start with an offer of a free inspection of the chimney of a house. Invariably a few bricks would be kicked loose. Then the ever-so-earnest contractor would report this disturbing find to the homeowner, collect a substantial advance to make the repairs, and vanish into the hills of Tennessee. That practice and others that gave home remodelers a bad name led to enactment of the Home Repair and Remodeling Act, yet another example of the law of unintended consequences.

The statute requires contracts in writing for repairs in excess of $1,000.00 and delivery of pamphlets full of warnings to the homeowner/ customer and details about their rights. Naturally, this reversed the dynamic, and with the help of case law, unscrupulous homeowners preyed upon contractors, obtaining lavish improvements to their homes and then stiffing the contractors on the grounds that the contract was unwritten or the pamphlet had not been delivered.

The pendulum recently started to swing back to equilibrium owing to an especially outrageous example of overreaching and some common sense in the Illinois General Assembly and the Illinois Supreme Court. A married couple hired a friend to convert a three-flat into a single-family home. The contract was unwritten, and it escalated from $187,000.00 to $500,000.00 as they added ever more improvements, refinements, and upgrades. They paid the first $65,000.00 but refused to pay a penny more till all the work was done. The contractor went in hock and borrowed $150,000.00 to finish the job. Did he do the work and do it right? You bet. Apart from a quibble over a $300.00 repair of flooring the homeowners approved all the work and then stiffed the contractor for more than $300,000.00.

The contractor sued the homeowners. They obtained dismissal of all counts in the trial court on the grounds that the statute had been violated. The appellate court saved one count that allowed the contractor to sue for the reasonable value of his services. The case reached the Illinois Supreme Court, and there all three counts of the contractor's claim were upheld, not least because of an amendment to the statute. A clause that declared it "unlawful" to make more than $1,000.00 in home repairs without a written contract was replaced by a clause which allowed a homeowner damaged by a violation of the statute to sue under the consumer fraud act.

The upshot: A couple of cherry pickers who thought that $65,000.00 and a lost friendship was a small price to pay for a $500,000.00 house got their comeuppance. There is no joy in saying this: One of the homeowners was an attorney with a practice in real estate.