Attorneys: Rochelle, R. Scott
The issue of subcontractor liability under the Home Repair and Remodeling Act, 815 ILCS 513 (the "Act") is central to the Illinois Supreme Court's recent ruling in MD Electrical Contractors, Inc. v. Fred Abrams et al., 2008 Ill. LEXIS 305 (April 13, 2008). The court's decision – one of only three opinions that have interpreted the relatively-new Act – held that the Act does not apply to subcontractors, regardless of the extent to which they have contact with the homeowner.
The Act, which went into effect on January 1, 2000, was drafted with the purpose of improving communications between consumers and persons engaged in the business of home repairs or remodeling in order to "increase consumer confidence, reduce the likelihood of disputes, and promote fair and honest practices in that business in this State." 815 ILCS 513/5 (West 2004). Specifically at issue in this case is section 15, which states that, "a person engaged in the business of home repair or remodeling" shall provide a written contract or work order to the consumer prior to initiating any work over $1,000. The contract or work order must set forth the total cost of the project. 815 ILCS 513/15 (West 2004). Additionally, the Act also provides that it is unlawful for any person engaged in the business of home repairs and remodeling to begin a project without first obtaining a signed contract or work order. 815 ILCS 513/30 (West 2004). Moreover, the person performing the construction services must also provide the customer with a copy of the pamphlet: "Home Repair: Know Your Consumer Rights" prior to the execution of any contract. 815 ILCS 513/20 (West 2004).
The dispute arose when subcontractor MD Electrical Contractors ("MD") filed suit against homeowners Abrams to collect payment for work performed beyond the scope of Abrams' and MD's agreements with the general contractor. The homeowners claimed that the suit should be dismissed because the subcontractor did not comply with the Home Repair and Remodeling Act (requiring a contract for work performed over $1,000). The trial court agreed and dismissed the initial lawsuit. However, the Illinois Appellate Court reversed the trial court's decision, holding that the Home Repair and Remodeling Act did not apply to subcontractors. Thus, the subcontractor could maintain its lawsuit against the homeowner and collect the amount it was owed. The Illinois Supreme Court affirmed the appellate court's decision.
In reaching its decision, the supreme court generalized that general contractors are responsible for managing its subcontractors; consumers deal with the general contractor and not the subcontractors. The court wrote that for homeowners to have to deal directly with subcontractors would largely defeat the purpose of having a general contractor in the first place. The court held that "the hallmark of a subcontractor is that he works for the general contractor and not for the homeowner or business owner." Interpreting the Act as a whole, the court held that "it is clear that [the Home Repair and Remodeling Act] applies only to those who directly contract with a homeowner," the general contractor.
Furthermore, the court reasoned that the Mechanics Lien Act lends credibility to its conclusion that the Home Repair and Remodeling Act does not apply to subcontractors. The court stated that a "subcontractor's recovery against a homeowner is usually governed by the Mechanics Lien Act" and the "Mechanics Lien Act is designed to provide . . . a remedy for wronged subcontractors." Additionally, the court reasoned that "[i]f the Home Repair and Remodeling Act applies to subcontractors, portions of the Mechanics Lien Act are rendered superfluous," such as the requirement for a subcontractor to give notice to a customer in order to preserve a lien claim. The court concluded that in such an instance to require the subcontractor to also require a customer signature as specified in the Home Repair and Remodeling Act would "increase the burden on the very homeowners the Act is meant to protect."