Idaho attorney Chad Moody summarizes the disclosure requirements under Idaho Law. These required disclosures are important to help protect contractors working on residential construction projects.
Below is a formatted transcript of the video.
Hi, my name is Chad Moody. I am an attorney here at Johnson May. We have offices in Boise and Twin Falls, Idaho, and we're a full-service law firm.
Concerns with Liens in Construction Projects
One of the issues that clients bring into our office on a routine basis are concerns dealing with liens that were recorded against properties, oftentimes from construction projects. These people are the actual contractors, the builders, the laborers, the equipment providers, as well as the property owners. They present various different types of legal challenges unique to the type of client we come across.
Idaho's Disclosure Requirements for Homeowners and Contractors
Previously, one of my colleagues gave a presentation on Idaho liens, specifically mechanics liens and materialman's liens, and walked through some of the pitfalls and the basics related to those.
Idaho's legislature has, in part, expressly communicated its intent to protect owners and purchasers of residential real property by requiring that certain specified and detailed disclosures be provided to homeowners by contractors before entering into any legal contracts. The who, what, when, and how of these disclosure requirements and how they arise are contained in a densely worded statutory provision.
Understanding the Required Disclosures
The goal here is to break down the basics of what's required, so a person has a general knowledge. First, 'Who is required to make those disclosures?' The statute has a specific definition of who is included and who is required to provide those disclosures. Simply stated, however, it's any person who directly contracts with the homeowner or a purchaser of a residential property for the alteration, construction, or repair of that residential property.
Those disclosures are specifically laid out by statute, and they're specifically defined in four separate provisions, subject to various terms and conditions contained in those provisions. The initial required disclosures specified in the statute generally include the owner's right to receive proof of general liability insurance from a contractor or for workman's compensation.
The owner's right to require that the general contractor obtain lien waivers from any subcontractors that the general contractor has an agreement with and that perform work on the residential property. The owner's right to be informed of his option to obtain extended title insurance coverage to protect against potential liens.
The statute also requires additional disclosures later in the lifecycle of the project, and that generally includes a general contractor providing a list of subcontractors and materialmans and equipment rental providers that provided services or materials to that residential project. That list will include the names, the amounts, the addresses, and the phone numbers of those contractors. The contractors required to be on that list are those that have a direct contractual relationship with the general contractor.
Timing and Methods of Disclosures
An important question is, when are those disclosures required? And often times this is a pitfall for contractors. For the initial specified disclosures, the disclosures are required to be given to the owner or purchaser before the contractor and the owner or purchaser enter into a contractual agreement for any type of construction.
These disclosures are required when the construction project involves residential real property, and that contract exceeds $2,000 in value. This applies to any contract involving the construction, alteration, or repair of any improvement on that residential property. This includes newly constructed property.
The second disclosure, which is the list of subcontractors and materialmens that provided services during the course of the construction project. That list has to be provided on a timescale based on who the homeowner is. If it's a purchaser of residential property and you're closing on new construction, that list of subcontractors is required at the time of closing.
If you've got a circumstance where you have an existing home and you're doing a remodel job, then the list of subcontractor disclosures is required at the time that the final payment is made to the general contractor.
Written Disclosures and Retention
The last question is, how are the disclosures made? The disclosures must be in writing with all the information required under the Idaho statute. The writing must also contain the owner or the purchaser's acknowledgment of receipt of those specified statutory disclosures. In other words, you have to have a signature block with them acknowledging that they have obtained the required disclosures from the general contractor. Contractors should make sure this is actually signed and dated by the homeowners.
The contractors to retain a copy of that disclosure for reasons that include, among other things, ensuring that they have the right to file a mechanics lien down the road. Retention of the copy will be important given new changes in Idaho statute, which will be covered in a separate video.
Consequences of Non-compliance
So what happens if you don't file the disclosure? Both contractors and residential property owners should be aware that the ramifications of failing to comply with the disclosure statute. The failure is potentially actionable against the contractor. A failure to provide complete disclosures specified under Idaho law constitutes an unlawful, deceptive act or practice in the trade or commerce under the Idaho Consumer Protections Act. It is, therefore, critical that general contractors comply with these statutorily defined and required disclosures.
Consultation and Compliance
All parties should be aware that there are additional specified terms, conditions, and limitations on these disclosure requirements that are set forth in the statute. However, hopefully, through this presentation, you have a better understanding of some of the basics of what is required in those disclosures. Contractors should consult with their attorneys about their particular circumstances, their documents, and their ongoing practices to ensure that you are in compliance.
At Johnson May, our firm has the experience and the professionals to assist you with these and other legal matters.