Contractor’s Violation of Pennsylvania’s HICPA Registration Requirement Does Not Bar Quantum Meruit or Mechanics Lien Claims
The Pennsylvania Home Improvement Consumer Protection Act, 73 P.S. § 517.1, et. seq. (“HICPA”), became effective on July 1, 2009. The HICPA is designed to protect purchasers of home improvement services from contractors engaging in fraudulent business practices. It requires contractors who perform more than $5,000 of work per year, and whose company is worth less than $50,000,000, to register with the Pennsylvania Office of the Attorney General (“OAG”), and comply with HICPA’s substantive requirements. The HICPA requires contractors to enter into written contracts for performance of improvements, specifies provisions which must be included in the written contract (§ 517.7(a)), and identifies other provisions the inclusion of which makes the contract voidable by the owner (§ 517.7(e)). Finally, certain acts on the part of contractors, including failure to register with the OAG (id. § 517.9) are prohibited by the HICPA, which sets forth criminal penalties for fraud (§ 517.8). Significantly, a violation of the Act is also deemed to be a violation of the Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1 et. seq.
In Shafer Electric & Construction v. Mantia, the Superior Court of Pennsylvania addressed the statute’s impact on quantum meruit claims (a quasi-contractual common law claim that allows a party to recover the reasonable value of the services performed in the absence of a valid contract in Pennsylvania). The issue was whether a contractor in violation of the HICPA could nonetheless recover amounts due based on a quantum meruit claim, even if the contract itself was unenforceable because the contractor failed to register under the Act. The defendant homeowners had hired the contractor to build an addition. The contractor was licensed in its resident State of West Virginia, but was not licensed in Pennsylvania, and had not registered as required by the HICPA. After completing the work, the homeowners failed to pay. The contractor filed a mechanics’ lien, followed by a complaint to recover the amount due for breach of contract or, in the alternative, quantum meruit.
The homeowners sought to dismiss the complaint and strike the mechanics’ lien, arguing that that since the contractor was not registered with the OAG as required by HICPA, the contract was invalid and thus unenforceable in Pennsylvania. The Trial Court dismissed the complaint, but that decision was reversed by the Superior Court on appeal. Citing its prior opinion in Durst v. Milroy General Contracting, Inc. construing the HICPA, the Court held that § 517.7(g) of HICPA permitted recovery for quantum meruit. Although there was some ambiguity in the statute, the Court determined that the intent of the statute was to allow contractors, even if they violated the HICPA, to recover the reasonable value of services which were requested by the owner if it would be inequitable to deny such recovery.
The Shafer Electric and Durst decisions may provide some relief to unpaid contractors in Pennsylvania who are in violation of the registration requirements of the HICPA, but who nonetheless claim payment for the reasonable value of their services. While the statute is designed to protect consumers, and contractors should endeavor to comply with all of its requirements, the HICPA will not absolutely bar an unpaid contractor’s ability to recover the reasonable value of its services simply because the contractor has committed a technical violation of the statute that invalidates its contract.