When I’m working with a group of contractors, I often ask how many are providing a Right of Rescission form with their contracts. In an earlier class with over 20 attendees, only four raised their hand. Many contractors aren’t even aware of the document or realize its importance
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If you are selling your services to a homeowner, you are required by federal law to provide two copies of the Right of Rescission notice explaining they can change their mind and cancel the contract within three business days. If they change their mind, all they have to do is mail you one copy of the cancellation form, postmarked before midnight of the third business day.
Some refer to it as the cooling-off rule, and it’s been around for years. It’s designed to protect homeowners from flaky contractors and door-to-door salesmen. If you have a free evening, watch the 1987 movie Tin Men (it’s not family-friendly). I was tutored by tin men when I started in the business way back when; it was a good education in what not to do. You’ll see a lot of things in that movie typical of the “tin men” approach to business.
The cooling-off period is required by federal law. If you break it by not providing the appropriate forms in the appropriate manner when a contract is signed, your client can break the contract even if you’ve already performed the work. Don’t miss that phrase: even if you’ve already performed the work. You performed the work for free, and will probably get to pay legal fees as well.
There are many states with stricter requirements for the Right of Rescission, and you have to follow those state laws where applicable. If your state hasn’t passed a law implementing their own version of the Right of Rescission, you are bound by the federal law.
This obviously applies to remodeling and renovation contractors, but it also applies to specialty contractors working directly with homeowners. The only exception is repair and maintenance work; you can read details and exceptions on the federal rule here.
Gang, this item can take you right out of business in a hurry. If you are providing a Right of Rescission form when you sign a contract, good on you. If not, you need to get started.
We prefer to solve problems, not create them. Unfortunately, if you aren’t using the Right of Rescission form, we’re letting you know that you have a problem we can’t solve.
We can’t provide a copy of the form; you need to find the one that applies to your location. It needs to be a two-part form, and it needs to be provided with your contract, but separate from it. If you’re a member of an association, they should be able to help. You can find a few online here and here but I can’t vouch for whether they meet all requirements of the federal law or your state law. We don’t have language in our contract writer for this form, but you might want to look at Craftsman’s Contract Writer for your state.
If you sign a contract and don’t include the required paperwork, when a fight develops you could lose any claim you may have to be paid for the work you’ve done. And please, don’t try to avoid this requirement by not using a contract.
Look at it another way: presenting that form to your clients doesn’t just follow the law, it shows them that you’re a competent business owner. You know what you’re doing, and you’ll do it right. It’s worth the time to educate yourself and your staff about the federal requirements for the Right of Rescission, as well as your state laws.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations as needed.
IMPORTANT FOR EVERYONE TO READ THIS.
There is only one thing I can see wrong with the generic form they provide. It does not have a place for the homeowner to sign after the three day Right of Rescission which gives the homeowner a loophole later by saying I did send out the Right of Rescission via email, postal mail, handed it the contractor etc. so I drew up my own according to the laws of my state Wisconsin and included a spot for them that states the following:
It is now, a minimum, after midnight of the third business day after I/we have signed the “the Contract”
and realize that the three (3) days “right to cancel” have now gone by and WE
WISH NOT TO CANCEL by signing our names and date below WE STILL ACCEPT.”
Then have both sign and date it. Other wise like I said they have a loophole of possibly having you get to a point in the job where they can take over and use this to their advantage. Hopefully there aren’t a lot of people who would do that but trust me I have seen worse and it doesn’t hurt to always protect yourself for the just in cases.
ALSO IMPORTANT TO KNOW IS, At least in my state, if the “contract” is signed AT YOUR PLACE OF BUSINESS & NOT THEIR HOME you do not need a Three Day Right of Rescission. It was mainly because of all the door to door salesmen years ago who would not leave a customers house until they got the owner to a point where they just wanted them gone and signed just for that reason thinking it would be easy to go back and say I decline and want my down payment back after they left. We all know these kinds of salesmen would never send back a down payment because it was easy money they didn’t have to send back until this good law came forth. I remember a time right after my father passed, I was just turning twelve and we had a salesmen from Sears store come out and give us an estimate of something like $16,000.00 for about 6 square of siding and my mom didn’t know any better and asked me what I thought (even though i was only 12) and I said seams really high and we found a reputable contractor to do the work in which our neighbor worked for at the time.
Sincerely,
Allen Reed
Al Reed Builders, LLC
I do have a copy of my “Three Day Right of Rescission” if anyone would like a copy. I just include in, as part of the contract with two places to sign the contract at the end. One spat for both to sign and accept the contract and the other stating they did receive two copies of the Rescission along with other papers we must provide per our state laws for remodeling contractors-contracts. IF you would like a copy of mine I am not sure if I can leave one of my email’s on here or not but we will find out. Here is one I use just for stuff like this: [email protected]. In the subject line just ask for: “Copy of your Three day Right of Rescission please. I will send a Microsoft Word and PDF of it for you.
To protect myself: Please seek legal counsel in your state on it before using it as I am not a legal advisor and you take full responsibility if you do use it with no recourse towards Allen Reed or Al Reed Builders, LLC.
We always supply 2 copies of the “Notice of Cancellation” when we provide proposals. In our 16 years in business we have had 2 or 3 clients use the form and cancel the project within the 3 days. We had one cancel the weekend before one was to start – nothing purchased so we just said “ok!”. The biggest head scratcher was the husband who met us at the door the morning we were to start a kitchen remodel to say “could you wait out here a minute? I’m trying to talk my wife out of doing the remodel!” Needless to say he lost the argument and the kitchen remodel went forward as scheduled.
Tin Men took place in Baltimore, which I believe is the birthplace of the rescission right. This year, the MHIC decided that 3 days just wasn’t enough, so now we have to provide FIVE days, and SEVEN days if the homeowner is 65 and older. I’m not sure everyone knows that.