Maine contractor penalized for building without a contract | Residential house under construction

All residential contractors working in Maine should be aware that all of their contracts must be writing under the Maine Home Construction Contract Act. A violation under these provisions can lead to financial penalties and can jeopardize mechanics lien rights. The penalties for building in Maine without a contract can be seriously steep, as one residential contractor found out.

This should be a lesson to contractors everywhere: Always get that contract in writing! 

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The Maine Home Construction Contract Act

Residential contractors working in the state of Maine should hopefully be familiar with Maine’s Home Construction Contract Act (HCCA). These are certain requirements for residential contracts found under ME Stat. tit. 10 §1486 et seq.

These provisions apply to all contracts to build, remodel, or repair a residence. A residence includes all structures of 3 or fewer living units and garages. The most important aspect of this act is this:

Any home construction contract for more than $3,000 in materials or labor, must be in writing and must be signed by both the home construction contractor and the homeowner/lessee.”

The Act itself doesn’t provide for specific remedies. However, a violation of the HCCA is also considered a violation of the Maine Unfair Trade and Practices Act (UTPA). The UTPA includes remedies such as restitution and attorney fees.

Contractor working on a residential project without a written contract

A recent case, Sweet v. Breivogel, dealt with a contractor who violated the HCCA requirements by accepting work on a residential property without a written contract. The Breivogel couple hired John Sweet II for timber framing on the construction of a new residential property. After negotiations regarding the scope of work, they authorized Sweet to work with no written contract in place. Instead, they simply relied on an oral time and materials contract.

A year had passed and Sweet was paid for each progress payment invoice for progress payments. Upon completion, Sweet offered both a certificate of occupancy and a request for the final payment. The Breivogels paid $601,250, which was almost $52,000 less than Sweet was expecting as final payment. The owners refused to pay the rest.

Sweet subsequently filed a mechanics lien for the unpaid amount and initiated a foreclosure action.

The owners counterclaimed, stating that the contractor had violated the HCCA.

The contractor loses his claim

The trial court ruled that Sweet had indeed violated the statute and the $51,953 mechanics lien claim was dismissed. However, the court allowed him to keep the payments already received on the basis of quantum meruit, minus around $600 that the court determined was an overpayment. The Maine Supreme Court agreed, stating that even though a contractor had violated the requirement of working on a residential project without a contract; that doesn’t mean the contractor couldn’t still bring a suit for quantum meruit.

The court decided that the claim for quantum meruit was appropriate. Allowing the Breivogels to accept a benefit of Sweet’s work without compensation undercuts the purpose of quantum meruit; which is to allow recovery for services rendered when the words or conduct of the recipient created an expectation for payment. So Sweet was able to keep the $600,000 paid to him.

But that’s not the end of the story!

The contractor also has to pay owners’ court costs and attorney fees

The HCCA doesn’t provide any remedies, but a violation is deemed to be a violation of the state Unfair Trade Practices Act.  This act provides for restitution and the payment of attorney’s fees.

In order to receive restitution, the claimant must show that it lost money as a result of the HCCA, which is simply not the case here. The Breivogels were aware and assented to the work being performed by Sweet, and they could have terminated the project at any time. Therefore, they were unable to prove that they did not receive value for their payments to Sweet.

So the claim for restitution failed. But because of the UTPA violation, the Breivogel’s were entitled to recover court costs and attorney fees. Those penalties totaled up to a whopping $30,000.

Takeaway: Always get your construction contract in writing

Sure, even without a written contract, Sweet was able to retain most of the payments already made to him; but at what cost? At the end of the day, if you include the amount claimed under the lien, the overpayment amount, and Breivogel’s attorney’s fees, Sweet ended up more than $82,000 in the negative. And that’s before adding his own attorney fees and court costs to the total.

As a general rule, contractors should always record their agreements in writing, regardless of whether it’s required or not. Contracts act as a clear indication of rights and responsibilities between the parties.

Furthermore, if the project (like a residential project in Maine) requires a written contract, be sure you have one! A construction contract doesn’t need to be an overly complex set of documents. A simple, straightforward set of terms can be sufficient.

But property owners should know that hiring a contractor without a written contract isn’t a free pass to refuse payments. Courts will still award equitable remedies to the contractor under quantum meruit.