1. Do you qualify?
Review the questions listed below in order to determine whether or not you qualify for arbitration.
- Is there a written contract for the job?______
- Will this Request for Arbitration be filed within 2 years of the contract date? _____
- Was the contractor registered with the state as a Home Improvement Contractor on the date the contract was signed? (To find out call the Office of Consumer Affairs at 617-973-8700) ____
- Was the contract for improvements, repairs, renovations, alterations, or additions to a preexisting owner-occupied residence with no more than 4 units? ____
- Is the property or residence located in Massachusetts? ____
- Is the property your primary residence? _____
If the answer to any of the above questions is no, you do not meet the basic qualifications for the Home Improvement Contractor Arbitration Program. You may want to consult an attorney to explore other legal remedies for your claim.
Note: If you obtained your own building permit you may be eligible for arbitration (provided you satisfy the qualifications above), but may not be eligible for payment from the Guaranty Fund.
2. Even if you do qualify, is the Home Improvement Contractor Arbitration Program the most effective way for you to pursue your claim?
The Massachusetts Home Improvement Contractor Act establishes two means by which you may recover your damages: arbitration or a traditional suit in court. You should carefully weigh the costs of pursuing your claim through arbitration versus the costs of pursuing a claim in court. Keep the following factors in mind as you consider your options:
Arbitration is designed to offer a relatively quick method of dispute resolution. Generally, you will receive an arbitration decision within seventy-five days of the acceptance date for your Request for Arbitration. With the exception of small claims court, most consumers are unable to obtain a judgment in court as quickly.
The arbitrator's decision is legally binding. Unlike traditional arbitration, however, the Home Improvement Contractor Act allows either party to appeal the decision for a trial de novo (a new trial) in court within 21 days of the mailing of the arbitration decision.
PLEASE NOTE: If the contractor has filed for bankruptcy protection, you cannot pursue arbitration without permission from the bankruptcy court. This means that you must petition the bankruptcy court for Relief From the Automatic Stay to allow you to pursue your claim. You can contact the Office of Consumer Affairs for further instructions and a sample Motion for Relief from the Automatic Stay at (888) 283-3757.
B. Extent of your Damages
In arbitration, the arbitrator may award you monetary damages, or may require the contractor to complete, repair, or replace the work. If you are awarded monetary damages, you may receive your contract damages, consequential damages, and arbitration fee. Arbitrators may also award multiple damages in claims brought under the Consumer Protection Act (93A).
A violation of the Home Improvement Contractor Act constitutes a violation of the Consumer Protection Act (93A). As such, the Home Improvement Contractor Act allows you to file a private suit in court to enforce its provisions. As a first step, you or your attorney will need to send the contractor a 93A demand letter.
Under the Consumer Protection Act, if you win your case in court you may receive your actual damages or $25, whichever is greater. If the court finds that the contractor's violation was willful or knowing, then the court may award at least double but not more than triple damages. You may also be awarded attorney's fees, unless you rejected a reasonable settlement offer made by the contractor within 30 days of the mailing of your 93A demand letter. You should consult with an attorney for additional information.
How do you assess your damages?
Traditionally, the contract damage formula is as follows: the amount of the reasonable costs of completing the contract and, if necessary, repairing the contractor's defective work, minus the part of the contract price which has not been paid.
Example: You paid $5000 to a contractor to perform, X, Y, and Z. The full cost of the contract to perform X, Y, and Z was for $7000.
The contractor performed X fully and properly; performed Y fully but improperly; and failed to perform Z.
The City Building Inspector and another contractor estimate it will cost you $1500 to repair Y, and $1000 to perform Z. Your damage is $500.
Cost to complete and repair $2500
Minus the part of the contract price which has not been paid: $2000
($7000 - $5000)
In addition to contract damages, you may have consequential damages, such as time lost from work, additional heating expenses from an exposed roof, etc. These costs may be awarded in court and in arbitration.
Be aware that you may not recover all of your damages from the Guaranty Fund if you are unable to collect an awarded judgment against the contractor. Consequential damages, arbitration and court fees, and attorney's costs cannot be recovered from the Fund. For more information, please see our Actual Loss Worksheet. In addition, if it is found that the contractor's bid on the work was grossly below the cost generally accepted in the trade, you may not be able to recover your cost to complete the contract from the Fund. Instead, you will receive the cost to repair the contractor's defective work and any amount you overpaid the contractor.
Your Request for Arbitration is subject to a fee based on the size of your claim:
Amount of Claim
Up to $1,999
Up to $4,999
$5,000 to $9,999
$10,000 to $24,999
$25,000 to $49,999
If the hearing is extended beyond four hours, an additional fee up to $150 per hour may be charged.
Given these costs, once you have determined the amount of your claim, you should consider the following:
If your claim is less than $2,000, Small Claims Court is a less expensive alternative to arbitration. If your claim is for a relatively high dollar amount, you may want to consult with an attorney about any potential benefits of pursuing the claim directly in court.
If the contractor fails to comply with an arbitration award and you intend to pursue relief from the Home Improvement Contractor Guaranty Fund, enforcement of the award may require additional court action. Before you may be paid from the Fund, you must submit satisfactory evidence that "reasonable legal efforts" to collect your award have failed. "Reasonable legal efforts" are satisfied if:
- your contractor has filed for bankruptcy or has been adjudged bankrupt, or
- your contractor has fled the jurisdiction, or
- your attempts to collect the award in court have failed and a writ of execution has been served upon the contractor.
As such, in order to recover your damages from the Fund, you may need to confirm your award in court and obtain a writ of execution, even if you already have won your case in arbitration. You may want to consult an attorney about avoiding costs for both arbitration and court by pursuing the claim in court from the outset.
3. Do you have enough evidence to win an award?
Objectively weigh all the evidence that supports your case. Then consider the evidence that the contractor will use to defeat your claim or to file a counterclaim against you. If you determine that the balance is in your favor, then this program may provide an effective way to pursue your claim.
If you decide that arbitration is right for you, you should proceed to our page on How to File a Consumer Request for Arbitration. The Application for Arbitration is available online.