ABA Family Legal Guide

Home Ownership

Remodeling

Legal Protections

What protection do I have once I sign a contract?

Given the number of scam artists working the streets, your best federal protection may be the cooling-off period mandated by the Truth in Lending Act. Called a right of rescission, the law gives you three business days to cancel any contract that was signed in your home (or any location other than the seller's place of business) that involves any financial claim to your home. This occurs, for example, when the contract gives the contractor the right to file a lien against your home to enforce payment. This law also applies to any contract that involves the borrower making four or more payments, such as when the contractor finances a project by using your home as collateral for a second mortgage.

If circumstances entitle you to a cooling-off period, the contractor must give you two copies of the Notice of Right of Rescission at the time you sign the contract. It must be separate from the contract--not buried in fine print--and a copy must be given to each owner, because any one owner may cancel. The notice must identify the transaction, disclose the security interest, inform you of your right to rescind, tell you how to exercise that right, and give you the date the rescission period expires.