Restoration contracts: 3-day cancel right, deposits, what to strike

What are you signing when a restoration company hands you a contract?

Most restoration work starts with a one- or two-page document, often called a work authorization or emergency services agreement. It authorizes the company to begin extraction, drying or demolition, usually at rates it sets or at Xactimate pricing, and it makes you the party responsible for the bill. Your insurer is not a party to it. The contract between you and the company is what decides who owes what.

Two other documents often ride along. A direction to pay tells your insurer to send claim money to the contractor. Florida’s Insurance Consumer Advocate warns it “may require the insurance company to pay the contractor directly (sometimes before work is complete),” says “you are not required to sign this document to have work done,” and flags language that lets the contractor request payment from your insurer “without consulting you first.” An assignment of benefits goes further and transfers your claim rights, and Florida has largely banned it, as explained below.

A United Policyholders case shows why the first page matters. After the Marshall Fire, a family signed a contractor’s work authorization for cleaning, later found lead and dioxins the cleaning had missed, negotiated a $65,126 bill down to $42,176, and still faced a lien. The expert’s summary: “The carrier will only pay for the work once.” Read everything before anyone starts. Our questions to ask a restoration company cover the conversation that should come first.

Do you really have three days to cancel?

Sometimes, and the exceptions matter more than the rule. The FTC Cooling-Off Rule (16 CFR Part 429) covers a sale of consumer goods or services of $25 or more made at your home, or $130 or more at a temporary location away from the seller’s place of business. You can cancel until midnight of the third business day after the sale. Saturday is a business day; Sunday and federal holidays are not. The seller must give you two copies of a cancellation form and a dated contract with its name and address carrying this statement in bold type: “You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction.” Refunds are due within 10 business days of your notice.

The exceptions are in 16 CFR 429.0. The rule does not cover a sale where you initiated the contact and asked the seller to visit your home to repair or maintain your personal property. It does not cover a bona fide immediate personal emergency where you initiated the contact and gave the seller a separate, dated, signed statement in your own handwriting describing the situation and waiving the right to cancel.

In plain terms, a door-knocker’s contract is usually covered. The company you called at midnight to extract water usually is not, and if it handed you a pre-printed emergency waiver, ask why. Whether your contract is covered depends on its facts, so ask an attorney.

Does Florida give you a separate right to cancel?

Yes, with a similar catch. Florida’s home solicitation sale law (Fla. Stat. 501.021 to 501.055) covers a sale of consumer goods or services over $25 that a seller personally solicits somewhere other than its fixed business location. It does not cover a sale “that results from a request for specific goods or services by the purchaser,” so again, the company you called is likely outside it.

Under Fla. Stat. 501.025, you may cancel “until midnight of the third business day after the day on which the buyer signs.” Written notice can be delivered in person or by mail, and a mailed notice “shall be effective upon postmarking.” Under 501.031 the contract must carry a “BUYER’S RIGHT TO CANCEL” statement, and it must say that if you cancel, “the seller may not keep all or part of any cash down payment.” Violations are first-degree misdemeanors under 501.055. A business day here means any day except Sunday or a federal holiday.

Florida adds longer windows for two storm-specific contracts. Our guide to storm chaser scams covers how those contracts get signed in the first place.

What is an assignment of benefits, and is it still legal in Florida?

An assignment of benefits transfers your right to the insurance money to the contractor, which then deals with the insurer in your place.

Florida has shut most of that down. Under Fla. Stat. 627.7152(13), for policies issued on or after January 1, 2023, “a policyholder may not assign, in whole or in part, any post-loss insurance benefit,” and an attempt to do so “is void, invalid, and unenforceable.” Florida DFS says such contracts “are considered invalid and unenforceable.” The exceptions are narrow, such as a power of attorney under chapter 709 that lets a management company, family member or guardian act for the insured.

Older policies still allow AOBs with strict rules. For a policy issued from July 1, 2019 through December 31, 2022, the agreement must be in writing, allow you to rescind within 14 days, include a written itemized per-unit cost estimate, carry a notice in 18-point bold capitals, and cap emergency work at the greater of $3,000 or 1 percent of your Coverage A limit (627.7152(2)). Your declarations page shows the issue date.

A direction to pay is a different document. The statute does not mention it, and it is not banned, which is why it has replaced the AOB on many clipboards. If you sign one, limit it to payment for completed work you have approved, and ask an attorney what else it changes.

How much deposit is normal, and what does Florida law say?

Neither federal law nor Florida caps deposits, but Florida sets a clock. Under Fla. Stat. 489.126(2), a contractor who receives more than 10 percent of the contract price as an initial payment for residential repair, restoration or construction must apply for any needed permits within 30 days after the payment and start work within 90 days after the permits issue, unless there is just cause or you agreed in writing to a longer period. Under 489.126(3), a contractor paid more than the value of the work done may not stop working for any 90-day period. Breaking the deposit rule is a first-degree misdemeanor under $1,000 and a third-degree felony from $1,000 to under $20,000, with higher felonies above that (489.126(5)).

Florida’s Insurance Consumer Advocate gives the practical version: never pay in cash or in full up front, an advance payment “should never be more than 50% of the full price,” always get a receipt, and do not make the final payment until every item in the contract is done. Our restoration scams and red flags page covers the deposit tricks that follow a storm.

What should a good restoration contract include?

The DFS contractor FAQ and the Insurance Consumer Advocate’s guide describe the same document: everything in writing, a full work description, start and estimated completion dates, an itemized budget, a payment schedule, a promise to pull permits, and proof of insurance. For repairs tied to a property insurance claim, Fla. Stat. 489.147(2)(e) requires a good-faith estimate of “itemized and detailed cost of services and materials,” and DFS calls a lump-sum or vague estimate a red flag.

Which clauses should you strike or question?

Strike means cross it out, initial it and have the contractor initial it before you sign. If the company refuses, that is useful information. Nothing here is legal advice; for your own contract, ask an attorney.

How does Florida’s construction lien law affect you?

The lien-law notice Florida requires on home contracts over $2,500 says people who work on your property and are not paid “have a right to enforce their claim for payment against your property.” If your contractor fails to pay its subcontractors or suppliers, those people “may look to your property for payment, even if you have already paid your contractor in full” (Fla. Stat. 713.015).

The moving parts:

• Notice of Commencement. You record it with the clerk before work starts and post a copy at the job site. DBPR applies it to improvements over $2,500. It is void if work does not start within 90 days, and payments made after it expires (one year unless it says otherwise) are “improper payments” (Fla. Stat. 713.13).
• Notice to Owner. A subcontractor or supplier you did not hire must serve this before starting or within 45 days after, and failure is “a complete defense to enforcement of a lien” (713.06(2)(a)). Keep every one you receive.
• Claim of lien. Must be recorded within 90 days after the lienor’s final furnishing of labor or materials (713.08(5)). It stays valid one year unless the lienor sues; your Notice of Contest of Lien shortens that to 60 days (DBPR).
• Your protection. Get a release of lien from anyone who served a Notice to Owner before each payment, and hold the final payment until the contractor delivers its final payment affidavit (713.06(3)(d)). For a specific lien problem, DBPR’s guide says to consult an attorney.

How do you cancel properly?

Put it in writing, send it the way the rule requires, and keep proof. Under the FTC rule, sign and date one copy of the cancellation form, or write a letter if you were not given forms, and mail it to the address given for cancellations, postmarked before midnight of the third business day. The FTC recommends certified mail with a return receipt and keeping a copy. The seller must refund within 10 business days (16 CFR 429.1).

Florida’s home solicitation law accepts written notice in person or by mail, effective on postmark, and the notice “need not take a particular form” (Fla. Stat. 501.025). Florida’s roofing cancellation is stricter: send it “by certified mail, return receipt requested,” or another mailing that provides proof, to the address in the contract (489.147(6)(c)). DFS says the same and posts cancellation forms on its storm page. Photograph the signed notice, the envelope and the receipt, and email the contractor a copy the same day.

If you are unsure which rule applies, Florida DFS says to call its helpline, 1-877-693-5236, before signing anything, and the same advice holds before cancelling.

What happens to work already done if you cancel?

If your sale is covered by the FTC rule and you cancel in time, the seller must refund your payments within 10 business days, and in Florida “the seller may not keep all or part of any cash down payment” (Fla. Stat. 501.031). If your sale is excluded, because you called the company or signed a handwritten emergency waiver, the contract itself decides what you owe for work performed. For a Florida roof contract after a declared emergency, the right ends at the “official start date,” which the statute defines to include a code-compliant temporary repair (489.147(6)(a)), so a tarp can close the window.

Two things do not change when you cancel. Your policy still expects you to protect the property: the HO-3 sample form’s Duties After Loss require you to “protect the property from further damage,” make “reasonable and necessary repairs,” and “keep an accurate record of repair expenses,” so line up another company and keep going. Our duty to mitigate guide explains how insurers read that duty. And an unpaid contractor can still record a claim of lien within 90 days of its last work in Florida (713.08), so what is owed for finished work is a question for an attorney.

First, get the emergency work done on a short work order that covers only the emergency. Our emergency roof tarping guide and tarping and board-up cost page show what it should contain, and the hire-a-pro hub covers choosing the company for the rest.