WHAT IF A CONTRACTOR CHARGES MORE FOR REBUILDING AFTER A WILDFIRE?
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As fire crews work to contain the Greater Los Angeles wildfires, residents are turning their attention toward rebuilding. Some experts suggest that that effort may take several years given that the wildfires damaged or destroyed roughly 12,000 structures in addition to sewer systems, power lines, and roads with costs estimated at $250 billion to $275 billion.
Unfortunately, this presents opportunities for contractors who may seek to turn this terrible devastation into enormous profits. In fact, the public has already witnessed similar opportunism on the part of merchants, landlords, and others who have engaged in “price gouging” for goods, services, and accommodations since the start of the wildfires. All of this may lead wildfire victims to wonder whether there are protections against contractors who may likewise choose to price gouge during the rebuild.
Generally, California law does provide for meaningful protection against price gouging in the wake of a natural disaster. In the context of efforts to repair and rebuild, California Penal Code Section 396(c) declares that “it is unlawful for a contractor to sell or offer to sell any repair or reconstruction services or any services used in an emergency cleanup for a price of more than 10 percent above the price charged by that person for those services immediately prior to the proclamation or declaration of emergency.”
Section 396(c) permits a greater price increase only if the contractor “can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services . . . and the price represents no more than 10 percent greater than the total of the cost to the contractor plus the markup customarily applied by the contractor for that good or service in the usual course of business immediately prior to the onset” of the emergency.
The law then makes it “a misdemeanor punishable by imprisonment in a county jail for a period not exceeding one year, by a fine of not more than ten thousand dollars ($10,000), or by both that fine and imprisonment.” And such violations constitute “an unlawful business practice and an act of unfair competition,” allowing consumers to use California’s consumer protection statutes as recourse. Significantly, the law declares the “remedies and penalties . . . cumulative to each other . . . and the remedies or penalties available under all other [California] laws.”
In an effort to “help Los Angeles rebuild faster and stronger,” Governor Gavin Newsom signed an executive order extending Section 396(c)’s proscriptions against price gouging by contractors from 180 days to a full year, prohibiting such practices through January 7, 2026. Accordingly, until at least January 7, 2026, wildfire victims who are overcharged for repair and rebuilding efforts may have a legal claim. Any individual considering legal recourse should consult a qualified attorney who can evaluate the applicable laws, relevant legal developments, and specific facts of a given case.
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