Certified Remodeler

Module 1: Business
Chapter 3: Standards of Practice and Code of
Ethics

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Certified Remodeler
Module 1: Business
Chapter 3: Standards of Practice and Code of
Ethics

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 Certified Remodeler
Module 1: Business
Chapter 3: Standards of Practice and Code of
Ethics

The purpose of the NARI Standards of Practice Manual is to serve as an

official guide to the high standards of honesty, integrity, and responsibility
to which all members of the National Association of the Remodeling
Industry (NARI) are pledged in the conduct of business. As such, it serves
as the official interpretation of the Association’s Code of Ethics.
Also, all contractors finally approved by NARI for certification (CR, CRA,
CRS, CKBR or GCP) must indicate by an affidavit that they are familiar with
these standards and agree to conduct their businesses in conformance
with them.
The application of the advertising provisions of these standards by media
and the voluntary adherence to all provisions by individual manufacturers,
suppliers, and remodeling contractors will be a significant contribution
toward effective self-regulation in the public interest and will inspire public
confidence in this industry. Strict observance by local associations will
likewise enhance the public image of this Association.
It should be noted that these standards are not in any way intended to
infringe upon the right of an individual business to sell or advertise its
products and services at whatever prices it chooses. In fact, they are
designed to encourage trade and to promote substantive competition for
the benefit of all citizens. Members should also be aware that compliance
with these standards does not absolve them of the responsibility for
additional compliance with federal, state, and local laws and regulations as
they relate to advertising, selling, and servicing practices including licensing
where applicable. No provision of these standards or the Code of Ethics
shall be construed so as to require noncompliance either with federal
regulations or with state and local regulations which are consistent with the
federal regulations. Should any part of these standards or the Code of
Ethics stand in conflict with such regulations, only those conflicting parts
shall be rendered null and void; the remaining parts remain in full force.
On the following pages you will find excerpts from the NARI Standards of
Practice Manual. The Manual in its entirety is provided in Appendix A. For
the purpose of the certification exam, the questions are NOT limited to the
information presented in this chapter. You should expect to see questions
that will cover the entire range of topics found in the NARI Standards of
Practice Manual.

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 Certified Remodeler
Module 1: Business
Chapter 3: Standards of Practice and Code of
Ethics

ADVERTISING

The standards in this section pertain to the means by which members

obtain customers, including but not limited to the use of advertising in print
and broadcast media, direct mail advertisements, telephone solicitations,
and door-to-door canvassing.

Layout and Composition

These standards apply to both visual and oral presentations.

The composition and layout of advertisements shall clearly denote and
distinctly separate the various products and services being offered so as
not to confuse and mislead the reader, viewer, or listener.
Prices, illustrations, and descriptions shall not be placed in an
advertisement so as to give the impression that the price or terms of
featured items apply to other items in the advertisement when such is not
the case.
Headlines and captions shall be free from exaggeration or deception and
shall conform with any description appearing in the text. For example, a
heading or caption shall not be used which refers to a different make,
brand, grade, or quality from the product(s) illustrated, listed, or described.

Size and Specifications

In general, when a price is quoted the advertisement shall:

State the size and specifications of the product or area featured in units of
measurement and terms customarily used in the industry, provided that
such statements are clearly and readily understood by potential customers;
Not contain any ambiguous statements such as “large door,” “section,”
“front,” etc., unless accompanied by actual measurements.

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Disclose any conditions and restrictions where the featured size, price
specifications, and terms are available only on the basis of certain
structural, soil, or site conditions, local building codes, etc.
State clearly and conspicuously any limitations and conditions on what will
be supplied at the featured price in immediate conjunction with the featured
statement, e.g., “14’ x 25’ Frame Garage – Unpainted,” “12’ x 16’ Room
Addition – Shell Only.” The absence of any such limitations and conditions
shall mean that the finished item will be built or supplied at the advertised
price;
The manufacturer and the seller shall be responsible for the accuracy of all
specifications found in fact sheets and in all advertising and descriptive
materials that they publish. Sellers, however, will be granted a presumption
of good faith in the accuracy of information provided to them by
manufacturers who are members in good standing of NARI.

“Bait 'n Switch” Advertising and Selling

A bait offer is an alluring but insincere offer to sell a product or service that
the seller does not intend to sell. Its purpose is to cause customers to
switch from buying the advertised product or service in order to buy
something else, usually at a higher price or on a basis more advantageous
to the seller.

A seller should not use nor permit the use of the following “bait ‘n switch”
practices:

• Refusal to show or demonstrate the represented products or to

undertake the represented services;
• Disparagement of the offered product or service, warranty availability,
parts availability, credit terms, etc.;
• Selling the offered products or services and afterwards persuading
the customers into making a switch to other products or services;
• Refusal to take orders for the offered product or service or to deliver
within a reasonable period of time;

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• Demonstrating or showing a defective sample of the offered product

or service;
• A compensation plan designed to penalize salespersons who sell the
advertised product or service.

Warranties or Guarantees

The unqualified term “warranty” (or “guarantee”) shall not be used in

advertising or selling.
When the term “warranty” (or “guarantee”) is used in oral or written
representations, the following disclosures shall be made clearly and
conspicuously:
• The nature and extent of the warranty, including what materials,
services, workmanship, or characteristics are warranted or excluded;
its duration; and what must be done by the customer before the
warrantor will fulfill the obligation;
• The manner in which the advertiser will perform under the warranty,
such as repair, replacement, refund of initial purchase price, refund of
replacement cost, etc. If either the advertiser or the customer has an
option as to what may satisfy the warranty, this shall be clearly
disclosed; and
• The warrantor's identity, to avoid confusion as to whether a supplier,
manufacturer, or the advertiser is the warrantor.

“Factory to You,” “Wholesaler,” “Wholesale Prices,” etc.

The terms “factory to you,” “wholesaler,” “wholesale prices,” etc., have

been the subject of great abuse in advertising. They imply a significant
savings from the actual price at which identical products are currently being
offered by representative sellers in the market area, or, where identical
products are not being offered, for comparable values in the market area.

Such terms should not be used unless the implied savings can be
substantiated and the use of such terms meets all the requirements here.
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• The terms “factory to you,” “direct from the manufacturer,” “factory

outlet,” etc., shall not be used unless all advertised products are
actually manufactured by the seller or in factories of common
ownership or control.
• The terms “wholesaler,” “wholesale outlet,” “distributor,” etc., shall not
be used unless the seller actually owns and operates or directly and
absolutely controls a wholesale distribution facility which sells
products to retailers for resale.
• The terms “wholesale prices,” “at cost,” etc. shall not be used unless
they are the current prices which retailers usually and customarily pay
when they buy such products for resale.
• A statement such as “deal directly with the owner and save” or similar
claims may be used only if the owner does, in fact, sell the product or
service himself and this actually results in a savings to the customer.

Sales

The unqualified term “sale” may be used in advertising only if there is a

significant reduction from the advertiser's usual and customary price of the
product or service offered and the sale is for a limited period of time.

Free

The word “free” may be used in advertising whenever the seller is offering
an unconditional gift.

If receipt of the “free” product or service is conditional on a purchase:

The seller must disclose his condition clearly and conspicuously together
with the free offer (not by placing an asterisk [*]or symbol next to “free” and
referring to the condition(s) in a footnote);

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The normal price of the product or service to be purchased must not have
been increased nor its quantity or quality reduced; and
The free offer must be temporary; otherwise, it would become a continuous
combination offer, no part of which is free.

Installation and Other Charges

If the item is not portable and/or requires special connections, delivery and
setup, etc., those charges must be clearly disclosed.

The product representation should include the following information:

• If an offered item includes the cost of installation, the offer shall

clearly and conspicuously disclose that fact in immediate
conjunction therewith; e.g., “Price Includes Installation,” “Including
Installation,” etc.
• If installation is extra, the offer shall clearly and conspicuously
disclose that fact in immediate conjunction therewith; e.g.,
“Installation Extra,” “Plus Installation,” etc.
• If installation is optional, the advertisement shall clearly and
conspicuously indicate whether there is a charge for installation;
e.g., “Installation Optional at Extra Cost,” “Install Yourself, Or We
Can for Nominal Charge,” etc.
• Abbreviations such as “Inst. Opt,” “Opt. Inst.,” etc. shall not be
used.
• If there is a minimum installation charge, the minimum charge shall
be stated, e.g., “Minimum Installation Charge: $_____.”

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Module 1: Business
Chapter 3: Standards of Practice and Code of
Ethics

“Insured,” “Bonded,” “Licensed”

An advertiser shall not use the terms “bonded” or “insured” in any

representations unless there is a clear and conspicuous disclosure of the
type of bond or insurance, who is covered by the bond or insurance, and
the protection, if any, provided to the customer.
An advertiser shall not use the term “licensed” unless it has been granted a
license by the relevant licensing authority and disclosure is made for what
and by whom the license is granted.

Note: Some states and localities may have different requirements. Be sure
to check your state and local insurance, bonding, and licensing laws to
ensure compliance.

Telephone Solicitations

Any telephone solicitation shall, at the outset of each call, identify the name
of the caller, his company, its address, and the reason(s) for the call.

SALES

This section pertains to the selling of a product or service through point-of-

sale techniques and representations.

General

The requirements of truth, accuracy, and full disclosure that govern the
advertising and other customer solicitation activities of an industry member
shall also apply to point-of-sale contracts.
No oral statements shall be made which would violate any part or provision
of the standards set forth in the Advertising Section of the Manual.

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These basic principles shall apply to estimates, oral representations, and

written contracts which normally accompany a final sale of a product or
service.

Contracts and Other Documents

Misrepresentation

When an agreement is to be signed that binds the customer to a

contractual obligation, either immediately or upon subsequent approval or
execution by a company principal, no representation shall be made to a
potential customer that a document is merely an estimate form that has no
binding effect.

“Cooling Off” Notice

Regulations issued by the Federal Trade Commission, the Truth in Lending

Act, Regulation Z, and some state and local laws, require that oral and
written notice of the right to cancel a transaction shall be given to a
customer at the time of sale under certain conditions.

The following are some of the conditions that apply: door-to-door sales
involving $25 or more, credit transactions involving a security interest in
any real property, etc., within certain time limits (e.g. three business days),
and in certain form and language. Compliance with such regulations and
laws is the responsibility of the seller. The oral representations to the
customer at the point-of-sale shall include an explanation of how and to
whom notice of cancellation is to be directed.

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Waiver of Lien

Following verification of a customer's payment on a home improvement job,

the seller shall provide the customer with a lien waiver in such form and
frequency as state law may require.

SERVICE

This section pertains to all servicing activities of the seller with respect to
the customer after the sale is completed. This section does not set
minimum product or workmanship standards. (Product standards, short of
objectively established health and safety standards, should be specified in
advertising and contractual agreements. Workmanship standards are
difficult to define in this highly skilled industry.)

Substitution of Products or Services

An industry product or service which is not identical to samples submitted,

to specifications upon which the sale was consummated, or to
representations made pursuant to securing an order, shall not be shipped,
delivered, or installed without first obtaining specific written approval of the
customer to such substitution. Any difference in the quality or value of the
substitution shall be disclosed prior to obtaining such approval.

Delay

No seller shall designate a starting date, completion date, delivery date,

etc. unless such date can be ascertained with reasonable certainty. To
avoid customer concern and inconvenience, however, sellers may
designate general time periods when their obligation will be commenced
and the appropriate length of time required to complete the obligation.

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If delay is necessary or anticipated, the seller shall so inform the customer

and explain the reason(s) for the delay.

Proper Care of Customer's Property

Any anticipated damage or liability involving a property improvement job

shall be explained to the customer before a job is started. To the extent
possible, the remodeler shall use extra care to minimize and avoid damage
to the property and its surroundings and shall make every effort to ensure a
complete clean-up of work areas upon completion.

Completion Certificate

No customer shall be asked or induced to sign a completion certificate,

delivery receipt, or any other written instrument signifying that all
contractual obligations have been met unless such is actually the case to
the customer's satisfaction and to the seller's satisfaction. No
representations shall be made indicating that the customer's signature to
any such document is meaningless.

Warranties and Owner's Manuals

Following installation or delivery of some products or services (e.g., kitchen

appliances, bathroom fixtures, etc.) seller should leave with customer any
manufacturer's warranties or guarantees, instructions on how to obtain
service or repair, and literature from the manufacturer describing care,
maintenance, operation, and other information about the items.

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Customer Complaints

Prevention

Inspection – Prior to having a customer sign a certificate or delivery receipt,

it is advisable to encourage and (in the case of remodeling work) assist the
customer with inspection of the product or service.

Follow-up – A follow-up call to see if everything is all right should be made

to the customer within several days of the job’s completion.

Care and Maintenance Checklist – For many home improvements, it is

advisable for the contractor to provide a care and maintenance checklist for
the customer when the job is completed. Some have found it helpful to
provide reprints of articles appearing in home magazines, newspapers, etc.
that explain the kinds of responsibilities that should be assumed by a
homeowner for care and maintenance. Some even provide suggestions for
finishing an incomplete job.

Complaint Handling

Acknowledgment and Action – Prompt acknowledgment and action is the

proper response to customer complaints. Records on the investigation and
the determination of the causes for each customer complaint should be
maintained. Where a pattern of justifiable customer dissatisfaction
develops, immediate steps should be taken to eliminate the causes and
thereby prevent their recurrence.

Third-Party Dispute Settlement Mechanisms (alternatives to litigation) – For

customer complaints that appear unreasonable or for complaint situations
in which communication has broken down between the business and its
customer, the following procedures are approved and recommended:

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• Informal Mediation. The seller, when confronted with complaints

that cannot be resolved by his own efforts, may suggest
knowledgeable third parties to the customer, together with a promise
to do whatever such third parties suggest.
• Mediation by Industry Ethics Committees. Some remodeling
associations (local associations of NARI) have established ethics or
standards committees to make independent evaluations and
recommendations regarding customer complaints brought to their
attention. As with the informal mediation technique, this can
successfully resolve many more difficult complaints.
• Better Business Bureau Mediation. BBBs receive complaints from
dissatisfied customers and from businesses who are unable to
resolve such complaints. If the parties to the dispute have made
bona fide but unsuccessful efforts to resolve these complaints, the
local BBB will endeavor to mediate a solution.
• Arbitration. If a complaint remains unresolved by mediation
attempts, BBBs and/or NARl local associations in many areas offer a
program of arbitration to industry members and their customers. In
some areas this is a voluntary program in which neither party agrees
to arbitrate until an un-resolvable dispute actually arises, but one or
both parties are bound to the decision or award of the arbitrator after
agreeing to the process. In other areas, industry members have pre-
committed to arbitration through the BBB's Customer Care Program
in any complaint situations where the Bureau's mediation attempts
fail to obtain a resolution between the parties.

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Chapter 3: Standards of Practice and Code of
Ethics

The National Association of the Remodeling Industry's

Code of Ethics
Each member of the National Association of the Remodeling Industry is
pledged to observe high standards of honesty, integrity and responsibility in
the conduct of business:
1. By promoting only those products and services that are functionally
and economically sound and are consistent with objective standards
of health and safety;
2. By making all advertising and sales promotion factually accurate with
respect to product description, performance specification, and
cost/benefit analysis, and by avoiding those practices which tend to
mislead or deceive the customer with respect to competitive pricing,
savings claims, or the nature and significance of contracts,
warranties, finance agreements, completion certificates, lien waivers,
or liability and workers' compensation insurance;
3. By writing all contracts and warranties such that they are fair and
mutually beneficial to all parties concerned, such that they are free of
ambiguities or omissions which tend to obscure contractual
obligations, and such that warranty terms and provisions are free of
the capacity to mislead or deceive the customer as to quality or
longevity of the product or service;
4. By honoring all contractual obligations until and unless they are
altered or dissolved by the mutual consent of all contractual parties
concerned and by fulfilling those obligations in a reasonably prompt
manner that is fair to all parties concerned;
5. By promptly acknowledging and acting on all customer complaints,
and, in situations where complaints appear unreasonable and
persistent, by encouraging the customer to initiate an approved
third-party dispute settlement mechanism; and
6. By refraining from any act intended to restrain trade or suppress
competition and to thereby promote the private enterprise system and
its guaranty of equal rights for all.

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Chapter 3: Standards of Practice and Code of
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Study Questions:
1. When the term “warranty” or “guarantee” is used in oral or written
representations, which of the following disclosures is required to be
made clearly and conspicuously?
A. The nature and extent of the warranty.
B. The manner in which the advertiser will perform under the
warranty.
C. The warrantor’s identity.
D. A and C
E. A, B, & C

2. To advertise as “licensed” which of the following is not required?

A. Disclosure of who granted the license.
B. Disclosure of what license is granted.
C. Disclosure the owner’s driver’s license.

3. Refusal to show or demonstrate represented products or to undertake

represented services is best described as _________.
A. advertising
B. enticement
C. bait ‘n switch
D. shrewd business

4. Following the installation of kitchen appliances and bathroom fixtures,

the seller should do which of the following?
A. Inform the client of the website where warranty information may
be obtained.
B. Leave a business number where the installer can be reached in
the event of a problem.
C. Leave with the customer any manufacturer’s warranties,
guarantees, or instructions on how to obtain service or repair.
D. Leave literature from the manufacturer describing care,
maintenance, operation, and other information about the items.
E. C and D

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5. Which of the following is not a Third-Party Dispute Settlement

Mechanism?
A. Arbitration
B. Mediation by Industry Ethics Committees
C. Jury
D. Better Business Bureau Mediation

6. A customer may be asked to sign a completion certificate when ____.

A. the seller alone is satisfied that all obligations are met
B. all contractual obligations will be met imminently
C. all contractual obligations have been met
D. All of the above

7. Referral selling is where _________.

A. a client is asked to refer you to 3 of his acquaintances
B. a prospect is induced to sign a contract under the
representation that part or all of the cost of a product or service
can be earned through commissions paid for prospective
customer or buyer referrals
C. a competitor is asked to refer qualified prospects to you
D. All of the above

8. Promising a commission or a special price for using a client’s home in

special advertising is __________.
A. good selling practice
B. good for the buyer
C. called a model home scheme
D. a good way to build a reputation

9. Wholesale price refers to _________.

A. the promotional price in an advertised offering
B. the price a retailer usually pays when they buy products for
resale
C. any discounted price
D. All of the above

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Module 1: Business
Chapter 3: Standards of Practice and Code of
Ethics

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