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New Jersey Home Improvement Contractor's Legal Handbook

Introduction (1 of 10)

New Jersey’s Contractor’s Registration Act (Act) was adopted in 2004 and became effective in December 2005. The Act was an official reaction to decades of abuse in the home improvement industry and, as a result, it is broadly conceived and liberally interpreted in favor of the consumer. New Jersey’s legislators considered the public policy associated with the Act to be of such importance that New Jersey’s Division of Consumer Affairs (DCA) is required to undertake a public information campaign to educate both contractors and consumers of its provisions. The expansive nature of the Act is further extended by the regulations (Regulations) authorized by the Act and provisions in the Act that interlock with New Jersey’s Consumer Fraud Act. (CFA). 1 To an unsuspecting home improvement contractor, (H.I. Contractor) even a technical violation of these consumer-oriented statutes and regulations can produce financial ruin.

This writing is conceived to assist a H.I. Contractor to obtain general insight into the material responsibilities created by the Act and the CFA, as well as the punitive consequences associated with a violation of these statutes.


AN OVERVIEW (2 of 10)

The Act  applies to all persons or companies that advertise, make or sell home improvements, which is a term that is broadly defined.  The Act is applicable to all residential or non-commercial property, as well as  conversions of existing commercial structures into non-commercial property. Some of the work covered by the Act includes residential driveways, sidewalks, swimming pools, terraces, patios, additions, landscaping, fences, porches, windows, doors, cabinets, kitchens, bathrooms, garages, basements, waterproofing, fire protection devices, security protection devices, central heating and air conditioning equipment, water softeners, heaters, and purifiers, solar heating or water systems, insulation installation, roofing and siding, wall-to-wall carpeting or inlaid floor coverings.
The Act is not limited  to New Jersey based contractors, but all people or companies that provide home improvement services in the state, irrespective of where the H.I. Contractor’s principal place of business may be located.  Subcontractors engaged by a H.I. Contract are also covered by the Act. 
Architects, engineers, surveyors, electrical contractors, master plumbers and other related professions that require a certification or a license in the state of New Jersey, however are not.  There are certain other exceptions to the Act including home-improvement retailers with a net worth of $50,000,000 or more, people who work on their own properties and work performed on property owned or leased by charitable or non-profit associations.

The Act supersedes all municipal ordinances. Indeed, a municipality may not issue a construction permit to any H.I. Contractor who does not produce proof of registration.   The Act does not prevent a municipality from inspecting and regulating a Contractor’s work, however.  Notably, a H.I. Contractor can not start work until all governmental permits are secured and can not ask for or receive final payment under a home-improvement contract unless copies of inspection certificates are provided to the consumer.          


All people or companies that work in the home-improvement industry must  register with the DCA (Registration Responsibility) and maintain general liability insurance in the minimum amount of $500,000 per occurrence, (Insurance Responsibility).  In addition, H.I. Contractors are required to secure a   signed contract from every consumer before any work is started. This contract must contain specific terms identified in the Act and the Regulations. (Written Contract Responsibility). The final responsibility under the Act  relates to certain disclosures that must be made in advertising and marketing materials. (Disclosure Responsibility). 
The Act has designated the DCA to function as the Act’s administrative watch dog. The DCA is solely  responsible to review and approve requests for regulations, supervise and discipline H.I. Contractors and implement appropriate procedures to effectuate those ends.  A violation of the Act can produce criminal penalties, administration sanctions and civil liability under the CFA.


By the terms of the Act every person or company who makes, sells or advertises home improvements must file an application with the DCA and register annually thereafter.  The registration application requires an individual applicant or any officer, director or owner with a 10% interest in a business entity filing the registration application to disclose a vast collection of information, including information relating to prior civil or administrative adjudications involving fraudulent, deceptive or dishonest practices, as well as gross negligence or general incompetence in the construction industry.   If there are any changes to the information contained in the registration  application or any renewals, an amendment must be filed with the DCA within twenty (20) days of those changes.

The application must also include a disclosure statement, which requires the H.I. Contractor and its principals to advise the DCA of any prior criminal convictions that are enumerated in the Act or the Regulations.  The responsibility to disclose changes to the information contained in the disclosure statement is continuing, and must be acted upon promptly.  


In most cases, a H.I. Contractor will be able to complete the registration application and disclosure statement without much difficulty. In those instances, however, where the information requested may have a negative influence on an application for registration, it may serve the H.I. Contractor applicant well to engage an attorney to help with the process. In either case, the applicant must be truthful in providing the information required, because a breach of this responsibility can cause a revocation or suspension of the H.I. Contractor’s registration, a criminal prosecution, or liability under the CFA.



H.I. Contractors are required to purchase and maintain a commercial liability insurance policy with minimum coverage of $500,000 per occurrence. Proof of this policy must be filed with the DCA in a certification provided by the insurer that contains the insurer’s name, address, policy number, and the terms of coverage.
If the insurance policy is to be changed for any reason, the H.I. Contractor must submit proof of the replacement policy before the term of the original policy expires. 


This section of the Act was implemented  to cover claims resulting from injuries or damage that may occur during a home-improvement project. Since its purpose is to protect the homeowner and other third-parties, a H.I. Contractor should be very vigilant in keeping this policy in full effect and should deal with a reputable insurance agent to help with this responsibility.


The Contractor’s original registration certificate or a duplicate must be prominently displayed at all of the H.I. Contractor’s places of business. The registration number must also be prominently displayed on all advertisements, business documents, contracts, correspondence and  commercial vehicles used by the H.I. Contractor. In addition, any invoices, contracts or correspondence given to a consumer must identify the DCA’s toll free number.


The purpose of this section is to allow a consumer to readily identify a registered H.I. Contractor.  The cost of discharging this responsibility is not great.  It would be utter foolishness not to satisfy this responsibility, especially in light of the serious consequences that may follow.

The Act and Regulations require a written contract and any amendments to the original contract to be signed by both the H.I. Contractor and the consumer before work begins, where the value of the contract or amendment exceeds $500. The certificate of liability insurance referenced above must be attached to the contract as well.  The contract must be written in clear, legible and understandable language.  Although not specifically identified in the Act, New Jersey’s Plain Language Statute should also apply to a home improvement contract.
The contract or amendment to the contract must include, among other things,  the following information and terms: (1) name, address and registration number of the H.I. Contractor; (2) the consideration to be paid by the consumer, including finance charges; (3) the name and address of the H.I. Contractor’s salesman; (4) a specific description of the work to be performed and the principal products and materials to be used including, among other things, the model, year of production and the type, grade, size and quantity of materials; (5) the start date and end date; (6) a description of the mortgage or security interest, if any is to be used and whether they are evidenced by a promissory note; (7)  a statement that the contract can not be sold or assigned without the written consent of the consumer; (8) the guarantees or warrantees relating to work or materials used at the project, with a written copy of those guarantees to be produced at the time the contract is signed; and (9) a provision that recites, in conspicuous print, that  the consumer may cancel the contract within three business days after it is received .  Moreover, if the seller of the home-improvement service or material is other than the person who will perform under the contract, that person’s name and address must be disclosed.
The Written Contract Responsibility is the Act’s biggest liability trap. Even a technical violation can produce civil liability under the CFA and an adverse reaction from the DCA. Do not ever provide a consumer with any home-improvement services or products that exceeds $500 unless the consumer has signed a contract that covers every term and conditions required by the Act and the Regulations. Indeed, given the jeopardy involved with a violation of this responsibility, the H.I. Contractor should seriously consider engaging an attorney to draft a home-improvement contract, which can be used over-and-over again.  Further, in drafting written contracts, the H.I. Contractor  should seriously consider a clause that will require any consumer-disputes to be resolved by arbitration and not litigation. Arbitration is less expensive and the arbitration-dispute professionals usually have better insight into issues associated with construction cases than a jury and some trial judges. 

The DCA may refuse to issue, suspend or revoke a H.I. Contractor’s registration if the H.I. Contractor has been  convicted of certain criminal offenses or has been involved in other unacceptable conduct,  including fraud, deception, gross negligence, repeated acts of negligence and other types of “professional or occupational misconduct” .
A H.I. Contractor, previously convicted of any of the crimes specified under the Act, may avoid an adverse ruling by the DCA,  if it can be shown, by clear and convincing evidence, that the H.I. Contractor has been rehabilitated. In order to obtain the benefit of this section of the Act, however, it must be shown that the H.I. Contractor’s conviction was previously identified in the disclosure statement submitted with the H.I. Contractor’s application for registration. The factors to be used by the DCA in its analysis are specifically identified in the Act and include the date of the offense, the circumstances and seriousness of the offense, the age of the H.I. Contractor at the time of the offense, and “any other evidence of rehabilitation”. 
In a recent case, a contractor who has been convicted many years earlier of  possession of marijuana, sexual assault and a failure to register under Megan’s Law was refused registration by the DCA.  Notably, the contractor had participated in alcohol and drug rehabilitation programs and  produced an assortment of witnesses, including a business associate, a friend, and  recent clients to attest to his capabilities as a contractor and as a person.
A H.I. Contractor whose registration is denied, suspended, or  revoked because of information contained in the application for registration can have an opportunity to be heard, provided a written request is sent to the DCA within 30 days of the notice of the adverse action. In other cases, the DCA must provide an opportunity to be heard before an adverse ruling can be made.
A H.I. Contractor should be very sensitive to the right to be heard and the time constraints required by the Act and the Regulations because the 30-day time period  associated with that right will probably be strictly construed. To confound the problem, the Regulations seems to say that the 30-day time period begins to run on the date of the notice and not the date that it is received, which may be a good number of days removed from the date of the notice.  In all cases where the H.I. Contractor is told that the DCA may take an adverse action on an application, renewal, or on a complaint from a consumer,  an experienced lawyer must be hired, preferably a trial lawyer with a good working knowledge of the Act and the construction industry. 

Anyone who knowingly violates the Act is guilty of a fourth degree crime, which authorizes the sentencing judge to impose an 18-month period of imprisonment and a maximum fine of $10,000. In addition, anyone who violates the Act is also subject to an administrative penalty of up to $10,000 for a first offense and up to $20,000 for each subsequent offense.
The most available and most lethal of the weapons that can be used by a consumer for a violation of the Act, however, is the CFA.
In approaching CFA litigation, the H.I. Contractor must know that New Jersey’s  Supreme Court has observed that the CFA was conceived to give the state one of the strongest consumer-protection laws in the nation. Therefore, it is  broadly interpreted and applied. Its core purpose is to eradicate “unconscionable business practices.”  Critically, the CFA provides a successful claimant the opportunity to obtain three times the actual damages sustained by the consumer and allows the shifting of litigation costs, including attorney’s fees, to the H.I. Contractor who has violated its terms.  The fee-shifting component of the CFA will apply, even if the consumer can not prove that damages actually resulted from a H.I. Contractor’s unlawful conduct.

Despite suggestions to the contrary in the title of the CFA, a claimant does not have to prove that a  H.I. Contractor acted fraudulently. Indeed, a H.I. Contractor that fails to comply with the Act or Regulations, will be strictly liable to the consumer, irrespective of the H.I. Contractor’s lack of fault, bad faith or illicit intent. Thus, if an H.I. Contractor fails to include a term in the consumer’s written contract required by the Act or the Regulations, the consumer may be able to prosecute a successful claim against that H.I. Contractor under the CFA.  Indeed, a technical violation of the Written Contract Requirement can render a claim for payment unenforceable and may require a return of all money previously received from the consumer for work performed under the defective  contract.

The CFA may also be violated for a whole host of other reasons, including if the H.I. Contractor: (A) misrepresents the quality or specifications of a product; (B) solicits a consumer with products not intended to be sold or can not be sold because of unavailability; (C) deceptively gains entrance into the consumer’s home; (D) fails to perform under a gift offer; (E) misleads or misrepresents pricing or financing terms; (F) fails to timely perform the work required by the contract; (G) makes misleading sales’ representations; (H) fails to obtain building permits prior to the start of work; (I) fails to provide a consumer with final building approvals before demanding final payment; and,  (J) fails to provide written of warranties relating to materials and services performed.
If there is any indication or suggestion of a criminal investigation involving a H.I. Contractor’s work, the H.I. Contractor must not speak with anyone or write any letters, even if the H.I. Contractor believes that the perceived problem can be explained away,  an attorney should be hired immediately. 
The same advice applies to any administrative action that may be taken against the H.I. Contractor by the DCA, because an adverse ruling will not only result in substantial penalties, but also, a revocation or suspension of registration.
If a consumer has filed a civil action against a H.I. Contractor alleging a violation of the CFA, an attorney should be hired as soon as possible.  Although, the CFA is seriously slanted in favor of the consumer, an experienced trial lawyer should be able to navigate through these troubling waters without losing the ship and all of its cargo.

CONCLUSION (10 of 10)
The Act and the CFA are literal mine-fields for the H.I. Contractor.  One faulty step can lead to serious criminal, administrative and financial consequences.  In order to obviate the prospects of these unnecessary controversies, a H.I. Contractor should carefully follow the instructions of these two statutes and their associated regulations.