The Highly Regulated Home Remodeling Industry

By Adam L. Browser

Some industries are highly regulated.  Banking, securities and health care are prime examples.  Although the home remodeling industry might not immediately spring to mind, the fact is that layers of both state and county statutes and requirements make home remodeling a highly regulated industry in New York.

Since the statutes and regulations occur at both the local and state levels and are not part of an overarching comprehensive regulatory scheme, many home remodelers, as well as homeowners who are the intended beneficiaries, are unaware of the statutes and regulations.  Failure to be aware of these laws and regulations can lead to significant consequences for home remodelers, which may include fines, denial or revocation of a license and inability to recover payment for work performed.

The regulations typically fall into two categories: contract requirements and licensing.  While many industries have licensing requirements, few have directives that mandate the inclusion of specific contractual clauses.   Home remodelers are likely familiar with their local requirement to have a license, but may be unfamiliar with the contract-based regulations.

At the state level, General Business Law 771 governs the contents of home improvement contracts.  It requires home improvement contractors – a very broad term as explained below – to provide a homeowner with a written contract that contains: (a) the name, address, telephone number and license number of the home remodeler; (b) the price; (c) the approximate or estimated dates to start the work and reach substantial completion; (d) a description of the work to be performed and the materials to be provided; (e) a statement of any contingencies that would materially affect the completion date; (f) whether a definitive completion date is to be of the essence; (g) a specific clause notifying the owner of the lien rights available to the general contractor, subcontractors and suppliers; (h) a clause notifying the owner of the contractor’s obligations under the Lien Law for monies received prior to completion; (i) if progress payments are to be made, a schedule of the payments identifying what work is to be done or material supplied in order for a payment to be due, which schedule must bear a reasonable relationship to the work performed or material supplied; and (j) a three day right to cancel the contract.

This statute covers almost all residential remodeling work including siding, insulation, driveways, swimming pools, windows, terraces, patios, landscaping, fences, porches, garages, flooring, basements, solar energy systems and other improvements, provided the cost exceeds $500 – a very low threshold.  Failure to comply with the statute subjects the home remodeler to fines of up to $250 for each violation or five percent of the aggregate contract price.  While the penalty cannot exceed $2,500 per contract, that limitation is likely of little solace to a home improvement contractor.  Moreover, failure to comply with these requirements may prevent a home remodeler from enforcing the contract in court.

Additional regulations exist at the county level.  For example, Nassau County requires greater specificity in contracts, including that brand names, colors, dimensions and model numbers for materials appear in the contract documents.  Whereas New York requires a home improvement contractor to notify the homeowner of his or her right to cancel the contract within three business days of its signing, Nassau County goes further and requires a form Notice of Cancellation to be provided along with the contract.

Nassau County also requires that work shall be completed no later than thirty days after the completion date specified in the contract.  In contrast, while New York State requires an estimated or approximate completion date, it does not contain a blanket requirement that work be completed within 30 days of the estimate.

Both Nassau and Suffolk County also regulate a home remodeler’s advertising and promotional material.  Besides the general prohibition on false or deceptive advertising applicable to all businesses, Nassau requires a home remodeler to display its full company name and license number to appear on all advertising and promotional literature.  Suffolk County also requires the license number on a home remodeler’s advertising.

Moreover, Nassau and Suffolk County, like many other counties, require a home remodeler to be licensed.  Failure to have a license will prevent the home remodeler from suing an owner for monies owed for the construction work.  Moreover, the licensing process itself requires disclosure of substantial personal and professional information, including whether the applicant was ever been convicted of a crime, filed bankruptcy, owes child support, or has had a license suspended or revoked.  The application, at least in Suffolk County, even asks for the name and address of the applicant’s accountant and whether a license has been denied to an immediate family member.  Providing false information in the license application can be a felony.

The City of New York also contains some similar rules and regulations of which a home improvement contractor must be aware, as well as others not required by Nassau or Suffolk County.  For example, a home improvement is prohibited from deviating from plans or specifications without the owner’s written consent.  Too, the Commissioner of Consumer Affairs may fine a home improvement contractor if it determines that the contractor or its management personnel are untrustworthy or not of good character.  This vague regulation may not withstand judicial scrutiny.

The public policy behind all these rules and regulations is the protection of consumers.  Thus they are likely to be interpreted broadly and in a manner advantageous to consumers.  Failure to be aware of, and follow, these legal requirements jeopardize a home remodeler’s opportunity to have an enforceable contract, to obtain payment for work performed and even its license and ability to remain in business.  Proactive attention to these laws and regulations are necessary and indispensable.

Adam L. Browser, Esq.
516-663-6559
abrowser@rmfpc.com

 

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