Contractors Beware: New Jersey Home Improvement Practices Regulations Can Cost You
In a recent New Jersey case, Huston v. Lieber, the court held in favor of homeowners and against a contractor on its claim of nonpayment because the contractor failed to include its contractor registration number and the right to cancel notice in the contract, and awarded the homeowners their attorneys’ fees. This drastic outcome is all too common for unwary contractors on residential construction projects in New Jersey.
The Huston Case
Robert and Eileen Lieber hired Dennis Huston to install a new deck in one of their Avalon rental properties. The Contractor prepared a hand-written estimate of approximately $16,000 based upon Lieber’s oral specifications. Lieber added written clarifications to the estimate and paid the Contractor just over $8,000 to begin the work. Neither party signed the contract. After the project was finished, the Liebers complained that there were defects in the work and refused to pay the balance due.
The Contractor filed a complaint in Cape May County for the amounts owed by the Liebers. The Liebers filed a counterclaim seeking attorneys’ fees, arguing that the Contractor was not entitled to his payment because he had violated the New Jersey Consumer Fraud Act (CFA) and its regulations. They claimed that the Contractor failed to (a) sign the contract, (b) include his contractor registration number in the contract, and (c) include language advising the Liebers that they had the right to cancel the contract within three days of its receipt. These are technical violations of the CFA regulations — the Home Improvement Practices Regulations (HIPR) and Contractor’s Registration Act (CRA).
The Superior Court of New Jersey found that the Contractor violated the CFA and was unable to recover the amounts owed to him, even though his work was not defective and even though the violations were technical and committed without the intent to deceive the Liebers. The Court also ordered that the Contractor pay the Liebers’ attorneys’ fees.
How could this happen?
The New Jersey Consumer Fraud Act
New Jersey enacted the CFA to protect consumers against fraudulent and unlawful practices in the sale of consumer goods and services, including unscrupulous contractors who perform home renovations and improvements. There are three types of unlawful practices (violations) under the CFA:
- Affirmative acts (false representations);
- Knowing omissions (withholding information); and
- Violations of related acts and regulations.
While the first two violations are unsurprising given the purpose of the CFA, the third is not as obvious and serves as a trap for the unwary. Under this third category, one can unknowingly violate the CFA, without intending to mislead the consumer. These violations, often technical in nature, can result in severe ramifications, including denial of a contractor’s otherwise valid claim to recover the cost of work performed, as well as payment of treble damages and attorneys’ fees to the homeowner.
The Home Improvement Practices Regulations & Contractor’s Registration Act
The two most important CFA regulations for contractors are the Home Improvement Practices Regulations (HIPR) and Contractor’s Registration Act (CRA). The HIPR requires that all contracts over $500 be in writing, signed by all parties, and must contain certain information, including:
- Contractor’s legal name and business address;
- Description of the work and products that will be used;
- Total contract price, including the hourly rate;
- Start and finish dates;
- Statement of any guarantee or warranty for the services; and
- Right-to-Cancel Notice in 10-point bold font.
In addition, contractors may not: ask the homeowner to sign a certificate of completion or make final payment prior to completion; fail to begin or complete the work on the date stated; fail to give written notice of reasons for any delays; or substitute materials or products. Further, under the CRA, a contractor must, among other things, provide a copy of its insurance certificate and telephone number of the insurance company, and include its registration number on all advertisements and documents.
Employees Are On the Hook
The CFA defines “seller” and “contractor” broadly to include individual employees. As a result, an employee may be held personally liable if she took part in the violation. For example, if the project manager forgot to update the completion date in writing after a weather-related delay or chose to substitute a different product without consulting the homeowner, she can also be sued, individually.
Even if You Win, You May Still Lose
Under the CFA, homeowners have extensive remedies, including actual damages, triple damages, and the recovery of attorneys’ fees. Because the HIPR and CRA are meant to punish contractors who commit violations, a court can order a contractor to pay the homeowner’s attorneys’ fees for a technical violation of the regulations, even if the homeowner suffered no other damages as a result of the violation.
If the homeowner withheld payment due to alleged defective work, as in Huston, failing to sign the contract has nothing to do with the contractor’s quality of work or the homeowner’s reasons for nonpayment. Nevertheless, the court can require the contractor to pay the homeowner’s attorneys’ fees because of this simple, technical error.
There are numerous other examples of such decisions in the New Jersey courts. Whether it was an intended consequence of the CFA, these legal decisions encourage homeowners to bring an action under the CFA or assert a counterclaim against a contractor because of the likelihood of recovering their attorneys’ fees.
What Can You Do?
- Follow all of the requirements of the Home Improvement Practices Regulations and the Contractor’s Registration Act.
- Put everything in writing, even for simple modifications or minor delays mid-project, and insist on signatures.
- Beware of “estimates,” as these may be construed as contracts that violate the CFA.
- Review your documents. We can help you update your advertising and contracts to comply with the law and protect you from opportunistic homeowners.