By Seth M. Rosenstein
For New Jersey homeowners, few endeavors are more impactful, exciting, and nerve-wracking than hiring a contractor to work on a major home improvement project. When all goes well, the result is a house that increases in value and improves the homeowner’s and their family’s quality of life. But if things go south, if the contractor fails to complete the agreed-upon work, doesn’t show up for days or weeks at a time, or botches the job through incompetence or corner-cutting, the experience can be frustrating and costly.
For contractors, that same combination of promise and peril also accompanies large projects. That is why it is so critical at the start of their relationship for the homeowner and contractor to have a clear, written understanding of the scope of work and their respective rights and obligations. It is also why New Jersey law imposes strict and detailed requirements for most home improvement contracts.
These requirements, found in Section 56:8-151 of the Home Improvement Contractors Registration Act (the Act), are primarily designed to protect homeowners, as befits the state’s robust consumer protection laws. But the notices, disclosures, and other terms of home improvement contracts mandated by the Act also shield contractors from spurious claims by homeowners or attempts to expand the scope of work beyond what was agreed upon.
Requirements Apply to All Home Improvement Contracts Above $500
The Act’s contract requirements apply to all home improvement contracts “for a purchase price in excess of $500.” Almost any physical work on a home, no matter how minor or superficial it may seem, constitutes a “home improvement” that triggers the Act’s contract provisions if above that price. This includes:
The remodeling, altering, renovating, repairing, restoring, modernizing, moving, demolishing, or otherwise improving or modifying of the whole or any part of any residential or non-commercial property. Home improvement shall also include insulation installation, home elevation, and the conversion of existing commercial structures into residential or noncommercial property.
Required Contents of New Jersey Home Improvement Contracts
All home improvement contracts for more than $500, and any amendments or changes to the terms and conditions of the agreement, must be in writing and signed by the homeowner and the contractor. The contract must “clearly and accurately set forth in legible form and in understandable language all terms and conditions of the contract,” including but not limited to:
- The legal name, business address, contractor’s registration number, and the sales representative’s legal name and business address.
- A copy of the certificate of commercial general liability insurance for $500,000 per occurrence and the telephone number of the insurance agency issuing the certificate.
- A description of the work to be performed and principal products and materials to be used or installed.
- A statement of any guarantee or warranty concerning any product, material, labor, or service made by the home improvement seller.
- A description of any mortgage or security interest to be taken in connection with the financing or sale of the home improvement.
- The total price, including any finance charges.
The contract must also contain a notice advising the homeowner they have the right to cancel the contract and receive a full refund of any money paid if they cancel it by midnight of the third business day after receiving a copy of the agreement. The Act specifies that the notice must be in 10-point boldface type and read as follows:
YOU MAY CANCEL THIS CONTRACT AT ANY TIME BEFORE MIDNIGHT OF THE THIRD BUSINESS DAY AFTER RECEIVING A COPY OF THIS CONTRACT. IF YOU WISH TO CANCEL THIS CONTRACT, YOU MUST EITHER:
- SEND A SIGNED AND DATED WRITTEN NOTICE OF CANCELLATION BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED; OR
- PERSONALLY DELIVER A SIGNED AND DATED WRITTEN NOTICE OF CANCELLATION TO: (Name, Address, and phone number of contractor)
If you cancel this contract within the three-day period, you are entitled to a full refund of your money. Refunds must be made within 30 days of the contractor’s receipt of the cancellation notice.
A contractor who tenders a home improvement contract that does not comply with the Act’s requirements, or fails to tender a home improvement contract, may be subjected to a claim under the New Jersey Consumer Fraud Act. A non-compliant contract also threatens the contractor’s ability to be paid for their work. Any attempts to collect those amounts afford the homeowner an opportunity to bring a counterclaim under the CFA, which, if successful, can lead to an award of threefold the damages sustained by the homeowner as well as reasonable attorneys’ fees, filing fees, and reasonable costs of the suit.
Whether you are a New Jersey homeowner or contractor, understanding your legal rights and obligations can establish a solid foundation for a successful project. If you have any questions or concerns about home improvement contracts in New Jersey, please contact Seth Rosenstein or one of the residential real estate attorneys at Ansell, Grimm & Aaron.