ASSEMBLY, No. 1028
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblymen DiGAETANO and KELLY
An Act concerning home improvement contractors and warranties, and supplementing Title 46 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be cited as the "Home Improvement Contractors Registration and Warranty Act."
2. As used in this act:
"Commissioner" means the Commissioner of Community Affairs.
"Department" means the Department of Community Affairs.
"Fund" means the Home Improvement Warranty Security Fund established pursuant to section 9 of this act.
"Home improvement" means the remodeling, construction, erecting, altering, renovating, repairing, restoring, re-roofing, re-siding, moving, demolishing, or otherwise improving or modifying of the whole or any part of any residential property and for which a construction permit is required pursuant to the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.).
"Home Improvement contract" or "contract" means an agreement between a home improvement contractor and a buyer who is the owner of a residential property for the performance of a home improvement costing $2500 or more. The contract shall be in writing and shall include, but not be limited to, a concise description of the home improvement to be performed and all labor, services, and materials to be rendered and furnished by the contractor.
"Home improvement contractor" or "contractor" means an individual, corporation, partnership, association, or other legal entity which offers to perform or performs, either directly or through others, home improvements pursuant to a home improvement contract. The term shall not include:
a. any person required to register pursuant to "The New Home Warranty and Builders' Registration Act." P.L.1977, c.467 (C.46:3B-1 et seq.);
b. any person performing a home improvement upon a residential property he owns, or that is owned by a member of his family, a charity, or other non-profit corporation;
c. any person regulated by the State as an architect, professional engineer, landscape architect, land surveyor, electrical contractor, master plumber, or any other person in any other related profession requiring registration, certification, or licensure by the State, who is acting within the scope of his profession.
d. any person who is contracted with to perform a home improvement upon residential rental property.
"Owner" means the person who owns the residential property and contracts with a contractor to perform a home improvement on that property, and his successors in title.
"Residential property" means that portion of any owner-occupied dwelling unit, planned real estate development, or cooperative and all structures appurtenant thereto, and any portion of the lot or site in which the structure is situated that is devoted to the residential use of the structure.
"Warranty" means a warranty prescribed by the commissioner as part of the warranty program established pursuant to section 7 of this act.
"Warranty date" means the date of issuance of a certificate of occupancy or certificate of approval for a home improvement by a code enforcement official pursuant to the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.).
3. A home improvement contractor shall not offer to perform home improvement or shall not engage in the business of performing home improvements unless registered with the Department of Community Affairs in accordance with the provisions of this act.
a. Every home improvement contractor doing business in the State shall biennially register with the commissioner. Application for registration shall be on a form provided by the department and shall be accompanied by a reasonable fee, set by the commissioner, in an amount sufficient to defray the department's cost of registering home improvement contractors; provided, however, that the initial registration fee assessed under the provisions of this act shall not exceed $200. Every applicant shall provide the following information:
(1) if an individual, the applicant's name and business address;
(2) if a partnership, the names and addresses of the general partners;
(3) if a joint venture, the names and address of all parties to the venture;
(4) if a corporation, the names and addresses of all officers;
(5) evidence of liability insurance and workmen's compensation insurance in an amount determined by the commissioner, except if the home improvement contractor qualifies as a self-insurer under Title 34 of the Revised Statutes or if he is precluded from purchasing workmen's compensation under chapter 15 of Title 34 of the Revised Statutes;
(6) disclosure of any recorded and unsatisfied judgments against the home improvement contractor; and
(7) such other information regarding the applicant and his home improvement business as the commissioner may deem appropriate.
b. In addition to the requirements set forth in subsection a. of this section, every applicant for registration, or an officer or partner of the firm applying for registration in the case of a partnership, joint venture, or corporation, shall submit to the commissioner an affidavit, sworn before a notary public that:
(1) the applicant, officer, or partner, as the case may be, has read and understands the provisions of this act; and
(2) the applicant, officer or partner, as the case may be, has read and understands the rules and regulations governing the practices of home improvement contractors promulgated by the Director of the Division of Consumer Affairs in the Department of Law and Public Safety pursuant to section 4 of P.L.1960, c.39 (C.56:8-4).
c. In addition to the requirements set forth in subsections a. and b. of this section, every applicant for registration, officer or partner, as the case may be, after the establishment of the home improvement warranty security fund in accordance with the provisions of section 9 of this act and in a manner prescribed by the commissioner, shall furnish proof of his participation in the fund or in an alternate home improvement warranty security program approved by the commissioner.
4. The commissioner shall issue a certificate of registration to each applicant who qualifies under this act. Each certificate shall have a registration number. A home improvement contractor shall conspicuously display his registration number wherever his company or business name is displayed. Upon the request of any customer or construction official, a home improvement contractor shall display his certificate of registration.
5. a. Every home improvement contract, and all changes in the terms and conditions of the contract, shall be in writing. The contract shall be signed by all parties thereto, and shall clearly and accurately set forth in legible form and in understandable language all terms and conditions of the contract, including, but not limited to:
(1) The legal name, business address, and registration number of the home improvement contractor;
(2) A description of the work to be completed by the home improvement contractor and the identification of the principal products and materials to be used of installed in the performance of the home improvement. Where specific representations are made that certain types of products or materials will be used, or the buyer has specified that certain types of products are to be used, a description of such products of materials shall be clearly set forth in the contract;
(3) The total price or other consideration to be paid by the buyer, including all finance charges. If the contract is for labor and materials, the hourly rate for labor and any other terms and conditions of the contract affecting price shall be clearly stated;
(4) The dates or time period on or within which the work is to begin and be completed by the home improvement contractor;
(5) A description of any mortgage or security interest to be taken in connection with the financing or sale of the home improvement; and
(6) A statement setting forth any guarantee or warranty with respect to any products, materials or by the home improvement contractor;
(7) If the home improvement so requires, a statement, provided by the commissioner, summarizing the "Home Improvement Warranty Security Fund" program; and
(8) A statement that warranty issuance and warranty performance obligations may not be related to or concurrent with the warranty date, and are conditioned upon the home improvement contractors' receipt of the full contract amount established in the home improvement contract.
b. In addition to the requirements set forth in subsection a. of this section, every written home improvement contract shall contain a conspicuous notice printed in 10-point bold faced type as follows:
"NOTICE TO CONSUMER
YOU ARE ENTITLED TO A COPY OF THIS CONTRACT WHEN YOU SIGN IT. KEEP IT TO PROTECT YOUR RIGHTS.
HOME IMPROVEMENT CONTRACTORS ARE REQUIRED BY LAW TO BE REGISTERED WITH THE NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS. IF YOU HAVE ANY QUESTIONS CONCERNING A CONTRACTOR, YOU MAY CALL (Insert telephone number)"
6. A home improvement contract may be cancelled by the buyer for any reason at any time before midnight of the third business day after the buyer receives a copy of it. In order to cancel a contract, the buyer shall notify the home improvement contractor of cancellation in writing, by registered or certified mail, return receipt requested, or by personal delivery to the address specified in the contract. All moneys paid pursuant to the cancelled contract shall be fully refunded within 30 days of receipt of the notice of cancellation. If the buyer has executed any credit or loan agreement through the home improvement contractor to pay all or part of the contract, the agreement or note shall be cancelled without penalty to the buyer and written notice of that cancellation shall be mailed to the buyer within 30 days of receipt of the notice of cancellation. The contract shall contain a conspicuous notice printed in at least 10-point bold faced type as follows:
"NOTICE TO CONSUMER
YOU MAY CANCEL THIS CONTRACT AT ANY TIME BEFORE MIDNIGHT OF THE THIRD BUSINESS DAY AFTER RECEIVING A COPY OF THIS CONTRACT. SEE ATTACHED CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT."
The commissioner shall, by rule and regulation, prescribe the structure and contents of the cancellation notice form required to be attached to each contract under the provisions of this section.
Any contract that does not have a cancellation notice form attached to it, as required under the provisions of this section, shall be void and unenforceable.
7. a. The commissioner, in consultation with representatives from the New Jersey Builders Association, shall promulgate rules and regulations establishing a home improvement warranty program and the procedures for the processing of claims against the "Home Improvement Warranty Security Fund" established pursuant to section 9 of this act. The warranty program is mandatory for home improvement contracts of $5000 or more and shall include standards for home improvements and for the quality of the elements and components of home improvements with guidelines, where appropriate, of what degree of noncompliance with those standards shall constitute a defect. The regulations shall be promulgated in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.); provided, however, that a public hearing shall be required prior to the adoption, amendment, or repeal of any rule or regulation so promulgated.
b. The time periods for the warranties established pursuant to this act are:
(1) One year after the warranty date, the home improvement shall be free from defects caused by faulty workmanship of defective materials due to noncompliance with the standards established by the commissioner;
(2) Two years after the warranty date, the home improvement shall be free from defects caused by faulty installation of plumbing, electrical, heating and cooling delivery systems; provided, however, that in the case of an appliance, no warranty shall exceed the length and scope of the warranty offered by the manufacturer of that appliance; and
(3) Five years after the warranty date the home improvement shall be free from major construction defects.
Notwithstanding the provisions of this subsection, an alternative program submitted for approval pursuant to section 11 of this act may contain warranties and time periods which are more inclusive and of greater duration than those set forth in paragraphs (1), (2) and (3) of this subsection.
8. During the applicable term of a home improvement warranty, the contractor shall be liable to the owner for any defect covered under the terms and conditions of that warranty. The liability of a home improvement contractor under this section shall not exceed the total cost of the home improvement as set forth in the contract between the owner and the contractor and in the warranty insurance policy.
9. a. There is established a nonlapsing, revolving fund to be known as the "Home Improvement Warranty Security Fund," to be maintained by the Treasurer and administered by the commissioner. The purpose of the fund is to provide moneys sufficient to pay claims by owners against home improvement contractors participating in the fund for defects in home improvements covered by the home improvement warranty.
b. On or after the first day of the 13th month immediately following the issuance of the first certificates of registration pursuant to section 4 of this act, the commissioner shall establish the amounts payable to the fund by participating home improvement contractors and a schedule of dates upon which those amounts shall be payable. The commissioner, from time to time and as the experience of the fund may require, may change the amounts payable by participating home improvement contractors.
The amount so established by the commissioner, together with any other amounts that may accrue as interest or which otherwise may be made available or credited to the fund, shall be sufficient to cover the costs of anticipated claims, provide a reasonable reserve, and defray the costs of administering the fund. The amounts paid by participating home improvement contractors shall be forwarded to the Treasurer and shall be accounted for and credited by him to the fund.
10. Prior to making a claim against the fund for a defect covered by warranty, the owner shall notify the home improvement contractor of the defect. If the contractor fails to remedy the defect within a reasonable time period, as the commissioner shall by rule and regulation prescribe, the owner may file a claim against the fund in the form and manner prescribed by the commissioner.
The commissioner shall review each claim to determine its validity. In the case of a valid claim, the commissioner shall:
a. Hold a hearing in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) applicable to contested cases, if requested by either party;
b. Submit the claim to a conciliation procedure, established by the commissioner pursuant to rule and regulation;
c. Submit the claim to an arbitration procedure, established by the commissioner pursuant to rule and regulation, if conciliation fails and the owner so requests; or
d. Render a decision on the claim.
The commissioner may assess reasonable hearing fees against an unsuccessful party in a claim decision.
Either party may, in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), appeal a decision rendered by the commissioner.
If a home improvement contractor is unable or unwilling to remedy any defect or incompletion identified in any conciliation, arbitration, or commissioner's decision, an award shall be paid the owner from the fund. The amount of the award shall be sufficient to cover the reasonable costs of remedying the defect or incompletion, but shall not exceed the total cost of the home improvement set forth in the contract. The award shall be paid the owner by the Treasurer upon certification by the commissioner.
In the case of a home improvement contractor who is unable or unwilling to remedy a defect or incompletion, the commissioner, as empowered under the provisions of section 12 of this act, may proceed to deny, suspend, or revoke that home improvement contractor's certificate of registration and, if appropriate, file a report thereon with the Attorney General.
e. If, at any time, the moneys available in the fund are insufficient to satisfy any outstanding awards and any anticipated awards for the succeeding year:
(1) the commissioner, after public hearing and upon reasonable notice, may:
(a) schedule award payments and establish a maximum amount that may be paid on any one claim; or
(b) require the participating home improvement contractors to pay an additional amount into the fund.
(2) The commissioner may also provide for:
(a) The assessment of surcharges against participating home improvement contractors who are responsible for awards against the fund;
(b) The initiation of an action in a court of competent jurisdiction for the reimbursement of awards paid from the fund by a home improvement contractor who was unable or unwilling to remedy a defect or incompletion; and
(c) The termination, after notice and hearing, of participation in the fund of a home improvement contractor who is responsible for a disproportionate number of awards paid from the fund.
f. The State shall have no obligation to contribute or otherwise make available to the fund any moneys from the General Fund and the State shall have no liability to any person having a claim against the fund, but which may be unpayable due to an insufficiency of moneys available therein.
g. The filing of a claim against the warranty specified by this act shall constitute the election of a remedy and shall bar the owner from all other remedies. Nothing herein shall be deemed to limit an owner's right to elect remedies other than the warranty provided for under this act, except that such an election shall bar the owner from pursuing the same claim under the warranty provided for in this act. For the purposes of this subsection, "election of other remedies" shall mean the filing in any court of a complaint, counter-claim, cross-claim or third party complaint that alleges: (1) matters covered by the warranty in particular or (2) substandard construction in general.
11. The commissioner may approve an alternative home improvement warranty security program that provides for payments of claims against participating home improvement contractors for defects subject to warranty and that is sufficiently funded to adequately cover the claims that may be reasonably anticipated to be filed against the participating contractors. The coverage afforded under an alternate program shall be at least equivalent to that offered under the home improvement warranty security fund established pursuant to section 9 of this act.
Any person seeking approval of an alternate home improvement warranty security program shall apply to the commissioner. The application shall be in a manner and form, and contain such information, as the commissioner may prescribe. An application fee, sufficient to cover the costs incurred by the department in reviewing such applications, shall be established by the commissioner. The commissioner shall review each application and may conduct such investigations as he deems necessary. The commissioner may, and if an applicant so requests, shall hold a hearing on an application.
If the commissioner determines that the proposed alternate home improvement warranty security program provides coverage equivalent to that afforded under the home improvement warranty security fund established pursuant to section 9 of this act and is adequately funded, he shall approve the alternate program.
A home improvement contractor who participates in an approved alternate home improvement warranty security program shall not be required to participate in the "Home Improvement Warranty Security Fund" established under section 9 of this act or to pay amounts into that fund. The election of remedies provisions under subsection g. of section 10 of this act shall also apply to alternate home improvement warranty security programs.
From time to time, the commissioner shall review each approved alternate home improvement warranty security program. If, in the course of his review, the commissioner shall determine that the program no longer provides equivalent coverage or is insufficiently funded, he may, after notice and hearing, revoke or suspend approval of the alternate program and require the affected contractors to participate in the home improvement warranty security fund established pursuant to section 9 of this act.
12. a. The commissioner, upon the complaint of an aggrieved person, may conduct investigations into the allegations made against any home improvement contractor required to be registered under the provisions of this act. In pursuit of his investigations, the commissioner is authorized to hold hearings, in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) applicable to contested cases; to subpeona witnesses and compel their attendance; to require the production of papers, records, or documents; to administer oaths or affirmations to witnesses; to inspect such relevant books, papers, records, or documents of the home improvement contractor at that contractor's place of business during normal business hours; and to conduct inspections of the home improvement work performed.
b. The commissioner may deny, suspend, or revoke any certificate of registration, subject to affording the registrant or applicant the opportunity for a hearing and appeals therefrom in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) applicable to contested cases, if the registrant or applicant has:
(1) Willfully made a misstatement of a material fact in an application for registration or renewal of registration;
(2) Conducted a home improvement business in any name other than the one for which the contractor holds a certificate of registration;
(3) Practiced the occupation of home improvement contracting in a manner that violates the rules governing the practices of home improvement contractors promulgated by the Director of the Division of Consumer Affairs in the Department of Law and Public Safety pursuant to section 4 of P.L.1960, c.39 (C.56:8-4);
(4) Knowingly violated any applicable building code provisions to a substantial degree;
(5) Failed to comply with any provisions of this act or the rules adopted pursuant thereto, after due notice from the commissioner, sent by certified mail;
(6) Abandoned or failed to perform, without justification, any home improvement contract; or
(7) Willfully deviated from, or disregarded, contract specifications without the written consent of the buyer.
(8) Failed, after the establishment of the Home Improvement Warranty Fund pursuant to section 9 of this act, to participate or continue to participate in that fund or in an approved alternate home improvement warranty security program, after receipt of due notice from commissioner, sent by certified mail.
c. To further protect the consumers of this State, the commissioner shall file a report with the Attorney General whenever:
(1) The commissioner shall deny, suspend, or revoke a home improvement contractor's certificate registration for a violation which involves paragraph (2), (3), (7), or (8) of subsection b. of this section;
(2) The commissioner shall receive complaints from five or more aggrieved persons against a home improvement contractor in any six month period; or
(3) The commissioner, in the course of an investigation conducted under the provisions of this act, has determined that the home improvement contractor may have used or employed an unconscionable commercial practice which may constitute an unlawful practice under the provisions of P.L.1960, c.39 (C.56:8-1 et seq.).
In connection with any report filed under the provisions of this subsection, the Attorney General may exercise the powers accorded by P.L.1960, c.39 (C.56:8-1 et seq.).
13. Any home improvement contractor who fails to register in accordance with the provisions of this act, or who offers to perform or performs home improvements without registering in accordance with the provisions of this act or during a period when his registration is suspended or revoked by the commissioner, shall be subject to a penalty of not more than $2,000 for each offense. The penalty shall be enforced and collected by the commissioner in the name of the State in summary proceedings in accordance with the "penalty enforcement law" (N.J.S.2A:58-1 et seq.).
Any penalties collected pursuant to the provisions of this section shall be used exclusively by the department to administer and enforce the provisions of this act.
14. a. This act shall supersede any municipal ordinance or regulation that provides for the licensing or registration of home improvement contractors or for the protection of homeowners by bonds or warranties required to be provided by home improvement contractors, exclusive of those required by water, sewer, utility, or land use ordinances or regulations.
b. A municipality shall not issue a construction permit for any home improvement to any home improvement contractor who is not registered pursuant to the provisions of this act.
15. The commissioner, pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), shall promulgate rules and regulations to effectuate the purposes of this act.
16. This act shall take effect on the first day of the sixth month after enactment, except that section 15 shall take effect immediately.
STATEMENT
This bill establishes a Home Improvement Contractors Registration and Warranty program within the Department of Community Affairs. Similar to "The New Home Warranty and Builders' Registration Act" created by P.L.1977, c.7, this bill would require contractors who are doing home improvements to register with the Commissioner of the Department of Community Affairs. In addition to registering, each home improvement contractor would be required to participate in the home improvement warranty security fund established under the bill, or to participate in an alternate home improvement warranty security program approved by the commissioner. Home improvement is defined under the bill to mean the remodeling, construction, erecting, altering, renovating, repairing, restoring, re-roofing, re-siding, moving, demolishing, or otherwise improving or modifying of the whole or any part of any residential property for which a construction permit is required pursuant to the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.).
Home improvement contracts would be required to be in writing and to contain information regarding the registration required by the bill, and the three day right of rescission available to consumers entering into contracts in New Jersey.
Home improvements performed under contracts covered by the bill would be required to be free from defects 1) caused by faulty workmanship of defective materials due to noncompliance with the standards established by the commissioner for at least one year after the warranty date, and 2) caused by faulty installation of plumbing, electrical, heating and cooling delivery systems for at least two years after the warranty date. In addition, the home improvement must be free from major construction defects for five years after the warranty date.
The Commissioner of the Department of Community Affairs must establish guidelines as to what constitutes a home improvement defect and the procedures for making a claim against the warranty fund established by the bill. The commissioner may also approve an alternate home improvement warranty security program that is sufficiently funded to cover claims that may be reasonably anticipated by participating contractors.
The commissioner is empowered under the bill to revoke, deny or suspend a contractor's registration certificate based upon negative contract experience of that contractor. A contractor who fails to register with the commissioner will be subject to a penalty of up to $2,000, to be collected pursuant to the "penalty enforcement law," (N.J.S.2A:58-1 et seq.).
The "Home Improvement Contractors Registration and Warranty Act."