ASSEMBLY, No. 1923
STATE OF NEW JERSEY
INTRODUCED MAY 6, 1996
By Assemblyman COHEN and Assemblywoman FRISCIA
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 or the commissioner's designee.
"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, altering, repairing, modernizing, modifying, converting, improving, constructing, adding to, subtracting from, moving, wrecking, or demolishing of residential property and the making of additions thereto, including, but not limited to, the construction, installation, replacement, improvement, or repair of driveways, sidewalks, swimming pools, terraces, patios, fences, porches, decks, windows, doors, cabinets, kitchens, bathrooms, garages, basements, fire protection devices, alarm systems, central heating and air conditioning equipment, water heaters and purifiers, solar heating or water systems, aluminum and vinyl siding, wall-to-wall carpeting, or attached or inlaid floor coverings, carpentry, cesspool and septic tanks, masonry, roofing, and other improvements, changes or repairs to structures or upon land which is part of a residential property. Home improvement shall also include basement waterproofing, insulation installation, and the conversion of existing commercial structures into residential property, but shall not include the construction of a new residence.
"Home improvement contract" or "contract" means an agreement between a home improvement contractor and an owner for the performance of a home improvement costing $500 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 though others, home improvements. The term shall not include:
(1) 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.), provided that person does not offer to perform or perform home improvements;
(2) 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;
(3) any person licensed under the provisions of section 16 of P.L.1960, c.41 (C.17:16C-77); or
(4) 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.
"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 on 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 when the home improvement is completed and paid-in-full.
3. a. No home improvement contractor shall offer to perform home improvements or shall engage in the business of performing home improvements unless registered with the Department of Community Affairs in accordance with the provisions of this act.
b. 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 costs 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 addresses of all parties to the venture;
(4) if a corporation, the names and addresses of all officers;
(5) evidence of liability insurance and worker'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 worker'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.
c. In addition to the requirements set forth in subsection b. 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 under the authority of section 4 of P.L.1960, c.39 (C.56:8-4).
d. In addition to the requirements set forth in subsections b. and c. of this section, every applicant, officer, or partner, as the case may be, who, in accordance with the provisions of section 9 of this act, is required to participate in the Home Improvement Warranty Security Fund, shall, after the establishment of that fund, and in a manner prescribed by the commissioner, furnish proof of his participation in the fund or in an alternate home improvement warranty security program approved by the commissioner.
e. A person registered as a new home builder under the provisions of "The New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.) who offers to perform or performs home improvements shall register in accordance with the provisions of this act, but shall not be assessed any fee for his biennial registration as a home improvement contractor so long as he holds a valid certificate of registration as a new home builder.
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 the 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 or 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 owner has specified that certain types of products are to be used, a description of those products or materials shall be clearly set forth in the contract;
(3) The total price or other consideration to be paid by the owner, 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 the price shall be clearly stated;
(4) The dates on or time period 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;
(6) A statement setting forth any guarantee or warranty with respect to any products, materials, labor or services made by either the manufacturer of those products or materials or by the home improvement contractor; and
(7) If the home improvement requires a construction permit pursuant to the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:270-119 et seq.), a statement, provided by the commissioner, summarizing the "Home Improvement Warranty Security Fund" program.
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 owner for any reason at any time before midnight of the third business day after the owner receives a copy of it. In order to cancel a contract the owner shall notify the home improvement contractor of the 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 owner 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 owner and written notice of that cancellation shall be mailed to the owner 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. IF YOU WISH TO CANCEL THIS CONTRACT, YOU MUST EITHER:
1. SEND A SIGNED AND DATED WRITTEN NOTICE OF CANCELLATION BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED; OR
2. PERSONALLY DELIVER A SIGNED AND DATED WRITTEN NOTICE OF CANCELLATION TO:
(Name of Home Improvement Contractor)
(Address of Home Improvement 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."
7. a. The commissioner, after consultation with representatives from the National Association of the Remodeling Industry and the New Jersey Builders Association, shall promulgate rules and regulations establishing a home improvement warranty program. The warranty program 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 commissioner, after consultation with representatives from the National Association of the Remodeling Industry and the New Jersey Builders Association, shall also promulgate rules and regulations establishing procedures for the processing of claims against the "Home Improvement Warranty Security Fund" established pursuant to section 9 of this act. Only claims involving home improvements 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.) shall be covered by and be eligible for award payments from the fund. The rules and regulations shall be adopted, and may be amended or repealed, in accordance with the provisions of the "Administrative Procedure Act," P.L.1968. c.410 (C.52:14B-1 et seq.); except that a public hearing shall be required prior to the adoption, amendment, or repeal of any rule or regulation.
b. The time periods for the warranties established pursuant to this act are:
(1) One year from and after the warranty date, the home improvement shall be free from defects caused by faulty workmanship or defective materials due to noncompliance with the standards established by the commissioner;
(2) Two years from and after the warranty date, the home improvement shall be free from defects caused by faulty installation of plumbing, electrical, heating and cooling delivery systems; except 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 from and after the warranty date for major construction defects.
Notwithstanding the provisions of this subsection, an alternative program submitted for approval pursuant to section 10 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.
9. a. There is established a nonlapsing, revolving fund, to be known as the "Home Improvement Warranty Security Fund" to be maintained by the State 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 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.).
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 home improvement contractors who perform or offer to perform home improvements 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.) and the times those amounts shall be payable. The commissioner may, from time to time and as the experience of the fund may require, change the amounts payable by participating home improvement contractors.
A home improvement contractor who does not perform or offer to perform home improvements 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.) shall not be required to pay any moneys into the fund.
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, educate the public concerning the protections provided through the department for persons who contract for home improvements, 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 State Treasurer and shall be accounted for and credited by him to the fund.
c. Prior to making a claim against the fund for a defect covered by the 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:
(1) 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;
(2) Submit the claim to a conciliation procedure, established by the commissioner pursuant to rule and regulation;
(3) 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
(4) Render a decision on the claim.
The commissioner may assess reasonable hearing fees against the unsuccessful party.
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 to 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 to the owner by the State 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 may, as empowered under the provisions of section 11 of this act, 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.
d. 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 may, after public hearing and upon reasonable notice:
(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.
e. 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.
10. 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 fund.
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 fund 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 the provisions of section 9 of this act or to pay any amounts into that fund.
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 fund.
11. 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 subpoena 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. The commissioner may assess reasonable hearing fees against the unsuccessful party.
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 re-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 manner that violates 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 under the authority of 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;
(7) Willfully deviated from, or disregarded, contract specifications without the written consent of the owner; or
(8) Failed, after the establishment of the home improvement warrant security fund pursuant to section 9 of this act, to participate or continue to participate in that fund or in an approved alternative home improvement warranty security program, if so required under the provisions of this act, after receipt of due notice from the 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 denies, suspends, or revokes a home improvement contractor's certificate registration for a violation which
involves paragraph (2), (3), (7), or (8) of subsection b. of this section; or
(2) The commissioner, in the course of an investigation conducted under the provisions of this act, shall determine 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.).
The Attorney General may exercise the powers accorded by P.L.1960, c.39 (C.56:8-1 et seq.) in connection with any report filed under the provisions of this subsection.
12. Nothing in this act shall limit the rights and remedies otherwise available to an aggrieved owner. The owner shall have the right to pursue any remedy legally available; except that the initiation of procedures to enforce a remedy other than that established by this act shall constitute an election that shall bar the owner from the remedies available under this act, while the election of a remedy under this act shall bar the owner from all other remedies. Nothing contained in this section shall be deemed to limit an owner's right of appeal under the remedy so elected.
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 less than $500 nor more than $25,000 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.).
The 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. No municipality shall 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 shall establish and undertake a public information campaign to educate and inform home improvement contractors and the consumers of this State of the provisions of this act. This public information and education program shall include a toll-free public telephone information service within the Department of Community Affairs to answer questions from the public regarding contractor registrations.
16. The commissioner, after consultation with the Commissioner of Insurance, shall promulgate rules and regulations requiring insurers to disclose to the department all such information concerning the issuance, renewal, cancellation, nonrenewal and termination of the insurance required for registration as a home improvement contractor under the provisions of paragraph (5) of subsection a. of section 3 of this act as the commissioner shall deem necessary to enforce the provisions of this act.
17. 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.
18. This act shall take effect on the first day of the sixth month after enactment, except that sections 16 and 17 shall take effect immediately.
STATEMENT
This bill provides for the registration of home improvement contractors with the Department of Community Affairs. The bill also establishes the "Home Improvement Warranty Security Fund" to provide moneys to pay the claims of consumers against contractors for defects in certain types of home improvements. The bill specifies that only claims involving home improvements for which a construction code permit is required pursuant to the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.) are covered by and eligible for payments from the fund.
Under the provisions of the bill, every home improvement contractor doing business in the State must biennially register with the department and provide such personal and business information as the Commissioner of Community Affairs deems appropriate, including evidence of liability insurance and worker's compensation insurance. In addition, applicants for registration are required to affirm that they have read and understood the provisions of the bill, and have read and understood 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 under the authority of section 4 of P.L.1960, c.39 (C.56:8-4). Once the "Home Improvement Warranty Security Fund" is operational, applicants who perform or offer to perform, home improvements which require construction code permits also must provide proof that they are participating either in that fund or an alternate warranty security fund approved by the commissioner.
The bill specifies that all home improvement contracts, and amendments thereto, must be in writing and that the language used in the contract must be clear and understandable. Home improvement contracts are also required to include a description of the work to be done and the types of products to be used, the total price of the improvement, the date or time period when the work is to begin and be completed, any manufacturer's guarantees or warranties on the products used, a statement informing the consumer that he has the right to cancel a home improvement contract within three days of signing it without penalty, and, if the type of home improvement so requires it, information relating to the protections afforded the consumer under the "Home Improvement Warranty Security Fund."
The bill also sets forth certain prohibited and unlawful acts by home improvement contractors. Home improvement contractors who are not registered pursuant to the provisions of this bill are subject to fines of not less than $500 or more than $25,000 and those who are registered, and who violate the bill's provisions, may have their registration suspended or revoked. To further protect the consumers of this State, the commissioner is to file a report with the Attorney General whenever a home improvement contractor's registration is revoked or suspended for specific violations or for employing an unconscionable commercial practice. In such cases, the Attorney General is authorized to exercise the powers accorded him under the consumer fraud laws, P.L.1960, c.39 (C.56:8-1 et seq.).
The registration and warranty program established by the bill are designed to supersede all local registration, licensing and bonding requirements, except those relating to water, sewer, utility or land use. The bill also prohibits municipalities from issuing construction permits for any home improvement to a contractor who is not registered with the department.
In addition, the bill directs the commissioner to establish and undertake a public information campaign to educate consumers and home improvement contractors of their rights and responsibilities and requires the Department of Community Affairs to establish a toll-free telephone number to answer questions from the public regarding contractor registrations.
"Home Improvement Contractors' Registration and Warranty Act."