Home Improvement Contracts – Proposal to Eliminate Award of Attorney’s Fees for Technical Violations of the Act and Regulations

New Jersey Senate Bill S1769, sponsored by Senator Shirley K. Turner, proposes to eliminate the award of attorneys’ fees, filing fees and costs of suit for committing technical violations of the Consumer Fraud Act. It seems to me that this is an excellent idea. It would retain the awarding of treble damages and attorney’s fees where a consumer can show actual damages from the actions, or inactions of a home improvement contractor yet may reduce protracted litigation by consumers with little damage but no exposure to the expense of a lawsuit.

Currently, the Consumer Fraud Act and the Home Improvement Practices Act apply to any home improvement contractor performing almost any type of repair, alteration or addition to a residential building or property. The Consumer Fraud Act was established to protect consumers from fraud, misrepresentations and other acts of bad faith. As a way to punish reprehensible behavior, the law provides for the awarding of treble damages, attorneys fees and court costs to plaintiffs that show a contractor has violated the letter of the law, or the regulations, in preparing and performing a home improvement contract. The plaintiff is not required to show that the violation of the law caused him to be damaged.

The Contractors Registration Act, NJSA 56:8-136 et seq., requires all home improvement contractors to be registered with the State of New Jersey, Department of Consumer Affairs. Exclusions to this requirement are provided for some persons already licensed by the State such as: architects, engineers, surveyors, plumbers and electricians. Home improvement retailers with a net worth of $50 million, or more are also exempted from the registration requirement as are the builders of new homes who are registered under the New Home Warranty and Builders’ Registration Act.

The law requires that contractors must maintain general liability insurance in a minimum amount of $500,000 per occurrence and that the work may not begin until all required permits have been issued. The contractor must not accept final payment prior to obtaining certificates of approval or occupancy.

All home improvement contracts in excess of $500 must be in writing and written in plain, understandable language (and yes contractors, they must be legible). The customer may cancel the contract, by midnight of the third business day after receiving a copy of the copy, by notifying the contractor by certified mail or personal delivery.

The contracts and all changes to the contract terms and conditions must be signed by both parties, and must contain the following information:

Name and address of the contractor
Contractor’s Registration Number
A detailed description of the work
Total price to be paid, including payment terms and conditions
Starting and completion dates
Printed disclosure language per NJSA 56:8-151
Certificate of Insurance

Right now a home improvement contractor who failed to include one of these items on the contract, or made a change in the work – even one requested by the customer – without a written change order, could be required to pay the plaintiff’s attorney’s fees, even if the work was performed properly. This just doesn’t seem equitable to me.

I think that Sen. Turner’s proposal would be improved by defining the term “technical violation”. For example, which of these infractions could be considered technical violations?

Starting work before receiving a building permit;
Forgetting to put the Contractor’s Registration Number on the Contract
Failing to provide a certificate of insurance
Completing the project one week late

While the current bill still leaves some questions unanswered, I believe that if enacted into law it will serve to eliminate some frivolous lawsuits while adequately protecting the consumer. Bad contractors may have their licenses revoked and guilty contractors will still be subjected to treble damages. If the damages are high, it’s unlikely that they were caused by a technical violation of the rules. That’s when fee shifting seems warranted.

The author, Carl E. Peters is one of fewer than 10 people licensed by the State of New Jersey as a Professional Engineer, Professional Land Surveyor, Professional Planner, Construction Official, Building Subcode Official and Plumbing Subcode Official. He is also a Certified Municipal Engineer and Mediator and founder of Carl E. Peters, LLC