Home Improvement Contracts And New Jersey Consumer Protection
This business and consumer alert is designed to help home improvement contractors and consumers understand the guiding principles behind New Jersey’s very strict consumer protections. Understanding these guidelines protects both the home improvement professional and the consumer.
OVERVIEW OF THE NEW JERSEY CONSUMER FRAUD ACT
What does the law protect? It is designed to protect consumers against any unconscionable commercial practices, deception, fraud or falsity in connection with the sale or advertisement of any merchandise or real estate. Courts have not formally defined an “unconscionable commercial practice," but overstating the quality of a product, saying the product can do something it cannot, delaying for weeks or months in delivering a product or service or using inferior materials in the construction of a home improvement project might well violate the Act.
Who is a consumer? The Act does not define a consumer, but the New Jersey courts have said that they will look at three things to determine if someone is a consumer: (1) the quantity of the purchase (the smaller the purchase, the more likely it is a “consumer" purchase); (2) the intended use of the product purchased (personal or home products are more likely for “consumer" use than is a product purchased for resale); and (3) the sophistication of the injured party. A purchaser who is not in the business of regularly buying the particular product or service – such as home improvement services -- would not be considered “sophisticated" and would benefit by the Act.
What can a consumer recover? A consumer can recover three (3) times his damages and attorney fees if he goes to court and proves a violation. A consumer might even be able to recover attorney fees if he can prove a violation of the Act, but no damages.
The New Jersey Office of Consumer Protection… can help in smaller matters. Here is their website: http://www.njconsumeraffairs.gov/ocp/ (http://www.njconsumeraffairs.gov/ocp/) . They can tell a consumer if the merchant or contractor has had other complaints and can try to speak with the merchant or contractor is a dispute arises.
HOME IMPROVEMENT CONTRACTORS AND NEW JERSEY CONSUMER PROTECTION
Contractor Registration Act or CRA. The CRA supplements the Consumer Fraud Act (CFA) by specifically regulating home repair contractors. Any violation of the CRA becomes a violation of the CFA. Moreover, if a contractor knowing violates the CRA, he could be found guilty of a fourth degree crime.
Who is covered by the CRA? The CRA applies to anyone who offers to perform in the business of making or selling home improvements. The CRA defines “home improvement" at length to include the remodeling, altering, renovating, repairing, restoring, modernizing, moving, demolishing or otherwise improving or modifying of all or any part or a residential or non-commercial property. It includes insulation installation and the conversion of a commercial property to a residential or non-commercial property.
Note that the Home Improvement Practice Rules or HIP also regulate home improvement contractors and define “home improvement" in great detail. The HIP includes the CRA definition of home improvement but adds specificity by listing services such as painting, making additions, driveway construction, sidewalk construction, swimming pools, terraces, patios, landscaping, fences, porches, windows, doors, cabinets, kitchens, bathrooms, garages, basements, basement waterproofing, fire protection devices, central heating and air conditioning equipment, water softeners, heaters, purifiers, solar heating or water systems, insulation installation, siding, wall-to-wall carpeting, and inlaid floor covering, but not new residence construction.
What must a contractor do under the CRA? First, the contractor must register annually with the Division of Consumer Affairs or DCA, pay the registration fee, and update any information filed with the registration within 20 days of the information change.
What must a home improvement contract contain? The CRA and HIP combine to require that every home improvement contract for a purchase price in excess of $500 and any later amendments:
· Be in writing;
· Be signed by all parties; and
· State clearly, accurately, and legibly in language that is understandable, the terms of the contract, including, but not limited to:
o The contractor’s legal name, business address and registration number; it must also include the name of the sales representative or agent who solicited or negotiated the contract;
o A copy of the certificate of commercial general liability insurance required of a contractor under the CRA and the telephone number of the insurance company issuing the certificate;
o A description of the work to be done and the principal products and materials to be used or installed; the description should include the name, size, capacity, model and model year of the principal products and fixtures to be installed and the type, grade, quality, size and quantity of the principal building or construction materials to be used;
o Where specific representations that certain types of products will be used or the buyer has requested these, a clear description of such materials;
o The total price or other consideration to be paid by the consumer under the contract, including financing charges;
o If the contract is for time and materials, the hourly rate for labor and all other terms of the contract affecting price;
o The dates or time period on or within which the contracted work will start and finish;
o A description of any mortgage or security interest to be taken in connection with the financing or sale of the home improvement;
o A description of any guarantee or warranty on the products, materials, services or labor;
o Conspicuous notice of the following in 10-point bold face type: “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 ___________________(THE NAME, ADDRESS AND PHONE NUMBER OF THE 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;" and
o The toll free telephone number maintained by the Director of Consumer Affairs for consumers who wish to make inquiries regarding contractor.
The CRA applies to any New Jersey contractor who lists his name or his business’s name in any classified advertisement, card, directory or sign.
Who is not covered by the CRA? The CRA also lists entities that are not covered:
· Those who perform home improvement for themselves or for a property they own;
· Those who perform home improvement for a property a family member owns, for a charity or other non-profit organization;
· Any person regulated by New Jersey as an architect, professional engineer, landscape architect, land surveyor, electrical contractor, master plumber or any other person in a related profession requiring registration, certification or licensure; or
· A home improvement retailer with a net worth of more than $50,000,000.
Insurance. Under the CRA, the registered home improvement contractor must secure, maintain and file with the Director of Consumer Affairs proof of a certificate of commercial general liability insurance in a minimum amount of $500,000 per occurrence.
Registration Number. Once the contractor is registered, he will receive a registration number. This number must be listed at the contractor’s place of business, in advertisements within the state, on all business documents, contracts and correspondence on home improvement, and on all commercial vehicles used for the purpose of providing home improvement.
Other Violations of the CFA. The Home Improvement Practice Regulations or HIP list a number of acts which are automatic violations of the CFA. Below are some of the more critical ones for home improvement contractors:
· Misrepresenting that products or services need no periodic repainting, finishing, maintenance of other service; are a specific name brand or manufacturer product; are a specific size, weight, grade or quality; perform certain functions or are equal to the performance of other products or materials; are or will be custom built; or meet or exceed regulatory standards;
· Offering to sell certain products when the real purpose or effect of the offer is to bait or entice the customer into the purchase of higher priced substitute products;
· Substituting products for those specified in the home improvement contract or otherwise presented by sample, illustration or model without the knowledge or consent of the owner;
· Asking the customer to sign a certificate of completion or to make a final payment before the home improvement is completed in accordance with the contract;
· Failing to begin or complete work on the date or within the time specified in the contract unless the reason is for a labor stoppage, unavailability of supplies, unavoidable casualties or other cause beyond the contractor’s control; and
· Failing to give timely written notice to the customer of reasons for delay beyond the contractor’s control and the date when work will begin or be completed.