WHY ALL HOME IMPROVEMENT CONTRACTORS NEED TO BE LICENSED: SOME USEFUL INFORMATION FOR CONTRACTORS AND THEIR CLIENTS

WHY ALL HOME IMPROVEMENT CONTRACTORS NEED TO BE LICENSED: SOME USEFUL INFORMATION FOR CONTRACTORS AND THEIR CLIENTS

Each year, residents and property owners in metropolitan New York spend more than a billion dollars on home improvements. Work ranging from the remodeling of a bathroom or kitchen to the repair of a leaky roof to the million dollar “gut” rehabilitation adds pride and vitality to our neighborhoods. The purpose of this pamphlet is to provide some vital information about the home improvement business which every contractor, subcontractor and consumer should be aware of the requirement that the contractor and subcontractor be licensed by the department of consumer affairs or other licensing authority covering the geographical area in which the contractor or subcontractor works. The license requirement is often overlooked and can result in the contractor’s or subcontractor’s inability to obtain compensation for its work, as well as the imposition of severe civil penalties and criminal liability.

DO I NEED TO BE LICENSED TO BE A HOME IMPROVEMENT CONTRACTOR?

If you engage in the following activities you need a home improvement contractor’s license: Construction, repair, remodeling, renovation, modernization, improvement or addition to any land or building used as a private residence, apartment (rental, cooperative or condominium) or dwelling place. This can include the construction, erection, replacement or improvement of driveways, swimming pools, terraces, patios, landscaping, fences, porches, garages, and storm windows. Some counties and municipalities also include interior and exterior painting in their definition of “home improvement.”

In most counties and municipalities, the construction of a new home is not considered a “home improvement.” In many counties and municipalities, there is an exemption from the licensing requirement when work is performed on structures containing more than 3 or 4 units, so long as the work is not contracted for by the unit owner or occupant.

If you are not certain whether the activities you are contemplating fall under the category of “home improvement,” contact the appropriate licensing authority set forth in the list on page 4 for more information, as each county and municipality has a different definition of “home improvement.”

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WHAT HAPPENS IF I’M NOT LICENSED?

YOU ARE NOT ENTITLED TO COMPENSATION FOR YOUR SERVICES. The law in the State of New York is that you cannot enforce your contract against the owner, nor seek the reasonable value of the services rendered, if you are not licensed. You must have the license when you perform your work and when you commence a lawsuit to recover monies due for your work. The Courts have held that it is irrelevant whether an owner knows you are not licensed prior to entering into the contract.

YOU ARE SUBJECT TO CIVIL AND CRIMINAL PENALTIES. It is a Class A misdemeanor in many counties and municipalities to engage in “home improvement” without a license. Fines can range from $500. to $5,000. for each offense, and civil penalties can be $100. per day. Imprisonment is also authorized under many statutes. Moreover, in New York City, a vehicle which is believed to be used in connection with unlicensed home improvement activity may be seized, and some have been seized by the New York City Department of Consumer Affairs.

HOW DO I GET A LICENSE?

The list at page 4 gives you the address and telephone number of the Department of Consumer Affairs or other licensing authority from which you may obtain further information and an application for a license. The fees and effective period for the license varies in each county or municipality and are listed in the chart at page 5. The chart will also give you general information regarding whether you will need to take a test, and have educational or practical experience in construction, in order to qualify for a license. For more specific information, contact the department or licensing authority directly.

I ALREADY HAVE A LICENSE, DOES MY COMPANY NEED ONE?

Generally, yes. It depends upon who contracted (or will be contracting) to perform the work. The person or entity who contracts to perform the home improvement work must be licensed. For example, if a contractor is a corporation, the possession of a license by one of its officers will not suffice. If, on the other hand, an individual is doing business under an assumed name, the license must be in the individual’s name. Some counties allow you to assign your license, however, there are restrictions as to whom you may assign the license and you must obtain approval from the licensing authority.

Generally, both contractors and salespeople must be licensed. A salesperson is generally one who sells goods or services pursuant to a home improvement contract in a representative capacity.

I’M ONLY A SUBCONTRACTOR, DO I NEED TO BE LICENSED?

Yes. Most county and municipal statutes specifically state that both contractors and subcontractors must be licensed. Moreover, without a license, a subcontractor will forfeit its mechanic’s lien rights (however the subcontractor can generally seek recovery from the contractor). Employees of a contractor do not have to be licensed.

AS A SUBCONTRACTOR, DO I NEED TO WORRY ABOUT WHETHER THE GENERAL CONTRACTOR IS LICENSED?

Yes. Where a subcontractor works for a general contractor who is not licensed, but is required to be, both the general contractor and subcontractor will likely forfeit their mechanic’s lien rights and/or any recovery from the homeowner. In that event, the subcontractor would have to look solely to the general contractor for payment.

WHAT OTHER OBLIGATIONS DO I HAVE AS A HOME IMPROVEMENT CONTRACTOR?

Article 36 A of the General Business Law requires that every contract for home improvement involving an aggregate price of $500. or more, must be in writing, and include provisions such as a description of the work to be performed, notice to the owner of the possibility that a lien may be filed against the property for unpaid claims, that the contractor is required to deposit all payments received prior to completion in accordance with subdivision 4 of section 71 a of the Lien Law and that in lieu of such deposit, the contractor may post a bond, or provide a contract of indemnity or letter of credit to the owner guaranteeing the return or proper application of the owner’s payments to the purposes of the contract.

WHAT OBLIGATIONS DOES A HOME IMPROVEMENT CONTRACTOR HAVE UNDER SUBDIVISION 4 OF SECTION 71 a OF THE LIEN LAW?

You must deposit any payments received from the owner prior to substantial completion of the work under the contract, into an escrow account within five (5) business days after receipt. Unless the contract specifies the name of the financial institution where the funds will be placed, no later than ten (10) business days after the deposit has been made, you must advise the owner in writing of the name of the financial institution where the funds have been placed. In lieu of making the deposit into an escrow account, you may post with the owner a bond, contract of indemnity or irrevocable letter of credit, guaranteeing the return of the payments or proper application of the payments to the purposes of the contract. This subdivision does not apply to contracts which provide that you will be paid on a specified hourly or time basis for work that has been performed or for charges for materials that have been supplied prior to the time that payment is due.

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NEW YORK CITY
        Department of Consumer Affairs
        42 Broadway
        New York, New York 10004
        (212) 487-4379
 
NASSAU COUNTY
        Department of Consumer Affairs
        160 Old Country Road
        Mineola, New York 11501
        (516) 571-3871
 
SUFFOLK COUNTY
        County Executive's Office of Citizen Affairs
        North County Complex, Bldg. 340
        Hauppauge, New York 11788
        (516) 853-4600
 
WESTCHESTER COUNTY
        Department of Consumer Protection
        Licensing Division
        112 East Post Road, 4th Floor
        White Plains, New York 10601
        (914) 285-2211
 
ROCKLAND COUNTY
        Office of Consumer Protection
        18 New Hempstead Road
        New City, New York 10956
        (914) 638-5280
 
CITY OF YONKERS
        Department of Community Services
        Office of Consumer Protection
        Commerce Community Center
        201 Palisade Avenue
        Yonkers, New York 10703-3197
        (914) 377-6807
 
CITY OF LONG BEACH
        City Clerk's Office
        City Hall
        One West Chester Street
        Long Beach, New York 11561
        (516) 431-1000
            

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