Monday, January 27, 2014

Fair Warning for New York Contractors


The state of New York doesn’t license construction contractors. But don’t be confused. Staying out of legal trouble in New York isn't simple. Here’s why:

Because construction contractors aren’t licensed by the state, New York cities and counties are free to do the licensing. And several do. For example, the City of New York licenses home improvement contractors. Nassau County, Rockland County and the City of Long Beach also license contractors.

New York courts cut no slack when enforcing these license laws. If you don’t have a license, it’s simple. You’re not going to collect a dime. Case closed. Courts won’t do anything to enforce agreements made by unlicensed contractors. Maybe worse, unlicensed contractors are subject to having their vehicles impounded. It happens.

Incidentally, all this could change. New York Assembly Bill 595, introduced January 8, 2014, would require home improvement contractors to be licensed state-wide. A similar bill died in the legislature last year. But this year, who knows?

More to the Point
But even in cities and counties where no license is required, New York State lays out an obstacle course for construction professionals.

Commercial work -- New York General Business Law § 756-a sets the standard for every contract. If you don't cover key points like payment date, validity of invoices, grounds for disapproving an invoice, grounds for stopping work or several other topics, § 756-a fills in the details, maybe not what you intended. To keep New York General Business Law § 756-a out of your contracts, make sure your agreements cover all the bases.

Residential work -- New York General Business Law § 771 lists what has to be in your contract:
(1) Your name, address, telephone number and license number, if applicable.
(2) The start date and the completion date.
(3) A list of subs and suppliers.
(4) Notices about trust accounts for subs and the right to cancel.
(5) A progress payment schedule.

New York courts take § 771 very seriously. The case of Carrea & Sons, Inc. v Hemmerdinger proves the point. Carrea, the contractor, wrote the contract. Hemmerdinger signed on the dotted line. But when it came time to collect, the homeowner had complaints and didn’t want to pay. Carrea sued. The court never got to hear Carrea explain that he did the work and deserved to be paid. Instead, the owner insisted that Carrea’s contract was illegal. There wasn’t a beginning date or a completion date. And two notices required by § 771 were omitted. That’s all the court needed to know. Case closed. The contractor collected nothing. The court’s November 24, 2013 decision should serve as a caution for all New York contractors. In the words of Judge Latwin:

It is always the contractor who prepares the contract. It is their business to do so. It is their obligation to prepare the contract in compliance with the law. If they fail to do so, it is the contractor who should bear the burden, not the homeowner . . . Enforcing the alleged contract would violate the very public policy considerations giving rise to the statute's enactment.

If you're serious about drafting perfectly legal construction contracts in New York or any other state, have a look at Construction Contract Writer. The trial version is free.

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