NEW YORK LAW JOURNAL

Collecting Judgments Against

Home Improvement Contractors

By Bruce Feffer

Many homeowners, including owners of co-op and condominium units, rely on home improvement contractors when making alterations, renovations or repairs to their residences. Problems can arise however, when the contractor fails to perform or complete the agreed upon project or performs the work in a sub-standard way resulting in damage to the premises. The homeowner may be able to obtain a judgment or arbitration award for damages against the contractor, but in many cases the contractor is a sole corporation and by the time the judgment is awarded, the corporation's assets, if there ever were any, have "disappeared."

The New York City Department of Consumer Affairs, pursuant to 2-224 of the Rules of the City of New York, has established a Home Improvement Trust Fund to provide payment to aggrieved consumers unable to collect judgments against licensed home improvement contractors. The process of collecting from the fund is not simple and may take years to navigate successfully, but it is often the only recourse of homeowners holding uncollectible judgments.

The Home Improvement Trust Fund is maintained by contributions from licensed home improvement contractors, who may elect to pay $200 upon each renewal of their license in lieu of furnishing a $20,000 bond. Additional contributions may be required by the Commissioner of Consumer Affairs to prevent depletion of the fund. Contributions do not, however, relieve a home improvement contractor of any obligation to pay awards, fines or judgments rendered against the contractor by either the Department of Consumer Affairs or a court of competent jurisdiction.

The New York City Administrative Code Title 20, Subchapter 22, provides for the licensing of persons engaged in the home improvements, remodeling and repair business. "Home Improvements" is defined by the Code 20-386(2)) as "the construction, repair, replacement, remodeling, alteration, conversion, rehabilitation, renovation, modernization, improvement, or addition to any land or building, or that portion thereof, which is used or designed to be used as a residence or dwelling place ...."

A homeowner may be an owner of a private home, condominium unit owner, a tenant, "or any other person," including partnerships, corporations, companies, firms and trade groups and associations.

Prohibited Conduct

In addition to the language of the specific contract involved, which would ordinarily define conduct that constitutes a breach, certain conduct by home improvement contractors is prohibited by the Administrative Code. Such conduct, enumerated in 20-392 and 20-393 of the Code, includes "abandonment or willful failure to perform... or willful deviation from or disregard of plans or specifications in any material respect without the consent of the owner."

Various types of fraud, deception or misrepresentation also are included in the list of prohibited acts.

Once a consumer obtains a judgment against a contractor, the most logical first step is to pursue collection from the bank accounts or other assets belonging to the contractor, if such can be located. If this method is attempted with no or only partial success, the consumer may contact the Department of Consumer Affairs Complaint Division.

The consumer will be asked to provide a copy of the judgment, the contract on which it was obtained, the license number of the contractor, and any additional documentation showing that collection has been sought and that payment remains due.

Once a complaint is filed in this manner, the department will contact the contractor and if necessary conduct an administrative hearing to determine why the judgment has not been satisfied. If, after a hearing, the department finds in favor of the consumer (i.e. that the contractor has violated a law, ordinance or regulation, such as failing to perform services) the department may order the contractor to satisfy the judgment or award within 30 days.

If the contractor fails to do so, the department may then revoke the contractor's license and impose fines. Only after these steps have been completed, and there remains no satisfaction of the judgment, will the department invade the fund to pay both the amounts owed to the consumer as well as any fines owed to the department by the contractor.

In the event that a contractor's license is revoked, surrendered or not renewed, and the fund is invaded to pay an award, fine or judgment rendered against the contractor, the contractor will not be eligible for a new or reinstated license until the amounts paid out the fund are replenished in full by the contractor. Nor will a license be issued or reinstated to any home improvement business in which the contractor is an officer, shareholder, partner or principal, until such amounts are repaid.

Limitations

There do exist certain important limitations to this process.

Most importantly, perhaps is that disbursements are limited to no more than $20,000 for any award, fine or judgment arising from a single home improvement contract.

Secondly, disbursements from the fund are made at the discretion of the Commissioner of Consumer Affairs, and may only be sufficient to pay a portion of the debt owed.

Third, disbursements are not made to pay an award, fine or judgment rendered against a home improvement contractor who was never licensed by the department.

Finally, where a licensee posts a bond, in lieu of contributing to the fund, satisfaction of the award, fine or judgment will not be made from the fund.

In utilizing the services only of home improvement contractors licensed with the New York City Department of Consumer Affairs, consumers will arm themselves with an additional means of redress in cases where a contract is breached but judgment cannot be satisfied.

The Department of Consumer Affairs can be contacted to verify that the contractor is licensed, as well as to inquire about past or pending complaints against the contractor.

NEW YORK LAW JOURNAL
Wednesday, June 14, 1995