A00105 Summary:

BILL NOA00105
 
SAME ASNo same as
 
SPONSORCahill (MS)
 
COSPNSRPheffer
 
MLTSPNSR
 
Amd SS770, 772, 773 & 774, Gen Bus L
 
Enhances protections for homeowners who have paid contractors, subcontractors, and material suppliers for home improvements; enhances penalties, civil and criminal for violations of the consumer protection provisions of the Home Improvement Contracts article of the general business law; authorizes the attorney general to prosecute crimes under that article.
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A00105 Actions:

BILL NOA00105
 
01/05/2011referred to judiciary
01/04/2012referred to judiciary
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A00105 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A105
 
SPONSOR: Cahill (MS)
  TITLE OF BILL: An act to amend the general business law, in relation to home improvement contracts   PURPOSE: This bill addresses the continuing problems that are faced by consumers that hire unscrupulous contractors that improperly build new homes, construct home additions, or construct other home improve- ments to residential properties.   SUMMARY OF PROVISIONS: Section 1: Amends General Business Law section 770(7) to broaden the definition of "custom home" to include two family dwellings where the owner occupies one of the units of such duplex. Section 2: Amends General Business Law section 771(1)(d) to alter the term materialman so that such term is gender neutral. Section 3: Amends General Business Law section 772(1) to increase penal- ties from $500 to up to $2,000 for contractors who induce a consumer to enter into a home improvement contact that contains fraudulent represen- tations. In addition, contractors that commit a substantial violation would be subject to an additional penalty of up to $5,000. Section 4: Amends section 773 of the General Business Law to add progressively severe civil penalties for those unscrupulous contractors that repeatedly violate Article 36-A. It also increases the criminal penalties for the repeated violation of Article 36-A. Section 5: Amends General Business Law section 774(2) to authorize the Attorney General to prosecute any crime defined in section 773 of this chapter. Section 6: Amends section 2 of the Lien Law to make its terms gender neutral and to broaden the definition of "persons" to include limited liability companies. Section 7: Amends section 19 of the Lien Law to make an exception in the operation of the Lien Law. Section 8: Amends section 33 of the Lien Law to make an exception in the operation of the Lien Law. Section 9: Adds a new section 19-a to the Lien Law that revises the procedure on how liens may be filed by subcontractors and to hold harm- less home owners from liens filed by subcontractors when the homeowner has paid the contractor for work completed. Section 10: Amends section 54 of the Lien Law to ensure that a homeowner is protected from a subcontractor lien action when such homeowner has paid the contractor for the work that has been completed.   EXISTING LAW: This bill expands protections that are already given to homeowners that contract with unscrupulous contractors that do home construction projects.   JUSTIFICATION: Even with the laws that are on the books to protect consumers from the fraudulent activities perpetrated by illicit home construction contractors, there is still a significant amount of ques- tionable construction practices and activities that defraud consumers. In some situations, consumers have paid the contractor for work done, however, the contractor has not paid the subcontractors, consequently, the subcontractors file liens on the construction site property to recover funds from the property owner that has already paid for the work. The purpose of this bill is to encourage subcontractors to only enter into relationships with bona fide contractors that are able to pay for the work of a subcontractor or encourage the subcontractor to receive a formal guaranty in some form from the general contractor that they will receive money for the work they complete. Otherwise, the consumer is obligated to pay twice for the work. In certain circumstances, when a lien had been filed even though the consumer paid the contractor, the home construction must stop because the consumer does not have the addi- tional funds needed to complete the home. Should this occur, the consum- er is obligated to pay off the liens and often does not have sufficient funds to complete the house so that the consumer may be able to live in it. Most contractors are bona fide operations that perform the tasks asked of them in a way that satisfies the consumer. However, after contacting the Orange County and Ulster County District Attorney's Offices, it seems that there are a few unscrupulous contractors or persons who represent themselves as contractors who seem to perpetrate most of the fraudulent home construction cases. Many of these fraudulent home improvement contracts are entered into with senior citizens and the elderly. Further, several District Attorney's Offices have inquired about altering the law so that persons that routinely perpetrate fraudu- lent home construction projects can be made subject to heightened crimi- nal sanctions for their activities.   LEGISLATIVE HISTORY: 2009-2010 A599 Referred to Judiciary 2007-2008 A402 Referred to Judiciary 2005-2006 A3933 Referred to Judiciary 2003-2004 A8419 Referred to Judiciary   FISCAL IMPLICATIONS: None   LOCAL FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: This act shall take effect on the first of November next succeeding the date on which it shall have become a law.
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A00105 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                           105
 
                               2011-2012 Regular Sessions
 
                   IN ASSEMBLY
 
                                       (Prefiled)
 
                                     January 5, 2011
                                       ___________
 
        Introduced  by M. of A. CAHILL, PHEFFER -- read once and referred to the
          Committee on Judiciary
 
        AN ACT to amend the general business law, in relation to  home  improve-
          ment contracts
 
          The  People of the State of New York, represented in Senate and Assem-

        bly, do enact as follows:
 
     1    Section 1. Subdivision 7 of section 770 of the general  business  law,
     2  as  added  by  chapter  32  of  the  laws of 1989, is amended to read as
     3  follows:
     4    7. "Custom home" means a new single family residence  or  a  residence
     5  designed solely for occupancy of not more than two families living sepa-
     6  rately,  to  be constructed on premises owned of record by the purchaser
     7  at the time of contract[,]; provided that such residence is intended for
     8  residential occupancy by such purchaser [and the  contract  of  sale  is
     9  entered  into on or after the first day of March, nineteen hundred nine-
    10  ty].
    11    § 2. Subdivision 1 of section 772 of  the  general  business  law,  as

    12  added by chapter 421 of the laws of 1987, is amended to read as follows:
    13    1.  Any  owner  who  is induced to contract for a home improvement, in
    14  reliance on false or fraudulent written representations or false written
    15  statements, may sue and recover from such contractor a penalty of  [five
    16  hundred]  up to two thousand dollars plus reasonable attorney's fees, in
    17  addition to any damages sustained by the owner by reason of such  state-
    18  ments  or  representations.  Any owner who is aggrieved by a substantial
    19  violation, as defined in section seven  hundred  seventy-three  of  this
    20  article,  may  sue  and  recover from such contractor a penalty of up to
    21  five thousand dollars plus reasonable attorney's fees,  in  addition  to

    22  any  damages  sustained  by  the  owner  by  reason  of such substantial
    23  violation. In addition, if the court finds that the suit  by  the  owner
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD00774-01-1

        A. 105                              2
 
     1  was  without  arguable  legal  merit, it may award reasonable attorney's
     2  fees to the contractor.
     3    §  3.  Section  773 of the general business law, as amended by chapter
     4  587 of the laws of 1990, is amended to read as follows:
     5    § 773. Violations. 1. (a) Technical violations. Every home improvement
     6  contractor who violates any of the provisions of this article  shall  be

     7  subject to a civil penalty not to exceed one hundred dollars in the case
     8  of a first violation.
     9    (b)  For  a  second  violation  within a period of three years, a home
    10  improvement contractor shall be guilty of a violation and shall be fined
    11  two hundred fifty dollars.
    12    (c) For a third or subsequent  violation  within  a  period  of  three
    13  years, a home improvement contractor shall be guilty of a class B misde-
    14  meanor and shall be sentenced to a mandatory, definite term of imprison-
    15  ment of three months and may also be fined as provided in the penal law.
    16    2.  Substantial  violations. (a) Every home improvement contractor who
    17  fails to deposit funds in  an  escrow  account  or  provide  a  bond  or

    18  contract of indemnity or irrevocable letter of credit in compliance with
    19  the  requirements  of  section  seventy-one-a  of the lien law, [or] who
    20  fails to provide a written contract substantially in compliance with the
    21  requirements of this article, or who violates the provisions of  section
    22  seven  hundred  seventy-one-a  of  this  article shall, in the case of a
    23  first violation, be subject to a civil penalty not to exceed the greater
    24  of two hundred fifty dollars [for each violation] or five percent of the
    25  aggregate contract price specified in the  home  improvement  contract[;
    26  provided, however, that in no event shall the total penalty exceed twen-
    27  ty-five hundred dollars for each contract].

    28    (b)  For  a  second  violation  within a period of three years, a home
    29  improvement contractor shall be guilty of  a  class  A  misdemeanor  and
    30  shall  be sentenced to a mandatory, definite term of imprisonment of six
    31  months and may also be fined as provided in the penal law.
    32    (c) For a third or subsequent  violation  within  a  period  of  three
    33  years, a home improvement contractor shall be guilty of a class E felony
    34  and  shall be sentenced to a mandatory, definite term of imprisonment of
    35  one year and may also be fined as provided in the penal law.
    36    3. Mitigating factors; defenses. In an instance where  the  contractor
    37  has been shown to have committed [multiple violations] a first violation

    38  of  this  article or the provisions of section seventy-one-a of the lien
    39  law, the court shall consider the following factors in assessing a civil
    40  penalty pursuant to paragraph (a) of subdivision one or paragraph (a) of
    41  subdivision two of this section: the volume of business which  the  home
    42  improvement  contractor  performs  on  an  annual  basis, [the number of
    43  contracts in violation,] the actual financial loss or exposure to finan-
    44  cial loss suffered by [any] the owner as a result  of  the  [violations]
    45  violation,  and  whether  the  home improvement contractor acted in good
    46  faith or willfully with respect to such violations. No home  improvement
    47  contractor shall be subject to the increased penalties provided by para-

    48  graph (a) of subdivision two of this section if such contractor shows by
    49  a  preponderance  of the evidence that the violation was not intentional
    50  and resulted from a bona fide error made notwithstanding the maintenance
    51  of procedures reasonably adopted to avoid such a violation.
    52    § 4. Subdivision 2 of section 774 of  the  general  business  law,  as
    53  added  by chapter 421 of the laws of 1987, is amended and a new subdivi-
    54  sion 3 is added to read as follows:
    55    2. The civil provisions of this article may be  enforced  concurrently
    56  by  the  director of a municipal consumer affairs office, or by the town

        A. 105                              3
 
     1  attorney, city corporation counsel, or other lawful designee of a  muni-
     2  cipality  or local government, and all moneys collected thereunder shall

     3  be retained by such municipality or local government.
     4    3.  The  attorney  general is hereby authorized to prosecute any crime
     5  defined in section seven hundred seventy-three of this article.
     6    § 5. This act shall take effect on the first of November next succeed-
     7  ing the date on which it shall have become a law.
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