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.
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
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
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
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
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
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.
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.
STATE OF NEW YORK
2011-2012 Regular Sessions
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-
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
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-
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.
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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.