Educational Consumer Tips

Home Improvement Contracts -- NYS Law

Author: Better Business Bureau

State law regulates the sale of home improvement goods and services and applies to most types of improvements costing more than $500 where a deposit is given by homeowners, co-op owners and tenants. Here are some important provisions of the law:

1) Any schedule of progress payments agreed to in the contract must bear a reasonable relationship to the work done, materials purchased or other project-related costs. 

2) Any contract payments received by a contractor from a customer prior to the substantial completion of the job must be put into a trust or escrow account in a New York State bank within 5 business days and the customer must be notified where the money is being held within 10 business days. The contractor can withdraw the deposit only under these circumstances: a) under the terms of the payment schedule agreed on by the contractor and customers. b) upon substantial completion of the job c) if the customer violates the contract, but only to the extent that the amount covers the contractor's cost. 

3) As an alternative to the progress payments arrangement, the contractor must deliver a "bond" or "contract of indemnity" to the customer, guaranteeing the customer's money will be properly used or returned. The bond must be delivered within 10 business days after the contractor receives the customer's money. 

4) Home improvement contracts must be in writing, legible and in plain English. A copy of the contract must be given to the customer before any work begins. The contract must contain: a) the contractor's name, address and telephone number. b) the approximate start and completion dates, including any contingencies which would change the completion date. c) a specific description of the work and materials, including brands, model numbers or other identifying information along with the price. d) and the following notice: "The customer has an unconditional right to cancel until midnight of the third business day after the contract was signed. Cancellation must be done in writing. The Contractor is legally required to deposit all progress payments received prior to completion in an escrow account or to post a bond to protect these payments. If the contractor or subcontractor who does the work is not paid he may have a claim against the customer's property under the Lien Law." 

5) A customer may sue for actual damages, plus a $500 penalty and reasonable attorneys' fees if the contractor has used fraudulent written statements to get the customer to sign the contract. The Attorney General is also authorized to go to court to stop illegal practices and order contractors to compensate dissatisfied or defrauded customers. Contractors can also face $100 civil fines for violating the law and fines from $250 to $2500 for violating provisions of the law dealing with the protection of the customer's payments. 

6) The contractor must also continue to comply with any local licensing laws. The information contained in this guide was created in conjunction with the New York State Attorney General's Office. For additional information on the law you may contact them at 1-800-771-7755. 

For more information, contact: 

Better Business Bureau 
100 Bryant Woods South, Amherst, NY 14228
(800) 828-5000

This report is general in nature and is not intended as a Business Review on any company, service or product.