What Pennsylvania Contractors ABSOLUTELY NEED TO KNOW Before Doing Residential Home Improvement Work in New Jersey
As a Pennsylvania contractor performing services in New Jersey, it’s crucial to understand the differences between New Jersey’s and Pennsylvania’s state laws concerning home improvement work. New Jersey has specific regulations and consumer protection laws that not only differ from Pennsylvania’s laws, but are much more consumer friendly in many ways and can be devastating for Pennsylvania contractors who are caught unaware. Here’s what you need to know:
1. New Jersey Consumer Fraud Act
The New Jersey Consumer Fraud Act (CFA) offers some of the strongest protections to consumers in the entire nation. Under this law, contractors are prohibited from engaging in fraud, misrepresentation, or misleading advertising.
Key Differences from Pennsylvania Laws
While Pennsylvania has its own Unfair Trade Practices and Consumer Protection Law, which serves a similar purpose, the New Jersey CFA is much broader in scope. For example, the CFA applies not only to direct consumer transactions but also covers advertising and promotional activities. This means that contractors need to be particularly diligent about their marketing practices to avoid potential legal pitfalls in New Jersey.
Perhaps even more importantly, a contractor may be found liable for consumer fraud in New Jersey even if they make a misrepresentation unintentionally. A contractor can be found guilty of consumer fraud for a simple wrong statement, if it is material to the transaction. It does not matter whether the misrepresentation was intentional, or simply a mistake. In other words, intent to deceive is not essential in order for a homeowner to win a consumer fraud lawsuit against a contractor in New Jersey.
Additionally, the homeowner does not actually have to be deceived in order to win a consumer fraud action. This means that even if the homeowner knew you were wrong when you made a statement to them, they can still sue you and win after the project is complete.
If you think that is unfair, it this next part may seem too strict to be true. But I assure you it is.
If you are found liable for violating the New Jersey Consumer Fraud Act, you will have to pay three-times the actual damages caused. Not only that, you will also be forced to pay not only your own attorney’s fees, but you will also need to pay the homeowner’s attorney’s fees. For these reasons, even very small mistakes can lead to disproportionately high judgments. For example, an accidental misrepresentation which caused only $2,000 in damages, has resulted in a judgment against a contractor for $6,000 in compensable damages, AND over $20,000 in attorney’s fees which the contractor had to pay on behalf of the homeowner. That does not include whatever fees the contractor had to pay their own lawyer!
In short, it is extremely important that you know what you are doing if you plan to perform any home improvement work in New Jersey. Otherwise, a small mistake can lead to a fatal lawsuit for your company.
2. Home Improvement Practices Regulations
New Jersey’s Home Improvement Practices Regulations impose specific requirements on contractors engaged in home improvement projects. Any violation of these Regulations is also mandatorily considered a violation of the New Jersey Consumer Fraud Act. So these regulations must be strictly adhered to, and taken seriously.
Contract Requirements
Under these regulations, contractors must include several key elements in their contracts when working on home improvement projects, including but not limited to:
- Contractor Information: Full name, address, and registration number of the contractor.
- Description of Work: A clear and detailed description of the work to be performed.
- Cost and Payment Terms: Total cost, including any deposits and payment schedule.
- Timeline: An estimated start and completion date for the project.
- Warranties: Information about any warranties on labor and materials.
- Cancellation Rights: Homeowners must be informed of their rights to cancel the contract within three business days, using very specific language as outlined in the statute.
Note that some of the above information must also be included on all invoices and other communications between the contractor and the homeowner.
Failing to follow these regulations can expose you to liability (for violating the New Jersey Consumer Fraud Act), loss of New Jersey contractor’s license, and consumer complaints, so ensure that your contracts comply with these requirements.
3. Contractor Registration Act
New Jersey’s Contractor Registration Act mandates that any contractor performing home improvement work for compensation must register with the state. This registration is essential for legal compliance and consumer protection. Again, any violation of this act is also considered a violation of the New Jersey Consumer Fraud Act.
Registration Requirements
To register, contractors must:
- Submit an Application: Complete and submit the registration application to the New Jersey Division of Consumer Affairs.
- Provide Documentation: Include proof of liability insurance and a valid tax identification number.
- Pay Fees: Pay the applicable registration fees.
- Pass Background Checks: Contractors may be subject to background checks to ensure they meet the state’s standards.
Registration is crucial for contractors to work legally in New Jersey.
4. Understanding the Importance of Compliance
Operating in New Jersey as a contractor requires a solid understanding of state laws and regulations. Non-compliance with the New Jersey Consumer Fraud Act, Home Improvement Practices Regulations, or Contractor Registration Act can result in significant penalties, including fines and incredibly high judgments.
Recommendations for Pennsylvania Contractors
- Educate Yourself: Familiarize yourself with New Jersey laws and regulations related to contracting work.
- Consult Legal Counsel: Find legal counsel to help you construct your contracts, invoices, and other correspondence for your New Jersey work to ensure compliance.
- Maintain Transparency: Always provide clear and truthful information in your contracts, advertisements, and interactions to avoid violations of the CFA. If you are not sure of the answer to a question, find out the answer before guessing.
Some Final Thoughts
Expanding your contracting business into New Jersey presents opportunities but also requires a thorough understanding of the legal landscape. By adhering to the New Jersey Consumer Fraud Act, the Home Improvement Practices Regulations, and the Contractor Registration Act, you can protect your business and provide quality service to your clients. For further guidance, consider consulting a legal professional specializing in construction law to navigate these requirements effectively.
We have seen many Pennsylvania contractors be burned in New Jersey courts by assuming that the laws are similar to those in Pennsylvania. Do not be fooled, they are not the same! The laws may seem too one-sided to be true. Be assured, the laws referenced above are real, and can greater hinder or even destroy your business unless you practice strict adherence to them.
If you would like to update your contracts and practices for New Jersey before a problem gets out of hand, RHG Law can help you stay above board and protect you so your business can operate safely.
