For Surety Insurance Agency
NJ Home Improvement Contractor Bond
New Jersey construction law became more difficult for contractors in early 2024.
On January 8, 2024, a new law in New Jersey imposes new regulatory requirements on home improvement and home elevation contractors, beyond the existing requirements. It also requires that home elevation and home improvement contractors must now be licensed by the State, rather than just registered as before.
Applicability: Every Job Over $500
The new law applies to all home improvement and home elevation projects with a value of over $500. It creates a new category for a “principal” home improvement and home elevation contractor license, which must supervise jobs of $120,000 or more. The law does not apply to building new homes, only to the improvement of existing residential property.
New Agency Which Regulates Contractors
The law establishes a new State Board of Home Improvement and Home Elevation Contractors (the “Board”) to enforce and administer the law. The Board will be in the New Jersey Department of Consumer Affairs (the “DCA”).
When the Law Becomes Effective
The Governor must appoint members to the new board within ten months after the law was passed. The new requirements will become effective two years thereafter. The existing regulations for home improvement contractors and home elevation contractors remain effective, the only exception being that contractors must then be licensed rather than registered.
Contractors Required to be Licensed
Both home improvement contractors and home elevation contractors must now obtain a license from the Board to operate. They must have a license to even offer home improvement or home elevation services. Applicants will be required to take an examination, and meet experience and continuing education requirements. The Board is tasked with developing a code of ethics.
To obtain a license, an applicant must be at least 18 years old and have graduated high school or obtained a GED. They must pass the exam. Applicants must complete an apprenticeship program approved by the Federal Department of Labor or have at least two years of experience working for a licensed home improvement or elevation contractor, or its equivalent in another state. Applicants must disclose any criminal convictions and prove financial stability. Applicants must pay the required fees.
Applicants must comply with insurance requirements, including submitting proof of at least $500,000 in general liability insurance per occurrence and workers compensation insurance. Contractors are required to submit a Home Improvement license bond or cash security. The minimum amount is determined on a sliding scale based on the size of the job. Consumers may make claims on bonds and security with the Board. Additionally, home elevation contractors must submit proof of a minimum of $1,000,000 of cargo insurance. Certificates of all required insurance must be provided to the homeowner before the start of any project.
License numbers must be prominently displayed in business documents, correspondence (including emails), all place of business, advertisements, contracts, and on vehicles. Invoices, contracts and correspondence must also prominently display a toll free number for the consumer to contact the contractor.
Denial and Revocation of Licenses
Licenses may be denied or revoked by the Board for fraud, dishonesty or misrepresentation with the consumer or in the application process; for gross negligence, gross malpractice or gross incompetence; repeated acts of negligence, malpractice or incompetence; misconduct; violation of law or regulation; convictions related to home improvement or home elevation work; and/or for prior revocation or suspension. Contractors and applicants have the right to a hearing before denial or revocation.
Identification Badges
Contractors must wear identification badges issued by the Board which are clearly visible on their upper left torso when performing home improvement or home elevation services. Display of an unauthorized badge is a fourth degree crime punishable by up to 18 months in prison.
Grandfather Provisions
Contractors registered with the DCA for at least 5 years or with at least five years of experience with a registered contractor may be obtain a license without complying with the examination, education or other experience requirements. However, they will still be required to comply with all the other requirements, including the continuing education requirements.
Obtaining Permits
Municipalities may not issue permits unless the contractor is licensed.
Requirements for Contracts
The voluminous requirements for home improvement contracts remain intact, and now apply to home elevation contracts.
New requirements will also apply. Consumers must be given two copies of the contract. If the customer does regularly not speak English as their first language the contractor must give them a copy of the contract in the first language. If the contract value is $120,000 or more and necessitating approval by more than one subcode, the contract must state that a licensed principal home improvement contractor will oversee the project.
Continuing Education
All licensed contractors – even those grandfathered in – must take a minimum of six credits (hours) per year of continuing education approved by the Board.
Liability
Failure to comply with these requirements can result in the imposition of fines by the Board and criminal liability in some cases. In addition, homeowners may sue for triple the homeowner’s damages plus and attorneys fees for violations as before.
The Bottom Line
Don’t get caught unawares by the upcoming changes in the law. They will require significant effort (and some expense) to comply. However, failing to comply can open you up to significant liability.
- Bond Amount: Based on the typical scale of projects the contractor works on.
- $10,000 Bond: For contracts valued at less than $10,000, or for the performance of services in the past 12 months for contracts valued less than $150,000
- $25,000 Bond: For contracts valued between $10,000 and $120,000, or for the performance of services in the past 12 months for contracts valued between $120,000 and $750,000
- $50,000 Bond: For contracts valued at $120,001 or greater, or for the performance of services in the past 12 months for contracts valued at a minimum of $750,000
- Who Needs It: Most home improvement and home elevation contractors are required to obtain this bond by the New Jersey State Board of Home Improvement and Home Elevation.
- Purpose: To protect the state and consumers from unlawful practice and fraudulent activities on behalf of the contractor
How Does a New Jersey Contractor License Bond Work?
A New Jersey contractor license bond is an agreement between three different parties.
The Obligee
The local licensing authority is listed as the obligee of the bond, or the one mandating a bond be posted by the contractor.
The Principal
The principal is the contractor required to obtain the bond as a form of protection for their customers.
The Surety
The surety company provides the bond to the licensed contractor and pays any claims when they are filed. The contractor then repays the claim amount over time to the surety.
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