Commercial Law

In New York, consumers are protected by state and local laws. If a contractor fails to comply with these laws, significant remedies are available to victims, including monetary awards for breach of contract.

Failure to use an escrow account for prepaid fees – If a contractor receives funds from a homeowner, the contractor is required to deposit the funds in a trust account. These funds cannot be used for any other project or for the benefit of the contractor. The contractor must keep accurate books and records that identify the particular project with respect to the use of the funds. The law also gives a homeowner the right to have these books and records inspected. Failure to keep records of escrow fund transactions is presumptive evidence of larceny. A contractor who uses the funds provided by a homeowner for any other purpose may be guilty of larceny (NYS Lien Law Article 3A, Sections 75, 76, 79).

Proper documentation of the agreement – The law establishes the requirements for a home improvement contract including:

specifying the approximate or estimated dates the work will begin, when it will be completed, and contingencies that may delay completion of the work.
A description of the work to be performed, the material to be provided by the owner, and the agreed upon cost for the material and consideration for the work must also be provided, as well as an acknowledgment that the contractor is required to place any advance funds into an escrow account, stating whether there is an agreed upon payment schedule (NYS General Business Article 36-A, Section 770-774).

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