If you are a Contractor performing residential home improvement work in New Jersey, a recent case clarifies that you may be subject to Consumer Fraud Act claims even when your contract is fraud2.jpgwith a homeowner who serves as a “general contractor” on the project. In fact, such a contract is not only subject to the Consumer Fraud Act, but also to the Contractor’s Registration Act, and the Home Improvement Practices regulations adopted by the New Jersey Division of Consumer Affairs.

What Is The Consumer Fraud Act?

In 1960, the New Jersey Legislature enacted the Consumer Fraud Act “CFA”, (N.J.S.A. 52:17B-124; N.J.S.A. 56:8-3 ) to address consumer complaints regarding fraudulent construction practices in the market place. The CFA provides, among other things, that a successful homeowner who proves fraud be allowed to “treble” his damages against unscrupulous contractors and recover attorney’s fees. Since 1960, New Jersey Courts have held that the CFA should be “construed liberally in favor of consumers.”

If You Contract With A Homeowner – Even One Who Acts As The “General Contractor” On A Project – The CFA Applies

This month, the Superior Court of New Jersey rejected a contractor’s argument that a homeowner acting as a “general contractor” could not bring a claim under the CFA. In so doing, the Court pointed to the direct contractual relationship between the parties and concluded that “even if the plaintiff could be viewed as a general contractor with respect to the improvements to his home, he was entitled to the protection of the CFA in his dealings with contractors who performed [home] improvements.” This recent decision means that prudent contractors must assume that the CFA applies whenever a contract is entered into with a homeowner – even sophisticated homeowners who serve as their own general contractors.

Although the recent case focused primarily on the CFA, it addressed other consumer protections and serves as a reminder that New Jersey contractors must comply with all Home Improvement Practices Regulations (Administrative Code at N.J.A.C. 13:45A-16.1 et seq.). Also, as many contractors are aware, compliance with New Jersey’s Contractor’s Registration Act of 2004 is essential. The Contractor’s Registration Act requires every home improvement contractor to register with the Division of Consumer Affairs prior to performing work.

The Court acknowledged “the seriousness with which the legislature approached the perceived problems in [the home improvement] industry” and noted that such seriousness was reflected in the expansive language of the applicable laws as well as in the remedies – such as treble damages – that the consumer protection statutes afford.