Recovery Pitfalls In Home Improvement Disputes

General Business Law § 771 provides a host of requirements for home improvement contracts, chief among them being that such contracts must be in writing and signed by all parties. Additionally, the contract must contain the name, address, telephone number, and license number of the contractor, the dates that the work is to begin and to end, a description of the work to be performed, a list of the materials to be provided by the owner, the agreed-upon compensation due to the contractor, and a schedule of any progress payments.  The contract must also provide a series of notices to the owner advising that claims for payment may be enforced against the property by lien, that the contractor is required to deposit all payments received prior to completion in accordance with Lien Law § 71-a (4) or the contractor may post a bond, contract of indemnity, or irrevocable letter of credit, and that the owner may cancel the home improvement until midnight of the third business day after the day on which the owner signs the contract.

Despite the strict requirements of General Business Law § 771, it is not uncommon that parties engage in such home improvement projects on the basis of a hand-shake deal. While it is always advisable to put any such agreements in writing, including any changes to the work along the way, a contractor who improves a home absent a written contract is not without remedy should a dispute arise.

Courts have held that the absence of a written contract prevents recovery on a breach of contract cause of action but does not prevent a remedy on a theory of quantum meruit.  Johnson v. Robertson, 131 A.D.3d 670, 672, 15 N.Y.S.3d 457 (2d Dep’t 2015); see also Home Construction Corp. v. Beaury, No. 2014-06600, 2017 WL 1240146, at *2 (2d Dep’t Apr. 5, 2017) (“Although a contractor cannot enforce a contract that fails to comply with General Business Law § 771, a contractor may seek to recover based on the equitable theory of quantum meruit…”).

Essentially, where parties fail to adhere to statute so as to preclude a legal remedy, courts turn to equity to allow recovery for the fair value of work. A contractor in such a position, who can show (1) the performance of services in good faith, (2) the acceptance of services by the owner, (3) the expectation of compensation, and (4) the reasonable value of the the services rendered, will not be able to collect the agreed upon price, but will be able to recover the reasonable value of those services.  Soumayah v. Minnelli, 41 A.D.3d 390, 391, 839 N.Y.S.2d 79 (1st Dep’t 2007).

A final word of caution for contactors in New York City and most of the surrounding counties who are engaged in home improvement work: Courts may be willing to, in the interest of ultimate fairness, look beyond the lack of a written contract to allow a contractor to receive fair compensation for his work. Courts, however, do not extend the same leniency to unlicensed contractors, whether or not there is a written contract.

The New York City Administrative Code § 20-387, for example, requires that any contractor performing home improvements in New York City must be licensed. If an unlicensed contractor performs such work and a dispute arises, there is no theory under which he may recover for that work. Put more finely, a contractor who works without a license assumes the risk of never being paid for his work.  See Callos, Inc. v. Julianelli, 300 A.D.2d 612, 613, 752 N.Y.S.2d 398 (2d Dep’t 2002) (“It is well settled that licensing statutes are to be strictly construed, and that an unlicensed contractor forfeits the right to recover damages based on either breach of contract or on quantum meruit, as well as the right to foreclose of a mechanic’s lien.”)

The moral of the story: get your contracts in writing and make sure that your license is current.

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