By: Breiten Sundra and Victor R. Garlitos III, Esq.
Earlier this year, Governor Murphy signed into law P.L. 2023, c. 237, which (1) created the “Home Improvement and Home Elevation Contractor Licensing Act” (the “Act”), N.J.S.A. 45:5AAA-1 et seq.; (2) amended the Contractors’ Business Registration Act, N.J.S.A. 56:8-136 et seq.; and (3) created the New Jersey State Board of Home Improvement and Home Elevation Contractors. The Act introduced significant changes to the laws, on top of the existing framework, governing and regulating home improvement and home elevation contractors and their businesses. It also created a new regulatory body tasked with administering and enforcing the provisions of the Act, issuing licenses, and promulgating rules and regulations directly impacting the industry.
This Act ushers in several significant changes that contractors must familiarize themselves with to remain compliant. Below is an overview of the key changes affecting home improvement and home elevation contractors.
Under the new regulatory framework, a contractor’s license may be revoked if the oversight board determines that the contractor has engaged in fraudulent conduct, gross misconduct, negligence, or any other behavior deemed inconsistent with the public welfare. Additionally, municipalities will be prohibited from issuing construction permits to any contractor who does not hold an active, valid license. While contractors who previously held licenses for at least five years will not be required to comply with the requirements outlined below, they will still need to disclose their criminal history. N.J.S.A. 45:5AAA-13.
However, moving forward, all new contractors will be required to obtain a license from the New Jersey State Board of Home Improvement and Home Elevation Contractors in order to operate. For new contractors, the following will be required to obtain and maintain a license:
Contractors should be aware that maintaining compliance with the law is essential to avoid the risk of license revocation or application denial, and the inability to perform work legally within New Jersey.
While home improvement and home elevation contractors were previously only required to carry general liability insurance, the new law contractors obtain in addition Workers’ Compensation Insurance unless you fall under the exemption. Specifically, contractors must secure Workers’ Compensation Insurance by March 31, 2025, in order to continue operating. However, this does not apply to Single-person contractors who do not employ any staff as they are exempt from this requirement.
One of the most notable changes under the new law is the introduction of a compliance bond, letter of credit, or other security (“fund”) requirement for all contractors—both existing and new. Contractors must now establish this fund to cover penalties and infractions that may arise during the course of their business. It is important to note that the fund is used to “cover penalties accessed by the division for violations of [N.J.S.A. 56:8-136 et seq.],” and is not used to reimburse any homeowner who is party to the contract. N.J.S.A. 56:8-142(h) & (i).
Pursuant to N.J.S.A. 56:8-142, the required amount of the fund is determined by the valuation of the contracts the contractor is working on, as follows:
In all these cases, as money is paid from those funds by the contractor, the funds must be replenished.
Existing registrations with the state will expire on March 31, 2025, and license renewal applications will be available in January 2025, so there’s still time to figure out these new requirements. The state will require you submit proof of compliance with the new licensing, insurance, and fund requirements along with your application.
The new changes to the law are designed to provide greater protection to consumers while ensuring that contractors meet certain professional standards.
It is essential for all contractors—whether new or existing—to review the updated requirements and take steps to ensure full compliance by the deadlines outlined above. As for the newly established Board, it will take some time for it to promulgate new regulations that may further impact the industry. For those who have questions about the process or need assistance navigating these changes, we encourage you to reach out to a legal professional at KingBarnes Law Firm.
