New York home improvement contract requirements

Who the law covers

Article 36-A applies to a home improvement contract: an agreement over $500 between an owner and a home improvement contractor, meaning anyone whose home improvement contracts total more than $1,500 over twelve months. "Owner" includes homeowners, co-op shareholders, residential tenants and buyers of a custom home. "Home improvement" covers repairs and remodels plus roofing, siding, windows, insulation, solar energy systems, flooring, basements, driveways, pools, fences and landscaping. It excludes new homes other than custom homes, freestanding appliances, drapes and carpets, and work done under a warranty or maintenance agreement.

What § 771 requires in writing

The contract and every amendment to it must be in writing and signed by all parties. The writing must be legible and in plain English, and the owner gets a copy signed by you before any work is done. It must contain:

• Your name, address, telephone number and license number, if you're licensed locally.
• Approximate start and substantial completion dates, any contingencies that could change the completion date, and whether you've agreed that a definite completion date is "of the essence".
• The work and the materials, including make, model number or other identifying details, and the agreed price.
• The mechanic's lien notice, in clear and conspicuous bold type (below).
• The escrow notice: that you're legally required to deposit payments received before completion under Lien Law § 71-a(4), or may instead post a bond, contract of indemnity or irrevocable letter of credit.
• A progress payment schedule in dollars and cents, each payment tied to a stage of completion and reasonably related to the work, materials or costs at that point. Hourly or time-and-materials billing for work already done doesn't count as a progress payment.
• The owner's right to cancel until midnight of the third business day.
• Insurance disclosure: before work starts, the property or casualty policy that covers your work, with the insurer's phone number and address.

Deposits go into escrow

Article 36-A doesn't cap a deposit for most trades. What it controls is where the money sits. Under Lien Law § 71-a(4), payments you receive before substantial completion must be deposited within five business days in an escrow account at a bank, trust company, savings bank or savings and loan located in New York, and they remain the owner's property until applied to the job. If the contract doesn't name the bank, you must tell the owner in writing within ten business days of the deposit. The alternative is to give the owner a bond, contract of indemnity or irrevocable letter of credit guaranteeing the money, within ten business days of the payment. One account can hold several owners' funds if your books show each owner's share.

The three-day right to cancel

The owner may cancel until midnight of the third business day after signing, by any written notice that shows they don't intend to be bound; a mailed notice counts when it's posted. The right doesn't apply when the owner called you about a bona fide emergency and hands you a separate, dated and signed statement in their own handwriting describing it and waiving the right. If you sell at the customer's home, New York's Door-to-Door Sales Protection Act (Personal Property Law § 428) also requires its 10-point bold statement next to the buyer's signature and a completed "NOTICE OF CANCELLATION" form in duplicate, matching the FTC Cooling-Off Rule.

Roofing contractors

• Who counts. Section 770 defines roofing contractors to include roofing, gutter, downspout and siding work, by employees, independent contractors, day laborers or out-of-state crews.
• More in the contract. On top of the § 771 terms: your insurer's name, the type of coverage and the policy limits.
• No deposit. You can't require one. You may invoice for materials when they're delivered, after disclosing their cost in writing, and invoice the rest when the work is complete.
• Insurance claims. An owner whose contract will be paid from a property insurance policy can cancel until midnight of the third business day after the insurer says in writing that the claim isn't covered. You must refund within ten days, keeping only the reasonable value of emergency work they acknowledged in writing.
• No deductible deals, no adjusting. You can't promise to pay or rebate a deductible, or report, adjust or negotiate the claim for the owner.

Licensing: local, not state

New York State has no home improvement contractor license, which is why § 771 asks for a license number "if applicable". New York City does: the Department of Consumer and Worker Protection requires a Home Improvement Contractor license for home improvement work on residential land or buildings in the five boroughs. Some counties and towns license contractors too, so check where the job is. Local rules can add licensing but can't contradict § 771 (§ 775).

Penalties

• Technical violations: a civil penalty of up to $100.
• Substantial violations, meaning no escrow or substitute security, or no written contract substantially complying with the article: up to the greater of $250 per violation or 5 percent of the contract price, capped at $2,500 per contract. A contractor who shows an unintentional, bona fide error despite reasonable procedures avoids the higher penalty.
• Fraud: an owner induced by false written statements can recover a $500 penalty plus attorney's fees and damages (§ 772).

Signing it electronically

New York isn't a UETA state; its Electronic Signatures and Records Act gives an electronic signature the same validity as a handwritten one (see e-signature law in New York). That covers § 771's requirement that the contract be signed by all parties. Make sure the owner actually receives their signed copy before work starts, and for notices the law requires in writing, get the consumer's consent to electronic records first under 15 U.S.C. § 7001(c).

Setting it up in SignMaster

1. 1

   Name the bank in the template

   Put your escrow bank's name in your contract template with the lien notice in bold. Naming the depositary up front saves the ten-day letter.

2. 2

   Make the schedule fillable

   Add date fields for the start and completion dates, a checkbox for "time is of the essence", and currency fields beside each stage of the payment schedule.

3. 3

   Sign before you start

   Use Sign in person at the walkthrough. The owner gets the signed PDF by email at once, which is the copy § 771 requires before any work.

4. 4

   Paper the changes

   Amendments need signatures from all parties too, so send a change order for every change in scope or price.