Sunday, May 6, 2012
Will New York require contractors to notify home owners of the subcontractors it uses on projects?
New York's legislature may be overreaching on this one:
The legislature has proposed to amend Section 771 of the General Business Law to insert a requirement that all home improvement contracts contain a clause requiring contractors to identify subcontractors to home owners prior to the subcontractor providing the work. The statute would require the contractor to identify the subcontractor's name, address, phone number and license number. Up until this point there is no real downside to the proposed law other than an additional layer of paperwork for the contractor that may slightly increase overhead costs to make sure that this provision is complied with (especially on projects with multiple subcontractors). However, the legislature did not stop the proposed statute there. The proposed amendment would also allow the home owner to cancel the contract (without explanation or cause) without any penalty upon receipt of the subcontractor notice. It is this phase that appears to go overboard and grossly prejudice the contractor.
Many contracts contain clauses that require contractors to identify subcontractors and obtain owner approval before use of the subcontractor. In these instances they are negotiated terms and these terms are factored into the negotiated costs. But the clauses are not required by statute. If the contractor is not comfortable with the clause he or she can move on to another job. But a statutory requirement that it be in all home improvement contracts would make it impossible for home improvement contractors to move on to another job. This is an instance where the legislature needs to stay away. Too much regulation can really hurt an already devastated New York home improvement contractor industry.
Vincent T. Pallaci is a partner in the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on construction law. He can be reached at (631) 752-7100 or firstname.lastname@example.org. You can also visit our firm site at www.nyconstructionlaw.com