Mandated guarantees and warranties: home improvement and new home construction

Two different protections

New York regulates home improvement contracts and provides a housing merchant implied warranty for qualifying new homes. Payment security protects the return or proper application of money; a construction warranty addresses covered defects.

Home improvement contracts

Under General Business Law § 770, covered contracts have an aggregate price exceeding $500 and parties meeting the statutory definitions. Remodeling, roofing, and additions qualify. A custom home for the purchaser's residential occupancy on land already owned of record when contracting is included; an ordinary new home sale is excluded.

Section 771 requires a written contract and written amendments signed by all parties. Include contractor identification, work, materials, price, estimated start and completion dates, and whether a definite completion date is of the essence. Give the owner a contractor-signed copy before work. Required disclosures address mechanic's liens, advance-payment safeguards, and insurance.

Progress payments must state amounts and work stages and reasonably relate to work, materials, or expenses. A bond, indemnity contract, or irrevocable letter of credit may guarantee return or proper application of payments in place of the required deposit arrangement. Specified time-based payments for completed work or previously supplied materials receive different treatment.

The owner generally can cancel by written notice until midnight of the third business day after signing. The owner-initiated emergency exception requires a separate dated, signed handwritten statement describing the emergency and expressly waiving cancellation.

New home warranty: one, two, six

Under General Business Law § 777-a, the implied warranty survives title transfer. From the warranty date, coverage is:

• One year: defects due to unskillful construction.
• Two years: defects due to unskillful installation of plumbing, electrical, heating, cooling, and ventilation systems.
• Six years: material defects.

A material defect involves actual physical damage from failure of specified load-bearing portions, impairing their functions enough to render the home unsafe, unsanitary, or otherwise unlivable. Cosmetic damage alone is not that standard. Qualifying homes include single-family houses and for-sale condominium or cooperative units in residential structures of five stories or less. Successor owners receive the unexpired protection. Coverage excludes certain apparent defects that the buyer's examination should have revealed.

Preserve the claim

Written notice must reach the builder before suit and no later than 30 days after the applicable warranty expires. Allow reasonable inspection, testing, and repair. The lawsuit deadline is separate. Under § 777-b, a bare disclaimer cannot remove the housing merchant implied warranty: a replacement limited warranty must meet statutory requirements, be available before signing, and be incorporated into the contract. For an actual claim or proposed waiver, have an attorney review documents and deadlines.