You asked how the Department of Consumer Protection handles complaints about registered new home contractors.

SUMMARY

The law requires new home contractors to register with the Department of Consumer Protection (DCP), meet certain requirements relating to registration and the contracts they use with buyers, and participate in the New Home Construction Guaranty Fund.

The law establishes a New Home Construction Guaranty Fund along the lines of the Home Improvement Contractor Guaranty Fund. A consumer may be reimbursed from the fund for damages caused by the contractor that he is unable to collect. The act caps the reimbursement for a single claim at $30,000. It requires contractors to repay any money paid on their behalf.

The law establishes grounds for administrative discipline and civil and criminal penalties and makes a violation of its provisions an unfair or deceptive trade practice.

DCP reviews all written complaints about a new home construction contractor. It generally dismisses the first complaint about a contractor. If there have been more than one, it attempts to negotiate a settlement. If there have been more, it uses its enforcement authority. It seeks criminal enforcement only if a contractor is working without being registered.

THE LAW

Registration

The law requires new home contractors to register with DCP (CGS §§ 20-417a to 20-417j). Applicants must identify themselves and show that they have liability insurance and any required workers' compensation coverage. They must provide the names of the insurers.

Disclosures

The law requires new home contractors to inform their consumers, before entering into a contract, that they should (1) check with DCP to see if the contractor is properly registered and request his complaint history and (2) ask the contractor for a list of his 12 most recent prior customers. Contractors must also advise their customers to ask about the contractor's customer service policy and if the contractor will hold the customer harmless for work performed by the contractor's subcontractors.

Prohibited Acts

The law prohibits anyone from (1) presenting another's registration as his own; (2) knowingly giving false material evidence to the commissioner to register; (3) impersonating a registered individual; (4) using an expired, suspended, or revoked registration; (5) acting as a new home contractor without being registered; (6) representing that registration constitutes state endorsement of the contractor's work quality or competency; or (7) failing to refund a deposit as required.

Grounds for Discipline

A contractor may be the subject of administrative discipline for (1) failing to comply with new home contractor law, (2) obtaining a registration certificate through fraud or misrepresentation, (3) engaging in conduct likely to mislead, deceive, or defraud the public or the commissioner; (4) engaging in any untruthful or misleading advertising;

(5) failing to reimburse the New Home Construction Guaranty Fund; (6) engaging in an unfair trade practice; (7) failing to complete any task on time, as specified in a contract of sale; (8) failing to remedy violation of the new home construction contractor law or the State Building Code; or (9) if applicable, failing to maintain a certificate of good standing issued by the secretary of the state.

The law requires a contractor to refund a deposit within 10 days if (1) the consumer requests it in writing and mails or delivers to the contractor's last known address; (2) the consumer has complied with the contract up to the time of the request; (3) a substantial part of the work has not been completed; (4) more than 30 days have passed since the scheduled starting date or, if the contract does not set a starting date, since the date of the contract; and (5) the contractor has not provided a reasonable explanation of why he has failed to perform a substantial portion of the contracted work. For this purpose, the law defines "substantial portion of the contracted work" as (1) securing permits and approvals; (2) redrafting plans or obtaining engineer, architect, surveyor, or other approvals for changes requested by the consumer or caused by site conditions discovered after the contract was signed; (3) scheduling site work or arranging for other contractors; and (4) other work identified as "substantial portion of the contracted work" in the contract.

Disciplinary Powers and Civil Penalty

The law authorizes the DCP commissioner to suspend, revoke, or refuse to issue a certificate of registration, place a contractor on probation, or issue of letter of reprimand.

The commissioner may also impose a civil penalty on anyone who (1) acts as a new home construction contractor without a current registration certificate or who violates the new home construction contractor law. The fine may be up to (1) $500 for a first offense, (2) $750 for a second offense occurring within three years of a prior offense, and (3) $1,500 for a third and subsequent offenses occurring within three years of a prior offense.

The law requires the commissioner to hold a hearing before taking any disciplinary action.

Unfair Trade Practice

The law makes any violation of the new home construction contractor law an unfair trade practice under the Connecticut Unfair Trade Practices Act. The act prohibits businesses from engaging in unfair and deceptive acts or practices. CUTPA allows the DCP commissioner to issue regulations defining what constitutes an unfair trade practice, investigate complaints, issue cease and desist orders, order restitution in cases involving less than $5,000, enter into consent agreements, ask the attorney general to seek injunctive relief, and accept voluntary statements of compliance. The act also allows individuals to sue. Courts may issue restraining orders; award actual and punitive damages, costs, and reasonable attorneys fees; and impose civil penalties of up to $5,000 for willful violations and $25,000 for violation of a restraining order.

Further, anyone who violates the provision requiring contractors to return deposits is liable for triple damages.

Criminal Penalty

In addition to the other remedies, the law makes anyone who violates any of the prohibited acts guilty of a class A misdemeanor, which carries a prison term of up to one year, or a fine of up to $2,000, or both. If the court determines that a contractor cannot fully repay a victim with the normal probationary period, the law authorizes the court to impose a probationary period of up to five years.

DCP'S REPORTED COMPLAINT HANDLING PROCESS

All consumer complaints are received either in writing or by e-mail, according to DCP's Richard E. Maloney, Director of Trade Practices. A supervisor reviews and assigns them for entry into the complaint database. In fiscal year 2003-04, DCP received 95 complaints about the nearly 5,000 registered contractors. Of these, 24 consumers were reimbursed by the guaranty fund.

Maloney said that complaints are closed, mediated, or investigated. First, DCP personnel determine whether the contractor holds a current, valid registration. Second, they determine the amount of damage that is alleged to have occurred. Third, they discover if other consumers have filed complaints about the contractor. With this information, a supervisor evaluates the complaint and makes the decision whether to close, mediate, or investigate further.

A complaint is generally dismissed if it is the first about a contractor and there are only issues of workmanship, according to Maloney. In these cases, DCP sends the consumer a letter indicating that he may sue the contractor and may then be eligible for reimbursement from the New Home Construction Contractor Guaranty Fund.

If there had been “more than one complaint” about a contractor, DCP usually mediates the dispute. DCP sends a letter to the contractor asking for his response to the consumer's allegations. After it has been received, DCP attempts to negotiate a settlement.

Maloney states that DCP will investigate and use the law's enforcement authority if there have been “multiple complaints.” DCP will seek criminal enforcement only if the contractor is unregistered.

Maloney reports that many contractors use a contract that requires consumers to seek restitution through the American Arbitrator's Association instead of suing in court.

NEW HOME CONSTRUCTION GUARANTY FUND

The law establishes the New Home Construction Guaranty Fund to reimburse consumers for losses suffered from a contractor's failure to fulfill a contract properly. A consumer's reimbursement is limited to $30,000. The law requires each registered contractor to pay $480 biennially into the fund.

Reimbursement Request

A consumer who obtains a court judgment against a registered contractor, or one who was registered within two years of entering the contract with the consumer, may ask the DCP commissioner for reimbursement from the fund. The restitution order may come from a suit brought by the consumer, a civil suit brought by the state under CUTPA, a criminal proceeding brought under the new home contractor law, or a proceeding described below.

Consumer Requirements

A reimbursement request must be made within two years after the final judgment has been made or the time for appeal has passed. A consumer can ask for the amount of the judgment other than punitive damages, minus any amount already recovered from the contractor. The consumer must affirm that he has made a good faith effort to satisfy the judgment by following statutory post-judgment procedures, which may have included having a writ of execution served on the contractor, but the officer executing it stated (1) that there are no bank accounts or real property to satisfy the judgment, (2) that the amount realized from such accounts or property was insufficient to satisfy the damage portion of the judgment, or (3) the amount realized and the amount still due. A consumer with a judgment from small claims court, which can be for as much as $3,500, is exempt from the affirmation requirements. The act authorizes the commissioner to dispense with the requirement to follow statutory post-judgment procedures to collect the debt if the consumer satisfies him that it is not practicable and that the consumer has taken all reasonable steps to collect.

Contractor Notice and Hearing

The law requires the commissioner, before making a payment from the fund, to give a contractor an opportunity for a hearing to demonstrate that he has already reimbursed the consumer.

Guaranty Fund Proceedings

The law authorizes the commissioner to proceed against a registered contractor, or one who has been registered within two years before a new home construction contract takes effect, for a restitution order. The hearing must be held according to the Uniform Administrative Procedure Act. The commissioner must decide whether to exercise disciplinary powers, order restitution, or order payment from the guaranty fund.

Contractor Sanctions

Once the fund has paid a consumer, he must assign his rights to recover the money to DCP, which may seek to recover it from the contractor, plus reasonable interest. The commissioner may revoke the registration of any contractor whose actions have caused a guaranty fund payment and make reinstatement conditional on repaying the fund, with 10% interest. The commissioner may allow a contractor to register before repayment if he agrees to repay by a certain date.

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