December 16, 2019
by Bob Incollingo
It’s not enough for a lawyer to know the answer to a simple question. That lawyer needs to be able to “cite to authority” so that a judge can have confidence that the question has been answered the same way in the past. Relying on past decisions is the basis for our common law system, and it works pretty well over competing approaches.
Sometimes bankable answers to simple questions are not so easily researched, though, which can happen where a statute or a regulation is not to the point. Take this question for example: If you tear down a house, and rebuild it from the ground up on the original foundation, is that new construction or the improvement of an existing home?
To answer the question, building a new house on an old foundation is home improvement.
The answer matters a great deal, because in our state, new residential construction is governed by the New Home Warranty and Builders’ Registration Act (N.J.S.A. 46:3B-1 et seq), administered by the Department of Community Affairs. The State’s website explains the HOW program as well or better than I can, so I quote it here in relevant part:
“The New Home Warranty and Builders’ Registration Act (NJSA 46:3B-1 et seq) was enacted in 1977 to provide a broad scope for the warranty of a new home and standards for construction and quality of the structural elements and components of a new home. Basically, the law requires a builder to register with the State of New Jersey before starting construction of any new home and before offering a warranty on any new home bought and sold in the State. The law and regulations provide limited ten-year warranty coverage against defects of materials, workmanship, and systems in a new home. The law requires a builder to warrant each new home and to provide warranty follow up services: the builder is the warrantor of the home. In the event the builder does not make repairs on claims for which the builder has been found responsible, then the State New Home Warranty Security Fund covers the cost of these repairs. The law and regulations also provide a process through which the builder and the homeowner can resolve disputes over corrections of such defects. If a builder is found negligent and/or does not participate in this dispute settlement process, the builder’s registration can be suspended or revoked, thus preventing the builder from building new homes in New Jersey.”
By contrast, construction on existing residential property is governed by the rules and regulations of the New Jersey Division of Consumer Affairs in the Department of Law and Public Safety, which interpret the consumer fraud law for home improvement and are codified in Title 13 of the New Jersey Administrative Code. People are accustomed to a one year warranty on home improvement, so it surprises many to learn that the law doesn’t require that any warranty at all be given by a remodeler. However, if a warranty is given, it needs to be given in writing, and be clear, specific and definite as to its terms:
N.J.A.C. 13:45A-16.2 UNLAWFUL PRACTICES< 11. Guarantees or warranties: I) The seller shall furnish the buyer a written copy of all guarantees or warranties made with respect to labor services, products or materials furnished in connection with home improvements. Such guarantees or warranties shall be specific, clear and definite and shall include any exclusions or limitations as to their scope or duration. Copies of all guarantees or warranties shall be furnished to the buyer at the time the seller presents his bid as well as at the time of execution of the contract, except that separate guarantees or warranties of the manufacturer of products or materials may be furnished at the time such products or materials are installed.
Unfortunately, even with the broad definition of “home improvement” in the regulations of the Division of Consumer Affairs (N.J.A.C. 13:45A-16.1A), there is no clear guidance as to whether a tear down and rebuild is home improvement or new construction. To get the right answer, the place to look is the part of the Uniform Construction Code known as the New Jersey Rehabilitation Subcode (N.J.A.C. 5:23-6.1, et seq).
The New Jersey Rehabilitation Subcode has no definition for a teardown-rebuild, but the activity fits into the classification of Reconstruction, defined at N.J.A.C. 5:23-6.3:
"Reconstruction" means any project where the extent and nature of the work is such that the work area cannot be occupied while the work is in progress and where a new certificate of occupancy is required before the work area can be reoccupied. Reconstruction may include repair, renovation, alteration or any combination thereof. Reconstruction shall not include projects comprised only of floor finish replacement, painting or wallpapering, or the replacement of equipment or furnishings. Asbestos hazard abatement and lead hazard abatement projects shall not be classified as reconstruction solely because occupancy of the work area is not permitted.
The Rehabilitation Subcode discusses reconstruction (as defined) in specific detail in section 6.7, where it incorporates further requirements of later sections of the UCC. See, N.J.A.C. 5:23-6.7, 6.8 and 6.9. Read together, these detailed regulations leave no doubt that a tear down and rebuild project is a reconstruction project according to the definitions in N.J.A.C. 5:23-6.3, and subject to the further requirements of the law as home improvement. Reconstruction is not new construction. Reconstruction is home improvement.
Now you know. The next time your buyer wants a new home warranty for a completed tear down and rebuild, send them here.
Bob Incollingo is a dedicated New Jersey construction attorney who litigates construction, business, and real estate cases in Gloucester County, Burlington County, and Camden County, New Jersey from his office in Cherry Hill. More articles like this appear on RJILAW.com.