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By Douglas, J. Rose
Starting early next year Capital Region home improvement contractors must be careful with how they interact with mortgage brokers. Under a new state law that takes effect Jan. 6, 2012, home improvement contractors and their agents or sales representatives will be prohibited from steering customers to mortgage brokers for home improvement loans.
On Oct. 14, 2011 Gov. Andrew Cuomo signed the legislation into law (Ch. 593, L. 2011), which amends New York’s Banking Law. This law came in response to the practice of home improvement contractors and mortgage brokers in particularly urban areas, according to the bill’s sponsor memo. The law aims to prevent “high-pressure sales tactics” where contractors solicit high-interest second mortgages for mostly low-income and elderly homeowners in need of home repairs.
This law applies to any person or entity that performs home improvement work for a fee, with labor and material expenses totaling at least $200. Parties that conduct home improvement work but outright own or partly own the property, such as cooperative corporations, landlords and condominium board of managers, are exempt from the law’s provisions. Other key provisions in the law for home improvement contractors include:
- A prohibition against contractors promoting, advertising or arranging for the services of a mortgage broker;
- A prohibition against contractors receiving “anything of value” from mortgage brokers in return for referrals.
- A prohibition against contractors acting on behalf of mortgage brokers in transactions; and
- A prohibition against contractors co-signing or acting as guarantors for home improvement mortgage loans.
Home builders and other contractors in the Capital Region’s residential construction industry with questions regarding how this law could impact home improvement projects in Albany, Troy, Schenectady, or Saratoga Springs should consult with a construction law attorney.
Douglas J. Rose is a partner at Tully Rinckey PLLC who concentrates his practice on corporate and commercial law, including construction, civil litigation, bankruptcy law, real estate law. He can be contacted at drose@1888Law4Life.com. To schedule a meeting with one of Tully Rinckey PLLC’s civil litigation attorneys in Albany, N.Y. call 1-888-LAW-4-LIFE.
