Home Improvement Contractor Disputes in NYC

Contractor disputes Reza Yassi handles for homeowners

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Reza Yassi represents homeowners, co-op shareholders and condo owners when a renovation goes wrong:

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• The contractor took a deposit and stopped showing up, never started, or spent your payments elsewhere

• The work is defective, unfinished or badly delayed

• The contractor demands more than the contract price for disputed extras

• An unlicensed contractor is suing you, or a contractor or supplier filed a mechanic's lien on your home

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These cases are part of the firm's commercial and civil litigation practice, and the general rules of breach of contract apply.

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New York home improvement contract requirements

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A home improvement contract worth more than $500, and every change to it, must be in writing and signed by all parties (General Business Law § 770(6); § 771). It covers repairing, remodeling or adding to residential property. The contract must include:

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• The contractor's name, address, phone and license number, if one is required

• Approximate start and completion dates, and whether a definite completion date is of the essence

• The work, the materials (make and model where relevant) and the price

• Notices about mechanic's liens and about escrow or a bond for payments made before completion

• Any progress-payment schedule, with each payment tied to a stage of work

• Notice of your three-business-day right to cancel, and the contractor's insurance details

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You must receive a copy signed by the contractor before work starts (§ 771(2)). Skipping the escrow or written-contract rules can also bring a civil penalty, capped at $2,500 per contract, that the Attorney General or a local consumer affairs office can pursue (GBL § 773; § 774). If false written statements induced you to sign, you can recover damages plus a $500 penalty and reasonable attorney's fees (GBL § 772); see also fraud and misrepresentation.

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A missing term does not always erase the contractor's right to be paid; courts look at the facts and do not all apply the rule the same way.

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Can I cancel a home improvement contract in New York?

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Yes, until midnight of the third business day after you sign, by written notice saying you do not intend to be bound; a mailed notice counts when mailed (GBL § 771(1)(h)). The right does not apply if you called the contractor for a genuine emergency and signed a handwritten waiver.

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Contractor took my money: deposits, escrow and trust funds

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Money you pay before the work is substantially complete must go into an escrow account at a New York bank within five business days, unless the contractor gives you a bond, contract of indemnity or letter of credit instead (Lien Law § 71-a(4)). Your deposit stays your property until it is properly applied under the payment schedule or the contract is substantially performed; if you breach, the contractor may keep only a reasonable liquidated-damages amount stated in the contract, and only after seven days' written notice to you. Hourly payments for work already done are exempt.

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Money a contractor receives for a home improvement is also held in trust (Lien Law § 70). In Ippolito v TJC Development, LLC, 83 AD3d 57 (2d Dept 2011), the court held that homeowners are beneficiaries of that trust and can sue the contractor's officers and agents who diverted their payments. The claim is about diversion, not just a missing escrow account, so trace where the money went. Reza Yassi brings these Lien Law article 3-A trust claims for homeowners. Two cautions:

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• A trust claim must be brought as a representative action for all the trust's beneficiaries, following class-action procedure, and generally within one year after the improvement is completed (Lien Law § 77).

• In Ippolito, arbitrating only the contract claim barred a later trust claim against the company itself. Bring all your claims together.

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See the guide on protecting a home improvement deposit. The NYC Department of Consumer and Worker Protection (DCWP) advises paying no more than 25% up front.

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The NYC Home Improvement Contractor Trust Fund

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If a licensed New York City contractor did not finish the job or owes you money, the city's Home Improvement Contractor Trust Fund may repay part of your loss:

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• Claim process, up to $20,000 (raised from $10,000 on July 18, 2025): you filed a DCWP complaint, fully took part in DCWP mediation without a settlement, and did not recover in court.

• Standard process, up to $40,000: you already have a judgment, arbitration award, administrative decision or a broken settlement, and money is still owed.

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The contractor must have held a DCWP license when you contracted and paid into the Fund, you need the contract and proof of payment, and payment is at DCWP's discretion. Work by an unlicensed contractor does not qualify.

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Home improvement contractor licenses in NYC, Nassau and Suffolk

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In New York City, residential construction, repair and remodeling work requires a DCWP Home Improvement Contractor license; DCWP's guidance applies it to jobs over $200. Check a license or complaint history by calling 311 or searching at nyc.gov/dcwp. On Long Island, Nassau County's Department of Consumer Affairs and Suffolk County's Consumer Affairs office license home improvement contractors and confirm licenses.

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Is it illegal to use an unlicensed contractor? The licensing duty falls on the contractor. But hiring one costs you the Trust Fund, so check the license in the exact name on the contract before you pay.

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When an unlicensed contractor sues you or liens your home

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A contractor suing a consumer for work that needs a New York City, Nassau, Suffolk, Westchester, Rockland or Putnam license must plead that it was licensed when it did the work, with the license number; if not, you can move to dismiss (CPLR 3015(e)).

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In B & F Bldg. Corp. v Liebig, 76 NY2d 689 (1990), the Court of Appeals held that a contractor unlicensed when the contract was signed or the work was done could not enforce the contract, and a later license did not save the claim; recovery for the value of the work was denied as well. A lien securing that claim generally falls with it.

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Mechanic's lien on your house: what homeowners should know

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If a subcontractor or supplier liens your home after you paid your contractor, two rules help you. On a single-family home the lien must be filed during the work or within four months after the lienor's last work, against eight months for other property (Lien Law § 10). And all liens from your contractor's subcontractors and suppliers together cannot exceed what you still owed the contractor when they were filed (Lien Law § 4), so keep your cancelled checks and payment records.

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A lien lasts one year unless the lienor sues to foreclose and files a notice of pendency. On a single-family home the lienor cannot simply file an extension; only a court order can extend the lien (Lien Law § 17). If a sale or refinance cannot wait, see construction disputes and mechanic's liens for how to bond, discharge or vacate a lien.

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Suing a contractor for bad work, unfinished work or delay

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Most homeowner claims are for breach of contract. What you recover depends on what went wrong:

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• Poor workmanship: the reasonable cost to repair or redo it, proved with photos, an inspection and estimates.

• Unfinished or abandoned work: follow the contract's notice-and-cure steps before terminating; damages are generally the cost to finish beyond what you still owed.

• Delay: if the contract makes the completion date of the essence (§ 771(1)(b)), missing it can be a serious breach; otherwise the contractor generally has a reasonable time.

• Missing permits or code violations: the cost to legalize or redo the work.

• Damage to the rest of your home, such as a leak, may also support a negligence claim.

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How long you have to sue a contractor in New York

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• Breach of contract: six years (CPLR 213(2)), generally from completion of the work, not discovery of the defect.

• Fraud: six years, or two years from discovery if later (CPLR 213(8)).

• Damage to property: three years (CPLR 214(4)); claims against an architect or engineer, three years (CPLR 214(6)).

• Trust claims: generally one year after completion (Lien Law § 77).

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Your contract may shorten these periods or require arbitration.

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What to do when a contractor job goes wrong

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1. Make no further payment for work that is unfinished, defective or disputed until the contract has been reviewed, and sign no release or acknowledgment of a balance.

2. Gather the contract, change orders, payment records, texts, emails and permits.

3. Photograph and video the site with dates, and keep leftover materials.

4. Check the contractor's license, in the exact name on the contract, for the date you signed and for the dates the work was done.

5. Send a written demand with a deadline to cure, following the contract's notice clause.

6. Report the dispute to DCWP by calling 311; for a licensed NYC contractor, DCWP mediation is also the first step toward a Trust Fund claim.

7. Calendar the deadlines above and check for an arbitration clause.

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Where a contractor case is heard, and what it costs

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In New York City, small claims court hears money claims up to $10,000 against a contractor who lives, has a business office or works regularly in the city (NYC Civil Court Act § 1801); in the Nassau and Suffolk County District Courts the small claims limit is $5,000 (Uniform District Court Act § 1801). Yassi Law P.C. does not appear in small claims court. New York City Civil Court hears claims up to $50,000 (§ 202). Larger claims and Lien Law trust claims generally go to New York State Supreme Court; an arbitration clause usually sends the dispute to an arbitrator.

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What kind of lawyer handles contractor disputes? A litigation lawyer who knows construction contracts, liens and the home improvement statutes. Most commercial matters are billed at $450 an hour under a written engagement letter; contingency or hybrid fees are exceptions for special cases. The first consultation with Reza Yassi is free, and he will tell you plainly whether the amount at stake justifies a lawsuit.

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Guides on this topic

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• Home improvement deposit escrow in New York: how homeowners protect and recover a deposit a contractor spent before doing the work.

• Contractor abandoned job in NYC: legal remedies: what to do in the first days after work stops and how cost-to-complete damages work.

• NYC home improvement contractor took your money? Recovering up to $20,000 through DCWP's Trust Fund: how the Trust Fund's claim and standard processes work, and what each one requires.

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Frequently asked questions

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What can I do if a contractor took my money and ran?

Send a written demand, gather your contract and payment records, and check the contractor's license. Deposits must be escrowed or bonded (Lien Law § 71-a(4)), and diverted payments can support a trust claim against the people who took them. For a licensed NYC contractor, the DCWP Trust Fund may repay up to $20,000 or $40,000.

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Can I get my deposit back from a contractor?

Often, if the work it paid for was never done. You will need proof tying each payment to work that was not performed or was defective.

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Can an unlicensed contractor sue me in New York?

It must plead that it was licensed when it did the work (CPLR 3015(e)). A contractor unlicensed at that time generally cannot enforce the contract, and a later license does not cure it (B & F Bldg. Corp. v Liebig).

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How long does a contractor have to put a lien on my house?

Four months after the last work for a single-family home, eight months for other property (Lien Law § 10). A lien ends one year after filing unless the lienor starts a foreclosure action and files a notice of pendency, files a one-year extension (not allowed on a single-family home), or gets a court order extending it (Lien Law § 17).

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How long do I have to sue a contractor for bad work?

Generally six years for breach of contract, counted from completion (CPLR 213(2)), and three years for damage to property (CPLR 214(4)).

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Can I sue a contractor in small claims court?

Yes. In New York City you can sue for up to $10,000 if the contractor lives, has a business office or works regularly in the city; in the Nassau and Suffolk District Courts the limit is $5,000. Yassi Law P.C. does not handle small claims cases. Larger claims go to Civil Court (up to $50,000 in the city) or Supreme Court.

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Do I have to pay a contractor who didn't finish the job?

Not the full price. After following the contract's notice steps, you can generally terminate and claim the cost to finish beyond what you still owed.

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If a contractor has your money, left your home unfinished or filed a lien on it, gather the contract and your payment records and send an inquiry or call (646) 992-2138 to schedule a free consultation with Reza Yassi.