Patrick Welch | Snell & Wilmer
Last year, the Nevada Legislature adopted more rigorous requirements exclusively applicable to Nevada residential improvement contracts involving single-family residences. See Nevada Revised Statutes (“NRS”) 624.970 and Assembly Bill No. 39 (2023 Regular Session Approved: June 2, 2023); see also NRS 624.455 (defining the term, “single family residence.”). This new statutory scheme seeks to establish “a mandatory minimum set of requirements for all such contracts” while furthering the Nevada State Contractors Board’s (“Board”) mission to ensure “the integrity and professionalism of the construction industry, promote quality construction . . . [and] protect the health, safety and welfare of the public.” The Nevada State Board of Contractors webinar can be found, here.
Notably, these new requirements don’t apply to all residential construction projects; rather their application tracks NRS 624.970, which defines “[w]ork concerning a residential improvement” or “work” as any construction, remodeling, repair or improvement performed by a residential contractor to a completed, single-family residence or any activity for the supervision concerning such work.” NRS 624.970.7(d). As such, the statutory requirements do not apply to new residential single-family construction, single-family construction that is not “owner occupied,” multi-family residential construction, or commercial construction of any nature. Id. In essence, its application is largely limited to remodel work.
Nevada licensed residential contractors seeking to undertake improvements at single-family residences and homeowners contemplating a home remodel or improvement need to be aware of these new statutory requirements, how they increase a contractor’s disclosure and transparency obligations to a homeowner, and how they subject contractors to new bonding requirements in some cases. The following list provides a snapshot of some of the more important requirements found in the new statutory scheme:
Residential improvement contracts involving single-family residences must be in writing and include such information as: (a) the name of the residential contractor, the contractor’s address and contractor’s license number and the monetary limit on the contractor’s license; (b) the name and mailing address of the owner of the single-family residence on which the contract work is being performed and the address or legal description of the property (e.g. APN # for the property); (c) the effective date of the contract (e.g. the date on which the last party executes the contract); (d) the estimated completion date for the contract work1; (e) a description of the contract work2; (f) the contract price, including all applicable taxes; (g) upfront deposits or initial down payment paid by the owner to the contractor shall not exceed $1,000 or 10% of the aggregate contract price, whichever is less3; (h) a statement that the contractor has provided the owner with the notice and informational form required by NRS 624.520 and 624.600; (i) a statement that any changes in the scope of the contract work or the contract price must be made via a written change order signed by the contractor and the owner4; (j) if the project includes new work concerning a residential improvement, the contract documents must include a plan and scale drawing showing the shape, size and dimensions of and the specifications for the construction and equipment for the work specified in the contract, and a description of the work to be done, the materials to be used and the equipment to be installed, and the agreed consideration for the work; (k) a schedule of payments showing the precise dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments from the owner during the course of construction under the contract5; and (l) if the contract provides for payment of a commission to a salesperson out of the contract price, a statement that the payment must be made on a pro rata basis in proportion to the schedule of payments made to the contractor by the disbursing party in accordance with the provisions of paragraph (k)6.
The new statutory scheme also recognizes that the contractor, as the licensed professional, in many cases, has superior construction knowledge as compared to the homeowner. For that reason, NRS 624.970.3 now requires the contractor to include certain provisions in the written contract requiring the homeowner to confirm his/her understanding of the contractual provisions and providing the homeowner with resources aimed at increasing transparency, including: (1) a method whereby the owner may initial provisions of the contract, thereby indicating that those provisions have been read and are understood; (2) a notice located in close proximity to the contract signature lines stating that the owner may contact the Board if assistance is needed to clarify any of the provisions of the contract that the owner does not fully understand, has the right to request a bond for payment and performance if such a bond is not otherwise required pursuant to NRS 624.270, may contact an attorney for an explanation of the owner’s rights under the contract, and may, if the contract was explained in a language other than the language in which the contract is written, ask for a contract that is written in the language in which the contract was explained (e.g. aimed at addressing language barriers for Nevada’s more vulnerable immigrant populations)7.
At the time the owner signs the contract, the contractor shall provide the owner a legible copy of all contract documents signed and a written and signed receipt for any money paid by the owner to the contractor for the contract work8.
The contractor is required to apply for and obtain all necessary permits required for the contract work9.
Footnotes
1. The date of completion should be specified and updated by written change order as may be needed to reflect the true date of completion as the work progresses.
2. The scope of work with sufficient detail should be updated as needed by written change order.
3. A contractor may collect an upfront deposit or initial down payment exceeding the above-referenced limit if it files a Residential Improvement Bond for the Protection of Consumers with a bond penal sum of $100,000 or if the contractor is granted relief from posting a bond by the Board pursuant to subsection 5 of NRS 624.270. A contractor may want to consult with a Nevada licensed surety bond producer who is experienced in the Nevada surety and construction market to obtain the correct statutory bond.
4. The statutory scheme provides that a change order is not enforceable against the owner who is contracting for work concerning a residential improvement unless the change order sets forth all changes in the work scope and price of the work and the changes are accepted by the owner in a written change order. A contractor may want to ensure that the change order describes the work in sufficient detail and states the change in price for that work.
5. The schedule of payments must not provide for the contractor to receive, nor may the contractor actually receive, payments in excess of 100% of the value of the contract work performed on the project at any time, excluding finance charges, except for an initial down payment or deposit. The provisions of paragraph (k) do not apply if the contractor has furnished a bond for payment and performance covering full performance and completion of the contract and the cost of the bond is included in the price of the project. A contractor may want to consult with a Nevada licensed surety bond producer who is experienced in the Nevada surety and construction market to obtain the correct payment and performance bond forms.
6. The statute affirmatively provides a homeowner with the unilateral right to modify the terms of the written contract (so long as the modification is reasonable) to ensure the contract complies with the provisions of NRS 624.970.2, other than the provisions of paragraph (g), and all applicable regulations adopted by the Board. NRS 624.977.1(a). Moreover, a written contract that requires a party to waive any right provided by Ch. 624 or any regulations adopted pursuant thereto or that relieves a person of an obligation or liability imposed by Ch. 624 or those regulations is void. NRS 624.970.5.
7. Nevada State Board of Contractors Webinar found, here.
8. All written information provided in the contract must be printed in at least 10-point bold type. The contract, receipt and other documents referenced in this subsection may be delivered to the owner by electronic means. A contractor may want to consult with an experienced construction law attorney on the drafting of a written contract and to develop a template that meets the statutory requirements.
9. The contractor and owner may want to discuss any required permits as early as possible upon executing their written contract to ensure that permits are timely applied for and received so that the estimated date of completion can be met.
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