By Michael Holzapfel, Esq.

March 27, 2008 – The Appellate Division of the New Jersey Superior Court recently sent a none-too-subtle message to residential contractors engaged in business in the Garden State: contract directly with a homeowner at your own risk.

In its published decision of Czar, Inc. v. Heath, the Court addressed whether the Consumer Fraud Act (CFA) applied in the context of a contractor retained to install kitchen cabinets, doors and moldings in a newly constructed residence, notwithstanding the fact that the Home Improvements Practices Regulations (HIPR) promulgated under the CFA exclude "the construction of a new residence" from their scope.

The facts of Czar were unremarkable. Prior to 2005, homeowners Jo Anne and Thomas Heath engaged a general contractor to construct a new home. The Heaths contracted directly, however, with Czar, Inc. (Czar) for the installation of custom kitchen cabinets, interior doors, a front door, and certain moldings; Czar was not a subcontractor to the general contractor. Eventually, a dispute between Czar and the Heaths arose over payment and timing of work. Czar sued the homeowners for moneys owed, and one month later the homeowners sued Czar for, among other things, consumer fraud.

At the trial, Czar argued that the CFA did not apply because the Heath’s home was a new residence, and the HIPR exclude "the construction of a new residence" from the definition of "home improvement." The trial judge agreed and dismissed the consumer fraud claim, noting that although Czar was not the general contractor, it was "intimately involved with the construction of the new residence, at least as to the kitchen." The Heaths appealed.

"New Construction" Protection Denied
Following the obligatory salute to the CFA as an expansively read, liberally interpreted remedial statute, the Appellate Division rejected the trial court’s interpretation, emphasizing not only the fact that Czar was not the general contractor, but also that it was not involved in any of the electrical, plumbing or structural work. Rather, Czar contracted directly with the Heaths to install various custom items. While that installation was obviously incident to the overall construction of a new residence, Czar itself did not "construct a new residence" for purposes of the HIPR.