In January 2024, the Governor of New Jersey signed P.L. 2023, c. 237. This law did three things:
- Changed the Contractors’ Business Registration Act, previously called the Contractors’ Registration Act.
- Created the Home Improvement and Home Elevation Contractor Licensing Act.
- Established the New Jersey State Board of Home Improvement and Home Elevation Contractors.
These changes are designed to strengthen consumer protection. If you’re a contractor in New Jersey, here’s what you need to know.
What are the new requirements for home elevation and home improvement contractors in New Jersey?
Home improvement and home elevation contractor businesses must fulfill a few new requirements going forward:
- Have workers’ compensation insurance (unless exempt).
- Maintain a compliance bond, letter of credit, or other security.
- Hold general liability insurance (already required).
- Minimum $500,000 per occurrence for home improvement contractor businesses
- Minimum $1,000,000 per occurrence for home elevation contractor businesses
What is a compliance bond?
A compliance bond is a type of surety bond that ensures contractors comply with state laws, regulations, and professional standards while performing their work.
In New Jersey, legislation now requires home elevation contractors and home improvement contractors to secure a compliance bond (or alternative security) to operate legally. This bond protects homeowners by providing financial recourse in cases where a contractor fails to fulfill their contractual obligations or adhere to licensing regulations.
One benefit of providing a surety bond is having a claims examiner involved if someone tries to make a claim on your bond. The claims examiner will determine if it is a rightful claim on the bond or not. If an irrevocable letter of credit or a cash deposit is used, there would be no claims examiner determining if it is a valid claim or not.
ZipBonds simplifies the process of obtaining compliance bonds. We help contractors meet these new requirements quickly and affordably while giving homeowners added confidence and peace of mind.
What amount of security is required for contractors in New Jersey?
Home improvement and home elevation contractors must post bonds in the following amounts (minimum):
- $50,000 for contracts valued at more than $120,000 or for the performance of services in the last 12 months for contracts valued at a minimum of $750,000.
- $25,000 for contracts valued between $10,000 and $120,000 or for the performance of services in the last 12 months for contracts between $150,000 and $750,000.
- $10,000 for contracts valued at less than $10,000 or for the performance of services in the last 12 months for contracts valued at less than $150,000.
See the original Notice from the New Jersey Division of Consumer Affairs for more information.
What can you provide instead of a surety bond?
Instead of a compliance bond, you may provide an irrevocable letter of credit or a cash deposit held in trust by the state in the amounts listed above. These alternatives serve the same purpose: to protect homeowners by ensuring financial recourse if the contractor fails to meet their obligations.
- An irrevocable letter of credit is a guarantee from a bank that ensures payment to a beneficiary (like the state) if the contractor fails to meet their obligations.
- A cash deposit is money the contractor provides directly to the state. It is held as security and can be used to compensate for damages or non-compliance.
When do you need your new compliance bond?
If you have an existing registration, it will expire on March 31, 2025. You may renew your application and apply for your compliance bond starting in January 2025. We encourage you to start the process sooner rather than later in case any hiccups arise in the application process.
Log into the registration renewal portal to begin the process. To complete the renewal, you must have proof of compliance (your surety bond or other security and insurance).
What happens if you don’t comply with the changes?
If you fail to obtain insurance coverage (if applicable) and the required security, your registration may be delayed or denied.
Additional Resources for New Jersey Contractors
These resources will help you better understand surety bonds and how they work for contractors like you. Don’t hesitate to contact ZipBonds directly if you have any questions. We’re always happy to help!
- Home Improvement Bonds
- Contractor Bond Guide
- Contractor Pre-Qualification
- Surety Bond Costs
- What Is a Bond Program? A Contractor’s Essential Guide
- Why Contractors & Agents Are Switching to ZipBonds
Apply for Your Compliance Bond in New Jersey Today
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to speak with an agent directly. Many of our bonds are approved and processed instantly upon application.