A Contractor’s Failure to Properly Register was a Crime Under New Jersey Law

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In July 2006, Martin Korab hired Eric Rowland, a contractor, after seeing one of Mr. Korab’s advertisements under the name “Mercury Woods Carpentry” in the telephone book. Mr. Rowland gave Mr. Korab a written proposal along with a diagram detailing a bathroom renovation project, and accepted a deposit of $3,750.00 upon Mr. Korab signing the proposal.

Thereafter, Mr. Rowland attempted to apply for a work permit and was rejected by the Hillsborough, New Jersey Building Department because he failed to register as a contractor with the New Jersey Division of Consumer Affairs. When Mr. Korab asked for his deposit monies back, Mr. Rowland refused to comply arguing that he should be compensated for his time and work in preparing the plans and applying for the work permit. Mr. Korab called the police, who determined that, neither Mr. Rowland nor Mercury Woods Carpentry was a registered contractor. Mr. Rowland advised the police that we has unaware of the registration requirement imposed by New Jersey law. Mr. Rowland was thereafter charged, by way of indictment, with violating the Contractor’s Registration Act, N.J.S.A. 56:8-136 et seq.

The Contractor’s Registration Act was adopted in 2004 (and became effective on December 31, 2005) and states that “no person shall offer to perform, or engage or attempt to engage in the business of making or selling home improvements unless registered with the Division of Consumer Affairs in accordance with the provisions of this act.” [N.J.S.A. 56:8-138(a)] The enactment of this law was a further extension of the New Jersey Legislature’s mission to protect consumers from fraudulent merchants and insure public safety—in this case, from contractors who were operating without licenses, proper insurance, and were taking peoples’ money without performing the services for which they were contracted.

Although this statute provides for regulatory relief, it also states that violations may be dealt with under the New Jersey Consumer Fraud Act (N.J.S.A. 56:8-1 et seq.), or by way of criminal prosecution. The relevant part of the statute reads: “In addition to any other penalty provided by law, a person who knowingly violates any of the provisions of this act is guilty of a crime of the fourth degree.” [N.J.S.A. 56:8-146]. It was for his failure to register with the Department of Consumer Affairs that Mr. Rowland was indicted for a fourth degree crime under this provision of the act.

The Law Division judge (which is the trial court level in New Jersey) dismissed the indictment against Mr. Rowland because the judge interpreted the statute as requiring the State to prove that Mr. Rowland knew his conduct violated the law. Since the indictment did not contain any evidence demonstrating such knowledge, the judge reasoned that the indictment could not stand.

The State appealed to the Appellate Division in New Jersey arguing that the lower court judge misinterpreted the Contractor’s Registration Act; and, the State asserted that it is not a requirement to prove that Mr. Rowland had knowledge of the law.

In rendering its decision in favor of the State, the Appellate Division found that ignorance of the law is irrelevant. The basic conduct that is prohibited by the act, and the elements that constitute the fourth degree offense, are 1.) engaging in the home-improvements business; and 2.) not being registered with the Division of Consumer Affairs. Mr. Rowland argued that without any proof that he was given notice of the law, his prosecution under the statute is a violation of due process. Relying upon other cases that have found business registration laws very common in states for the purposes of providing public safety, the Court dismissed Mr. Rowland’s argument that he was being denied due process. The Appellate Division reversed the lower court’s order to dismiss the indictment against Mr. Rowland and remanded the case for trial.

This case sends a clear message in New Jersey: Home-improvement contractors must be registered with the Division of Consumer Affairs or face the possibility of criminal penalties. While this may appear harsh, particularly given the fact that contractors will be held accountable whether or not they are aware of the registration requirement, the purpose is to protect consumers from unsafe and unscrupulous contractors.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.