The Nevada Legislature modified bonding requirements in Assembly Bill No. 39 (AB 39) concerning construction, remodeling, repair, or improvements to existing, completed single-family residences that are occupied by their owners.  Bonds for such residential contractors in the penal sum of $100,000 may be required if the contractor is not exempted.  AB is now the law, but it will take up to a year before it is actually codified into the Nevada Revised Statutes.

It is essential for surety practitioners to understand the implications of AB 39 as a violation of the provisions may result in bond claims.  AB 39 requires that specific information and contents are in each residential contract and the failure to include these constitutes a basis for discipline before the Nevada State Contractors Board. Below are some of the key requirements that must be in each residential contract and a bond coverage synopsis:

CONTRACTOR INFORMATION

Company name, address, license number(s), monetary limit(s).

HOMEOWNER INFORMATION

Name, mailing address, physical address/legal property description.

PROJECT INFORMATION

• Name, mailing address, physical address/legal property description.
• Date of contract.
• Estimated completion date.
• Description of work to be performed.
• Total amount of contract, including taxes.
• Notice of the Board’s Residential Recovery Fund.
• Any change orders agreed upon by the owner and contractor must be in writing, incorporated into the contract and include all changes in scope and price of work.
• Ensure all permits are obtained.

PAYMENT INFORMATION

• Down payment cannot exceed $1,000 or 10% of the contract price, whichever is less. A down payment may only exceed this amount if the contractor posts a Consumer Protection Bond with the Board In the amount of $100,000, or if the contractor was previously granted relief of the requirement to post a license bond. You can check your contractor’s bond status on the Board’s website.
• Schedule of progress payments (not to exceed 100% of contract value). This excludes finance charges & initial down payments or deposits made. Not required if Consumer Protection Bond is obtained.

CONTRACT MUST CONTAIN:

• A method whereby the owner may initial all contract provisions agreed upon.
• A notice to contact an attorney for an explanation of contract rights.
• The right to request a bond.
• The right to contact the Board for an explanation of written contract language.
• The right to receive legible copies (physical or electronic) of all signed documents and a written receipt.
• The right to modify the contract to ensure compliance with the law.

BOND COVERAGE

The bond is for the benefit of a “consumer” who entered into a contract with a contractor to perform work concerning a “residential improvement” and:

(a) Is damaged by the failure of the contractor to perform the contract or to remove liens filed against the property; or

(b) Is injured by any unlawful act or omission of the contractor in the performance of a contract.

        The term “consumer” is not defined in this specific statutory provision regarding “residential improvement”.  However, the term “consumer” is defined in a related statutory provision regarding residential pool bonds as a “natural person” who owns a single-family residence and enters into a residential pool or spa contract.  NRS 624.276(15).  The term “natural person” is not defined but on its face should exclude business entities. NRS 0.039.  Accordingly, consumer should refer to a “natural person” only.

       The project must be a “residential improvement” which means 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.  Not covered are new construction, commercial projects, apartment projects, investment properties for flipping or rental, or a single-family residence that is not used by the owner as the primary residence.  

       The unlawful act or omission in (b) refers to acts or omissions specifically identified as unlawful under NRS 624.  Day Night Mfg. v. Fidelity Cas. Co., 85 Nev. 227 (Nev. 1969).  Violation of the contract content requirements is not per se “unlawful” but are causes for discipline by the Nevada State Contractors Board.  A consumer may assert that failure to include mandated contract content qualifies as a claim under (a) but resultant damages would need to be shown.

RESOURCES

A copy of AB 39 and the consumer protection bond may be found at these links.

AB 39: https://www.leg.state.nv.us/App/NELIS/REL/82nd2023/Bill/9568/Text

Bond: http://www.nvcontractorsboard.com/pdfs/Forms/Residential%20Construction%20Consumer%20Bond.pdf

Please contact surety attorneys at the Faux Law Group should you have any questions.