In January 2024, Governor Murphy signed P.L. 2023, c. 237 into law, introducing changes to home improvement contractor licensing requirements in New Jersey. Among the updates is a new compliance bond requirement, aimed at improving consumer protection and raising accountability standards for contractors.
The legislation, which amended the Contractors’ Business Registration Act (CBRA) and introduced the Home Improvement and Home Elevation Contractor Licensing Act, requires all home improvement and home elevation contractors to provide financial security in the form of a compliance bond, irrevocable letter of credit, or other acceptable securities. These requirements must be met to obtain, renew or reinstate contractor registrations.
What Do These Changes Mean for Me?
If you’re a contractor in New Jersey, here’s what this means for you. Previously, contractors only needed to register with the New Jersey Division of Consumer Affairs (DCA) to operate. Now, you must obtain a license with several new requirements, including:
- Completing an approved training program
- Passing a licensing exam
- Meeting stricter financial security and insurance obligations
These measures are intended to ensure that licensed contractors meet high professional standards, protecting consumers and businesses.
New Compliance Bond Requirements
Moving forward, New Jersey home improvement contractors will need $10,000–$50,000 in surety bond coverage. The compliance bond tiers are determined by the value of your projects over the past 12 months as outlined below:
- A $10,000 bond is required for single contracts under $10,000 or annual totals below $150,000.
- A $25,000 bond is required for $10,000–$25,000 single contracts or annual totals of $150,000–$750,000.
- A $50,000 bond is required for single contracts valued over $120,000 or annual contract totals exceeding $750,000.
Alternatively, you can provide a letter of credit or another form of financial security approved by the Division. Learn more about the benefits of surety bonds versus letters of credit here.
New Insurance Requirements
In addition to the compliance bond, all New Jersey contractors must now carry commercial general liability insurance covering at least $500,000 per occurrence for home improvement work or $1,000,000 per occurrence for home improvement services.
If you don’t already have workers’ compensation insurance, you’ll also need to check if you’re exempt or must get a policy to stay compliant under this new legislation. Review the New Jersey Department of Labor and Workforce Development guide for more information.
Building Trust While Navigating Challenges
The compliance bond isn’t just about meeting state requirements. It’s also a way to build trust with your clients. By securing this bond, you show you’re committed to doing the right thing, whether that’s completing projects as promised or adhering to state regulations. This bill, if passed, will provide clients an easier means to restitution without having to go to court if you were to perform faulty or incomplete work.
However, for many small or independent contractors, the added financial burden of these bonds—combined with the stricter licensing and insurance requirements—may feel prohibitive. These changes could make it harder for contractors to stay in business, particularly those operating on smaller budgets or serving lower-income clients.
While the new regulations intend to raise contractor standards in New Jersey, they also present a higher barrier to entry and potential issues for many contractors to remain compliant.
Preparing for Compliance: Steps You Can Take Now
These changes are rolling out gradually, but you don’t want to wait to act. The licensing requirements will officially take effect two years after a majority of the New Jersey State Board of Home Improvement and Home Elevation Contractors members are appointed by the Governor, which must happen within ten months of the law’s signing.
Existing registrations will expire on March 31, 2025, and renewal applications open in January 2025. Although the bond form and other details aren’t finalized yet, here are some steps to prepare:
- Review your current registration status to ensure it’s active and in good standing.
- Evaluate your insurance coverage and confirm it meets the new requirements for general liability and workers’ compensation.
- Start exploring financial security options and speak with surety bond providers to understand costs and processes.
- Stay informed on updates from the New Jersey Division of Consumer Affairs and the new licensing board, as they release information about the bond form and other compliance requirements. (You can also bookmark this article to revisit for ongoing updates!)
- Plan for continuing education and licensing exams, particularly if you lack prior experience that may qualify you for grandfathering exemptions.
Taking these proactive steps now will help ensure you’re ready when the new rules take full effect.
Updates
We’ll keep this blog updated with everything you need to know, including where and how to get your compliance bond when it becomes available. For now, stay informed and start planning to ensure you’re ready when the new rules take full effect.
If you need additional construction-related bonds, visit our New Jersey contractor bond guide.