Construction contracts come in all shapes and sizes. They can be a simple one-page agreement or could include stacks of different documents depending on the scope of the project. Nevada is fairly lenient when it comes to construction contracts, generally allowing the parties freedom of contract to agree to whichever terms they choose — with some limitations.
However, when it comes to residential projects, in order to protect homeowners from unscrupulous contractors, Nevada requires certain information, notices, and disclosures that must be included in a construction contract.
Single-family residential improvement contracts in Nevada
Let’s start with the basics. Every prime contract for the repair, alterations, or improvement to a “single-family residential property must contain certain information and disclosures. First and foremost, every prime contract on such projects must include the contractor’s license number issued by the Nevada State Contractors Board.
Beyond that, there are some additional disclosures and notice language that must be provided to the homeowner in writing.
These can be either included in the contract itself, or provided separately:
List of subs and suppliers on the project
Under NRS §624.600, a General Building Contractor shall provide in writing to the owner of a single-family residence with whom he or she has contracted:
The name, license number, business address, and telephone number of:
- All subcontractors with whom he or she has contracted on the project
- All persons who furnish materials valued at $500 or more to be used on the project
Lastly, along with this list, there should be some notice language informing the owner that any of the parties listed may record a notice of lien on the property.
Failure to comply with these requirements can lead to potential administrative fines of up to $10,000, or any other potential penalties listed under NRS §624.300. This could also result in the limitation, suspension, or outright revocation of the contractor’s license.
Required disclosures on residential improvement projects
In addition to the list of subs and suppliers on the project, there are also two “informational forms” that must be provided to the owner in writing: one regarding mechanics lien rights in Nevada, and the other informing the homeowner of licensing requirements and how/where to file a complaint.
Mechanics lien disclosure
This disclosure, required under NAC 624.693, is meant to provide the homeowner with information regarding the Nevada mechanics lien process and ways to protect their property from such claims.
‘NOTICE TO OWNER’
Pursuant to NRS 108.221 to 108.246, inclusive, a contractor, subcontractor, laborer, supplier of materials or other person or entity who:
(1) Performs work or furnishes materials of the value of $500.00 or more to improve the value of your property; and
(2) Is not paid for the work or materials,
has a right to place a lien on your property on which the work was performed and to sue you in court to obtain payment.
This means that after a court hearing, your property could be sold by an officer of the court and the proceeds of the sale used to satisfy the amount you owe. If you did not ask for and receive releases of liens from the contractors’ subcontractors, laborers or suppliers of materials, a lien may be placed on your property or you may be sued even if you have paid your contractor in full.
To preserve their right to file a claim or lien against your property, certain claimants, such as subcontractors, laborers and suppliers of materials, are each required to provide you with a document called a “preliminary or pre-lien notice.” A preliminary or pre-lien notice is not a lien against your property. Its purpose is to notify you regarding persons or entities who may have a right to file a lien or claim against your property if they are not paid. To perfect their lien rights, contractors, subcontractors, laborers and suppliers of materials must file mechanics’ liens with the county recorder, which then become recorded liens against your property. Generally, the maximum time allowed for filing a mechanics’ lien against your property is 90 days after substantial completion of your project.
TO ENSURE EXTRA PROTECTION FOR YOURSELF AND YOUR PROPERTY, YOU MAY WISH TO TAKE ONE OR MORE OF THE FOLLOWING STEPS:
(1) Request that your contractor supply you with a payment and performance bond, which guarantees completion of your project and payment of the subcontractors, laborers and suppliers of materials who work on the project. This payment and performance bond is different from the surety bond that a contractor must file for licensure pursuant to NRS 624.270. A payment and performance bond provides that if the contractor does not complete the project, the bonding company will pay damages up to the amount of the bond. This payment and performance bond, as well as a copy of the construction contract, should be filed with the county recorder for your further protection. There is a fee for a payment and performance bond. This fee is usually equal to between 1 and 6 percent of the amount of the contract, depending on the ability of the contractor to be bonded.
(2) Require that payments be made directly to subcontractors, laborers and suppliers of materials through a mechanism that controls payment for construction. In the area in which you live, services to control the funding of your project may be available, for a fee, to control payment of your contractor by the use of vouchers or other means. These services may also provide you with waivers of liens and other forms of protection.
(3) Issue joint checks for payment, made payable to both your contractor and the subcontractors, laborers and suppliers of materials who were involved in the project or portion of the project for which payment is due and who sent a preliminary or pre-lien notice to you. Those persons or entities have indicated that they may have the right to place a lien on your property, and therefore you need to protect yourself. Making checks jointly payable will help to ensure that all persons due payment are actually paid.
(4) Require your contractor to provide you with unconditional “waiver and release” (lien release) forms so that when you make a payment on any completed phase of your project, each subcontractor, laborer and supplier of materials involved in that portion of the work for which the payment was made can sign the waiver and release forms. This protects you from liability to them for work for which they have already been paid.
Some stationery stores sell waiver and release forms if your contractor does not have them. The subcontractors, laborers and suppliers of materials from whom you obtain releases should be those persons or entities who have filed preliminary or pre-lien notices with you. If you are not certain which subcontractors, laborers and suppliers of materials are working on your project, you may obtain a list from your contractor. In regard to projects involving improvements to a single-family residence or a duplex owned by an individual, the persons signing these releases lose their right to file a mechanics’ lien against your property. In regard to other types of projects, obtaining such releases may still be important, but may not provide complete protection.
To protect yourself by use of a waiver and release form, you must be certain that all subcontractors, laborers and suppliers of materials who work on your project sign a waiver and release form. If a mechanics’ lien has already been filed against your property, in most cases the lien can only be released voluntarily by a recorded “release of mechanics’ lien,” which is signed by the person or entity that filed the mechanics’ lien against your property. However, if the person or entity that filed the lien fails to bring an action to enforce the lien in a timely manner, the lien may be removed without voluntary action on the part of that person or entity. You should not make final payment on your project until all mechanics’ liens that are filed against your property have been removed.
TO PROTECT YOURSELF FULLY, YOU SHOULD CONSULT AN ATTORNEY:
(1) BEFORE YOU SIGN A CONSTRUCTION CONTRACT; OR
(2) IF A LIEN IS FILED AGAINST YOUR PROPERTY.
Failure to provide this notice isn’t fatal to the prime contractor’s lien rights, but could subject the contractor to administrative penalties from the Board.
Contractor licensing disclosure
The second disclosure, required under NAC 624.6932, involves the contractor licensing requirements in Nevada.
Contractors are required by law to be licensed and regulated by the State Contractors’ Board. The State Contractors’ Board has jurisdiction to investigate complaints that are filed against contractors. Any questions concerning a contractor may be referred to the State Contractors’ Board at:
(1) 9670 Gateway Drive Suite 100 Reno, Nevada 89521 (775) 688-1141; or
(2) 2310 Corporate Circle Suite 200 Henderson, Nevada 89074 (702) 486-1100
The law of this State requires that a person or entity who enters into a contract to perform construction work be properly licensed by the State Contractors’ Board for the category of work that the person or entity intends to perform. Laws regulating licensed contractors are designed to protect the public. If you contract with a person or entity who is not licensed to perform construction work, your remedies against that person or entity may be limited to a suit in civil court. You may be liable for damages arising out of any injuries to an unlicensed contractor or that contractor’s employees, as well as withholding taxes, contributions pursuant to the Federal Insurance Contributions Act and contributions for industrial insurance and unemployment compensation. In addition, you must comply with other applicable state and federal laws regarding employment. Finally, you should be aware that construction performed on your property must comply with all applicable laws, ordinances, building codes and regulations.
A contractor is required to include the contractor’s license number on all of his or her advertising, vehicles, bids and contracts. You may contact the State Contractors’ Board to find out if a contractor has a valid license and, if so, the status of that license and the status of any disciplinary action by visiting the website of the Board at http://www.nvcontractorsboard.com or calling the Board at one of the telephone numbers listed above.
Residential Construction Recovery Fund Notice
Lastly, the prime contract for single-family residential improvements must also include a notice regarding the Nevada Residential Recovery Fund, which is a fund paid into by residential contractors and managed by the Contractor’s Board.
It is meant to offer protection for Nevada homeowners who contract with licensed contractors and, under certain conditions, are harmed by the failure of that contractor to properly perform qualified services. The required notice language under NRS 624.520 should read as follows:
RESIDENTIAL CONSTRUCTION RECOVERY FUND
Payment may be available from the Recovery Fund if you are damages financially by a project performed on your residence pursuant to a contract, including construction, remodeling, repair, or other improvements, and the damage resulting from certain specified violations of Nevada law by a contractor licensed in this State. To obtain information relating to the Recovery Fund and filing a claim for recovery from the Recovery Fund, you may contact the State Contractors’ Board.
Failure to include this notice can subject the contractor to a fine of up to $100 for the first violation and up to $250 for second or subsequent violations.
Residential swimming pool & spa contracts
In addition to the aforementioned requirements, there are even more requirements for a contract of $1,000 or more, concerning the construction, repair, or maintenance of a pool or spa in connection with a single-family, residential property. These requirements are spread out between NRS §624.940 and NAC §624.6958, this includes, but is not limited to:
- Contractor’s name, business address, and license number
- Property owner’s name and address
- The project’s address or legal property description
- Date of the execution of the contract
- Estimated date of completion
- Description of the work to be performed; including plans, scale drawings, and specs, the equipment to be used and installed
- Total contract amount (including any applicable taxes)
- A listed initial downpayment that cannot exceed $1,000 (or 10% of the total contract amount)
- A statement that the owner was provided with the notice and informational form as required under NRS. §624.600
- A statement that any additional work to be performed, whether or not pursuant to a change order, which will require the owner to pay additional money and any other change in the terms in the original contract must be agreed to in writing by the parties and incorporated into the original contract as a change order.
In addition to these provisions, the contract must also contain the following in at least 10pt, bold font:
- Schedule of payments and the amounts due for each that meets the requirements of NAC 624.6964;
- Agreement by the contractor to provide each sub or supplier prompt and full payment upon completion of each stage or phase of construction
- A statement that upon satisfactory payment being made for any portion of the work performed, the contractor shall, in accordance with subsection 3 of NAC 624.6966 and before any further payment is requested or made, provide to the owner an unconditional lien waiver for that portion of the work for which payment has been made.
The contract should also provide spaces where the owner can initial provisions indicating that they have been read. And lastly, near the owner’s signature line, there should be a statement that the owner may contact the Board if assistance is needed to clarify any provisions of the contract that the owner doesn’t fully understand, and that they have the right to request a payment and performance bond.