NRS 624.970 Places New Restrictions on Residential Contractors

At the end of the 2023 Legislative Session, the Nevada State Legislature (which meets every two years in Carson City, Nevada) passed many new laws that impact businesses engaging in construction work in Nevada. One such law was the bill known as AB39. This bill went into effect October 1, 2023, and was recently codified into the Nevada Revised Statutes as NRS 624.970. NRS 624.970 applies to construction projects taking place on "single family residences" only. For purposes of the new statute, a “single family residence” is owned by one or more individuals who occupy the residence upon which the construction is to take place. See NRS 624.455.

A seminar was organized by the Nevada State Contractor's Board in early October 2023 to present details about the new requirements and to address queries from interested individuals. Participating in this seminar provided an intriguing insight into the disparity between the NSCB's function and the perception of many licensees, inspiring me to deliver a presentation on the bill at the Nevada Contractor’s Association. A PDF copy of this presentation is available on my website, which was prepared before the bill was codified.

NRS 624.970 is available online, here. The statute's language is broad and contains provisions making a construction contract voidable by the individual owner-occupier of a residential construction project under certain circumstances. This means it has the potential to be used as a tool by savvy residential owners to renegotiate contracts after they have been signed, and as a basis for non-payment.

Two primary changes that contractors should be aware of are: (1) the limitation on the deposit amount that can be collected by a contractor prior to starting work on the Project; and (2) the requirement that the contract have a schedule of payments, providing a breakdown of the stages of progress payments as construction progresses, from the execution of the contract to completion of the job. These two changes have the “most teeth” of all of the changes included in NRS 624.970 because if a contractor does not comply with them, the owner may ability to void the entire contract.

The deposit requirement seems to concern residential contractors the most, but a contractor can be excepted from it if they obtain a consumer protection bond, in addition to their existing contractor’s license bond, in the amount of $100,000. This is a bond that the contractor must perpetually maintain on its license and is for the benefit of the public at large, including all customers of the contractor. The bond form required is on the NSCB's recently re-designed website, here.

The payment schedule requirement, while arguably less burdensome to incorporate into contracts, is not as easy to opt lawfully opt out of. The only way to become excepted from the requirement is to obtain both a payment bond and a performance bond for each residential construction project for which no schedule of payments is provided in the contract. These bonds can create a much higher degree of liability, both up and down the payment tiers of a construction project. Additional information about these different bonds is available here.

The best way to navigate these new rules for residential contracting is to contact a qualified lawyer to advise you about how to comply with these rules in a way that works best for your business. This article and the resource links provided herein are summaries of the law and are for reference purposes only and do not constitute legal advice.