By: Catherine Lusk  [10/7/22]

In Virginia, any contract with a licensed residential contractor must include a statement notifying the homeowners of the existence of the “Virginia Contractor Transaction Recovery Fund”, including information on how to contact the Department of Professional and Occupational Regulation (DPOR) Board for Contractors. 

This Recovery Fund was created as a means of providing consumer protection for residents of Virginia who have been defrauded by poor work or the dishonesty of a contractor. In cases where the contractor has few assets or is insolvent, the Recovery Fund may be the only opportunity for homeowners to recoup any of their losses. 

Am I Eligible to Make a Claim to the Recovery Fund?

The contractor you hired must have been licensed with the DPOR at the time you signed the contract with them. In Virginia, any contractor performing construction work under a contract worth $10,000 or more must be licensed. You can verify the license status of your contractor on the DPOR website at this link here.

Only private consumers who enter into contracts for work on a residential property or, in some cases, homeowners’ associations that contracted for work on common areas are eligible for relief under the Recovery Fund. The project must not have been part of a business that involves the construction or development of real property, and employees, vendors, or family members of the contractor, another licenced contractor or subcontractor, and financial or lending institutions are not eligible for relief under the Recovery Fund. 

Finally, your loss must have been caused by the “improper or dishonest conduct” of the contractor. Improper or dishonest conduct means that the contractor has engaged in the wrongful taking or conversion of money, property, or other things of value by fraud, material misrepresentation, or conduct that constitutes gross negligence, incompetence, or intentional violation of the Virginia Uniform Statewide Building Code. Merely breaching the contract is not sufficient to support a claim. 

How Do I Make a Claim to the Recovery Fund? 

In order to obtain relief under the Recovery Fund, you must first file a lawsuit in a court in Virginia against the contractor and obtain a judgment in your favor. If your judgment determines that your losses were based upon the improper or dishonest conduct of the contractor, the DPOR claim process will be streamlined. 

Next, you must conduct debtor interrogatories to determine if the contractor has any assets that can be used to satisfy the judgment. If there are any assets available, you must first exhaust all efforts to collect against those assets.  

Finally, once it is clear that the contractor does not have enough assets to satisfy your judgment against them, you can submit a claim to the DPOR Board for Contractors for review. 

The Board for Contractors will not consider claims until you have obtained a judgment and exhausted all other means to enforce that judgment. Obtaining relief from the Recovery Fund is a long, extended process that can take a year or more. 

How Much Can I Recover If I Make a Claim?  

Recovery Fund claims are limited to $20,000 per residential construction project, and a maximum of $40,000 will be paid out per contractor. If there are multiple claims against a single contractor that exceed $40,000, the maximum amount will be prorated amongst all of the claimants. 

What If My Contractor Was Not Licensed? 

Unfortunately, relief under the Recovery Fund is only available if the contractor held a valid license. Consumers may be able to make a claim against an unlicensed contractor under the Virginia Consumer Protection Act (VCPA). If a contractor entered into a contract with a homeowner that would require them to have a license, that contractor may have violated the VPCA, and you may be able to obtain a judgment against the contractor for your losses and reasonable attorneys fees. 

Do I Need to Be Represented by An Attorney?

The DPOR does not require homeowners making a claim against the Recovery Fund to be represented by an attorney. However, obtaining relief from the Recovery Fund is a lengthy process and you can only make a claim after a successful lawsuit against the contractor and after all other civil legal remedies have been exhausted. In many cases, there may be multiple people with claims against a contractor, and those who work with an attorney to navigate the entire process are more likely to make a successful claim to the Recovery Fund. 

To learn about how Dunlap Bennett & Ludwig can assist you with your legal needs, contact us by calling 800-747-9354 or by emailing clientservices@dbllawyers.com.


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Posted in: Litigation & Disputes, Real Estate

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