TCA § 39-14-154, also known as the construction theft statute, creates protections for homeowners by providing criminal liability for certain actions or inactions by contractors.  It seems the popularity of this enforcement is on the rise.  As we consult with clients who are Home Improvement Contractors, General Contractors, and Homeowners, it's clear a lot of misinformation is out there.

Who does it apply to?

A common misconception is that the statute only applies to Home Improvement Contractors as defined by TCA § 62-6-501, but it applies to all contractors, including general contractors. 

What constitutes a violation?

• The contractor and the homeowner must first enter into a contract for residential "repair, replacement, remodeling, alteration, conversion, modernization, improvement, or addition to any residential property, and includes, but is not limited to, the repair, replacement, remodeling, alteration, conversion, modernization, improvement, or addition to driveways, swimming pools, porches, garages, landscaping, fences, fall-out shelters, and roofing."
  • The contractor has failed to substantially perform the service, more than 90 days have elapsed since the starting date of the work, and a copy of the written request for a refund was sent by the homeowner to the consumer protection division of the office of the attorney general; and the homeowner made a written demand for a refund that was served on the contractor by certified mail; or
  • There is a material deviation from or disregard of plans, such that the value of the new construction is less than it was had the construction been performed according to the plans; and
• The contractor entered into the contract with the intent to deceive, defraud, or illegally deprive the homeowner of their property. Facts which establish a breach of contract may not necessarily reflect an intent to defraud or constitute "deception" within the meaning of our criminal code. See State v. Amanns, 2 S.W.3d 241, 245 (Tenn. Crim. App. 1999). In a recent case, the Tennessee Court of Criminal Appeals held that proof that despite the fact that "Defendant did not complete the projects he and the residential owner agreed to, in both written and possibly oral contracts, as evidenced by the residential owner's having to hire someone else to complete the projects [and] proof that Defendant did substandard work at the residential owner's home," the contractor was not liable under TCA § 39-14-154. State v. Pardue, No. M2023-00227-CCA-R3 (Tenn. Crim. App. 2024)

What steps does the homeowner need to take to properly enforce the statute in response to a violation?

There are two situations where a contractor may be found criminally liable under the statute.  Under the first, the following circumstances must also be true:

• • The contractor has failed to substantially perform the service;
  • More than 90 days have elapsed since the starting date of the work;
  • The homeowner sent a refund request by certified mail; and
  • The request was sent to the attorney general.

The second occurs when there is a substantial departure from the plans.

What terms are required to be in the contract?

The Tennessee Consumer Protection Act prohibits a home improvement services provider from entering into a contract for home improvement services without providing to the residential owner in written form:

• • That it is a criminal offense for the person entering into the contract for home improvement services with a residential owner to do any of the prohibited acts set out in § 39-14-154(b), by writing out the text of each prohibited act, and providing the penalty and available relief for such; and
  • The true and correct name, physical address, and telephone number of the home improvement services provider.

How can contractors avoid liability?

• Make sure your agreements are written by an attorney knowledgeable in construction law;
• Communicate with clients proactively;
• Make sure any change in address is widely known;
• Make sure to stay within monetary limits;
• Make sure you take less than a 1/3 deposit before beginning work;
• Make sure you are in contact with local inspectors;
• Always use written change orders; and
• Document communication as much as possible.

What are the common misconceptions?

A common homeowner error is to read the statute as it applies to making the demand for a refund but failing to check the rest of the boxes to comply with this statute.

Intent matters for a contractor to be liable under this statute.  Bad work, slow work, or incomplete work is not enough.

Many believe that this applies only to home improvement service providers, but the statute applies across the trades and to general contractors.

Homeowners often use this as a way to get paid back but, for the reasons listed in this blog, it could be the route that makes recovering money paid the most difficult.

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DZ Law specializes in residential construction disputes.  We work with contractors and homeowners.

(865) 898-0020

Related Statutes: TCA §§ 39-14-105, 47-18-101, 62-6-102, 62-6-501,