Construction fraud in New York refers to deceptive or unlawful conduct by contractors, builders, or tradespeople that causes financial harm or property damage to owners. While New York law does not define a standalone offense called “construction fraud,” prosecutors commonly pursue such cases under various criminal statutes, including:
- New York Penal Law Article 155 (Larceny and Theft Offenses), which may include embezzlement or theft of funds
- New York Penal Law Section 190.65 (Scheme to Defraud), targeting repeated fraudulent conduct in business transactions
- New York Penal Law Article 175 (Falsifying Business Records), often used when contractors manipulate documentation or billing
In more severe cases, such as those involving elderly victims or large scale financial losses, criminal charges may also include insurance fraud, grand larceny, or violations of the New York State Labor Law.
Examples of fraudulent behavior may include accepting payment without completing work, using substandard materials that lead to construction defects, misrepresenting licensing status or project timelines, or submitting inflated or false insurance claims.
In addition to criminal prosecution, construction fraud may also be addressed through civil remedies. On the civil side, property owners may pursue claims under:
- New York General Business Law Sections 349 and 350, which prohibit deceptive practices and false advertising in consumer transactions
- Common law fraud, which applies when a contractor knowingly makes false statements that induce reliance and cause financial harm
- Breach of contract or negligent misrepresentation, depending on the nature of the misconduct
Before initiating legal action, homeowners are generally advised to provide written notice of the issue and allow the contractor an opportunity to inspect or correct the problem. This is especially true if the contract includes such provisions.
If you suspect construction fraud, then your first step before decisions to sue a contractor should be to contact local law enforcement or the New York County District Attorney’s Office, which has a dedicated Construction Fraud Task Force. These administrative agencies investigate contractor related crimes and may pursue criminal charges where appropriate.
If you’ve experienced financial loss, it’s recommended to set up a legal consultation in New York with a New York lawyer who is experienced in construction litigation or contractor fraud to explore your legal options and help you determine your best course of action.
What Is Fraud?
In New York, the term fraud refers to a deliberate act of deception intended to secure an unfair or unlawful gain, often resulting in financial or personal harm to another party. In order to prevail in a fraud case, the plaintiff (i.e., the person alleging they were harmed) must establish several core legal elements that demonstrate both the deceptive conduct and the resulting injury.
The essential elements of fraud in New York include:
- Material misrepresentation or omission: The defendant must have made a false statement or failed to disclose a significant fact relevant to the transaction
- Knowledge of falsity or reckless disregard: The defendant must have known the statement was false or acted with disregard for its truth
- Intent to defraud: The defendant must have intended for the plaintiff to rely on the misrepresentation
- Justifiable reliance: The plaintiff must have reasonably relied on the false statement or omission
- Resulting damages: The plaintiff must have suffered actual and measurable harm as a direct result of that reliance
Is Criminal Fraud the Same as Contract Fraud?
No, criminal fraud and contract fraud in New York are distinct legal concepts. Criminal fraud involves intentional deception for unlawful gain and is prosecuted by the state under the New York Penal Law, such as Larceny (Article 155), Forgery (Article 170), or Scheme to Defraud (Section 190.65).
These criminal offenses require proof of criminal intent and are punishable by fines, imprisonment, or both. The prosecution must establish beyond a reasonable doubt that the defendant knowingly engaged in fraudulent conduct.
Contract fraud, by contrast, is a civil matter that is typically pursued by private individuals or entities. It arises when one party makes false statements or promises to induce another into entering a contract, and the injured party suffers financial harm as a result.
Under New York common law, the plaintiff must prove several elements to succeed in a contract fraud case:
- A material misrepresentation or omission of fact
- Knowledge of the falsity or reckless disregard for the truth
- Intent to induce reliance
- Justifiable reliance by the plaintiff
- Resulting damages
In certain cases, statutory fraud may also apply, such as under the Martin Act for securities transactions, or General Business Law Sections 349 and 350, which prohibit deceptive practices and false advertising in consumer dealings. In sum, unlike criminal fraud, civil fraud focuses on compensating the victim, not punishing the wrongdoer.
How To File a Criminal Charge Against a Contractor in New York
If you want to pursue criminal charges against a contractor in New York, the first step is to report any suspected misconduct to your local police department or the District Attorney’s Office. Criminal prosecution may be appropriate when a contractor knowingly engages in deceptive conduct to obtain money or property unlawfully.
For example, accepting payment without any intention of completing the agreed-upon work. Prosecutors may pursue such cases under statutes like Scheme to Defraud (New York Penal Law Section 190.65), Grand Larceny (Article 155), or Falsifying Business Records (Article 175). In certain cases, violations of New York’s Lien Law Article 3-A may also apply, especially if trust funds are being misused or diverted from their intended purpose.
What Are Some Types of Claims for Contractor Fraud Cases?
In New York, various legal claims may arise in cases of contractor fraud, depending on the nature of the misconduct. One of the most common types of contractor fraud is fraudulent misrepresentation, which applies when a contractor knowingly makes false statements that influence a homeowner’s decisions.
Another is fraudulent inducement, where deceptive promises are used to persuade someone to enter into a contract. If the dispute involves real estate, owners may pursue claims under New York General Business Law Sections 349 and 350, which prohibit deceptive practices and false advertising in consumer transactions.
Additional claims may include negligent misrepresentation, which arises when a contractor provides inaccurate information without exercising reasonable care, resulting in harm, even if there was no intent to deceive. Breach of contract is also a common claim when the contractor fails to fulfill agreed upon terms.
In certain situations, homeowners may assert constructive fraud, which focuses on the violation of a position of trust or fiduciary-like relationship, even without explicit intent to defraud. These civil actions are designed to help recover losses such as repair costs, reduced property value, or other out-of-pocket expenses stemming from the contractor’s misconduct.
Who Can Commit Construction Fraud?
Construction fraud in New York can be committed by a wide range of individuals or parties that are involved in a building project. This may include general contractors, subcontractors, suppliers, engineers, architects, or even the property owners themselves.
As noted above, fraud can take many forms and may occur at any point, from the planning and bidding phase to the construction and final review. Typical misconduct includes dishonest billing practices, misrepresenting credentials or experience, using poor quality materials, or providing false project details.
In short, anyone who fails to uphold their obligation to act honestly and ethically during the project may face civil lawsuits or criminal charges under laws such as New York Penal Law Article 155 (Larceny), Article 175 (Falsifying Business Records), or Article 176 (Insurance Fraud).
What Should I Do To Prevent Construction Fraud?
In order to reduce your risk of construction fraud in New York, you should begin by thoroughly researching potential contractors. For example, you should check references, verify licensing through the New York City Department of Consumer and Worker Protection (for home improvement contractors), and confirm that the contractor carries active general liability and workers’ compensation insurance as required by state law.
It is important to get all terms in writing, including labor scope, materials, costs, timelines, and warranties, to establish clear expectations. You should also avoid making large upfront payments, and instead use progress based installment payments tied to documented milestones and inspections.
It is also essential to maintain organized records of all contracts, receipts, permits, and communications, and remain actively engaged in overseeing the project to promote transparency and accountability throughout the construction process.
Can Settlements and Agreements Be Reached in New York Contractor Fraud Cases?
In New York, contractor fraud cases are frequently resolved through mutual agreements or negotiated settlements, particularly when both parties wish to avoid the cost and unpredictability of litigation.
These resolutions may occur either before or after a lawsuit is filed, and can include reimbursement for damages, contract termination, or other customized terms suited to the circumstances.
Civil claims such as fraudulent misrepresentation, negligent misrepresentation, breach of contract, or violations of New York General Business Law Sections 349 and 350 often form the legal basis for these settlements.
Agreements may also include confidentiality clauses, structured payment arrangements, or non-disparagement provisions, and are typically memorialized in a formal written contract that are signed by all parties involved.
Should I Contact a New York Lawyer About Construction Fraud?
If you suspect construction fraud in New York, or if you have suffered financial harm due to deceptive practices by a contractor, it is strongly advised to consult with an experienced New York construction lawyer as soon as possible.
LegalMatch can assist you in locating a qualified lawyer who can assist with cases involving fraudulent billing, unfinished or substandard work, misrepresentation of credentials or project details, and other forms of contractor misconduct.
As noted, these matters often involve complex legal and procedural issues. A knowledgeable attorney can help you understand your rights under New York law, gather supporting documentation, and pursue compensation through negotiation, mediation, or litigation. They can also represent you at any in person court proceedings or administrative hearings, if necessary.
