2.3 Residential Recovery Fund (NRS 624.400–624.560): Eligibility, Assessments & Payouts

Purpose of the Recovery Fund (NRS 624.400–624.560)

The Residential Recovery Fund, formally the account established under NRS 624.470, was created in 1999. A license bond can be as low as $1,000 and is shared among all claimants. The Fund gives homeowners a second, industry-financed source of recovery when a licensed residential contractor's violation of NRS Chapter 624 causes them actual damages.

Key Definitions

• Qualified Services (NRS 624.440): Any construction, remodeling, repair or improvement performed by a residential contractor on a single-family residence occupied by the owner.
• Residential Contractor (NRS 624.450): A licensed contractor who contracts with the owner of a single-family residence to perform qualified services.
• Owner (NRS 624.430): A natural person who owns a single-family residence and contracts with a residential contractor for qualified services. The term includes a subsequent owner, a natural person who buys the residence from the owner (NRS 624.460).
• Injured Person (NRS 624.420): An owner who is damaged by the residential contractor's failure to perform qualified services adequately, or who pays to release a recorded lien when the licensee willfully failed to pay for materials or services after receiving enough money to pay for them.

How the Fund Fits With Other Remedies

• It is not insurance; it is an account funded by assessments on residential contractors and administered by the Board.
• If the owner has recovered part of the loss elsewhere, such as from the license bond, the Board deducts that recovery before paying (NRS 624.510(5)).
• The Board must keep a minimum balance of $200,000 once that balance has been reached (NRS 624.550).

Biennial Assessments (NRS 624.470)

In addition to the license fee, every residential contractor pays a biennial assessment that may not exceed:

• The Board must reduce the assessment when the account reaches 150 percent of its largest balance during the previous fiscal year (NRS 624.470(3)).
• The assessment is part of the renewal package (NRS 624.283(2)(c)), and failure to pay it is a ground for discipline (NRS 624.3016(8)).

Filing Deadlines and Process

There are two routes to the Fund:

1. Complaint to the Board (NRS 624.480): File a complaint with the Board or its designee within 4 years after the completion of the qualified services.
2. Satisfaction of a Judgment (NRS 624.490): Within 2 years after obtaining a court judgment against the residential contractor for a Chapter 624 violation, apply to have the judgment paid from the account. All proceedings, including appeals, must be over, and the applicant assigns to the Board its right to enforce the judgment up to the amount paid.

For a complaint:

• The Board or a committee it appoints must hold a hearing and give the injured person at least 30 days' written notice of it. The hearing is public on request (NRS 624.500).
• The Board must act on the complaint within 6 months after it is filed.
• Staff send the complaint by certified mail to the contractor's address of record and investigate. Documents not provided to staff at least 10 calendar days before the hearing may be refused (NAC 624.755).
• The Board decides by final order, weighing the Fund's condition and, with several claimants, an equitable division of the money available (NAC 624.760).
• Disbursement may not begin until 30 days after the final order (NAC 624.770).
• The decision on eligibility is final and not subject to judicial review (NRS 624.510(4)).

Payment Limits (NRS 624.510)

Maximum Caps

• Per Claim: The Board may pay the actual damages suffered, or the unpaid actual damages in a judgment, but not more than $40,000.
• Per Contractor: Total recovery on all claims against any single contractor may not exceed $750,000 or 20 percent of the account balance, whichever is less. The balance is measured on the date the Board approves payment of all the claims.

What Counts as Actual Damages

• Recoverable: The owner's actual financial loss from the violation, such as the reasonable cost of having another licensee correct defective work or finish an abandoned job.
• Attorney's Fees: "Actual damages" includes attorney's fees or costs only in contested cases appealed to an appellate court. No other attorney's fees or costs are included (NRS 624.510(8)).

Several Claimants Against One Contractor

When valid claims against one contractor exceed the per-contractor cap, the Board divides the available amount equitably among claimants (NAC 624.760). For example, if 30 homeowners prove $1,500,000 of damages against one builder and the cap is $750,000, each could receive roughly half of the approved claim, never more than $40,000 apiece.

Who Cannot Recover (NRS 624.510(2))

An injured person is not eligible if:

1. Related or Cohabiting: The person cohabits with the licensee, is related to the licensee by marriage or by blood within the first or second degree of consanguinity, or represents such a person.
2. Business Relationship: The person was associated with the licensee in a business relationship other than the contract at issue.
3. Suspended or Revoked License: The contractor's license was suspended or revoked under NRS 624.300 when the contract was made.
4. Owner-Builder or Own Permit: The person obtained the building permit for the residence or built the residence as an owner-builder.
5. False Claim: The claim contains a false or misleading statement, or a forged or altered receipt or document that includes work beyond the scope of the contract.
6. Lien Claimant Without a Lien: The person is a lien claimant who did not file a lien under NRS 108.221 to 108.246.
7. Intent to Rent or Sell: The residence was built, remodeled, repaired or improved with the intent to rent, lease or sell it within 1 year after completion. Offering it for rent, lease or sale within that year creates a rebuttable presumption of that intent.

Because the Fund serves only natural persons who own single-family residences that they occupy, these claimants cannot recover: commercial property owners, investors, and suppliers or subcontractors (who use lien and bond remedies instead).

Required Contract Notice (NRS 624.520)

Every residential contractor must tell owners about the Fund, including a written statement in every agreement or contract for qualified services in substantially this form:

RESIDENTIAL CONSTRUCTION RECOVERY FUND: Payment may be available from the Recovery Fund if you are damaged financially by a project performed on your residence pursuant to a contract, including construction, remodeling, repair or other improvements, and the damage resulted 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.

The Board may fine a contractor up to $250 for a first violation and up to $500 for each later violation, and the fines go into the account. Failure to give the notice is also a ground for discipline (NRS 624.3016(4)).

After a Payment: Subrogation and Repayment

• Subrogation: To the extent it pays, the Board is subrogated to the injured person's rights, including the right to collect from the contractor's surety bond or cash deposit. The Board and the Attorney General must promptly enforce subrogation claims (NRS 624.510(6)). Each claimant signs a subrogation and cooperation agreement (NAC 624.765), and the final order goes to the Attorney General (NAC 624.770).
• Repayment as Discipline: The Board may order a licensee to repay the account for any amount paid because of its act or omission (NRS 624.300(1)(e)).
• Lien-Release Payments: If the Fund paid an owner to release a lien caused by the contractor's willful failure to pay after receiving the money, the Board may suspend or revoke the license. It may also refuse to issue, reinstate or renew a license for the contractor and its officers, directors, associates or partners until the money is repaid (NRS 624.530).
• Other Discipline: The Fund provisions do not limit the Board's ordinary disciplinary authority (NRS 624.530(1)).