If a homeowner has been partially paid by the general contractor who botched the job, can the homeowner still recover any of the remaining loss from North Carolina's Homeowners Recovery Fund?
Plain-English summary
NC's Homeowners Recovery Fund was set up to reimburse owners of single-family residential dwellings when a general contractor's dishonest or incompetent work caused them a monetary loss and the contractor will not pay. The Licensing Board for General Contractors administers the Fund. To get money out of the Fund, an applicant has to show a "reimbursable loss" under N.C.G.S. § 87-15.5(6).
The Board's general counsel asked the AG: what if the contractor paid the homeowner something but not enough to cover the loss? Can the homeowner still get the remaining shortfall from the Fund?
The AG's answer was no. The statute defines reimbursable loss as a monetary loss that "is not paid, in whole or in part, by or on behalf of the general contractor whose conduct caused the loss." The AG read those words at face value. "In whole" means total payment. "In part" means anything less than total. The phrase "in whole or in part" therefore covers any payment by the contractor, no matter how small. A homeowner who received even a token payment from the contractor is outside the definition of reimbursable loss, and the Fund cannot pay anything.
The AG quoted Webster's Ninth New Collegiate Dictionary on the meaning of "part" ("something less than the whole") and applied the standard statutory-construction rule that words must be given their plain meaning unless the context indicates otherwise. The opinion's underlying logic: the General Assembly knew how to write "partial payment does not bar partial recovery" if it wanted that result. It instead chose language that locks out any homeowner who received any contractor payment.
The practical consequence is sharp. A homeowner facing a $40,000 defect repair could decline a $500 settlement payment from the contractor in order to preserve eligibility for the Fund. Accepting the $500 would forfeit the entire claim. This is an outcome that may strike many readers as severe, but the AG concluded the statute's plain language requires it.
Currency note
This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Article 1A of Chapter 87, including the Homeowners Recovery Fund provisions, has been amended several times since 1998. The cap on recovery, the procedures for filing, and possibly the partial-payment rule itself may have changed. Anyone with a current claim should check the current text of § 87-15.5 and the Board's current procedural rules.
Common questions
Q: What is the Homeowners Recovery Fund?
A: It is a fund administered by the NC Licensing Board for General Contractors and funded by a small surcharge on contractor license fees. Homeowners who suffer dishonest or incompetent conduct by a licensed contractor and cannot recover from the contractor (because the contractor is insolvent, judgment-proof, or refuses to pay) can apply for partial reimbursement subject to statutory caps.
Q: So a contractor could pay a small amount to block any Fund recovery?
A: Under this opinion, yes. A contractor who saw the writing on the wall could write a $100 check to make the loss no longer "reimbursable" within § 87-15.5(6). Whether that was the General Assembly's intended outcome is a policy question, not a legal one. The AG was reading the statute as written.
Q: What should a homeowner do if a contractor offers a small payment as a settlement?
A: This was a tightrope even at the time. A homeowner with a serious claim should have consulted counsel before accepting any payment from the contractor, because under this AG opinion accepting the payment forfeits the Fund claim. A homeowner should also have checked whether the statute had been amended since 1998 before relying on this opinion.
Q: Does this affect insurance settlements or surety bond payouts?
A: The same § 87-15.5(6)c. excludes losses "covered by a bond, a surety agreement, or an insurance contract." So insurance and bond recoveries also keep the loss outside the Fund's reach. Subparagraph b. (the question this opinion addresses) is specifically about payments from the contractor itself.
Q: What if the contractor's payment came after the homeowner filed the Fund application?
A: The opinion does not directly answer this. The statute speaks of the loss being one that "is not paid" by the contractor, present tense. A reasonable reading is that the eligibility test runs to the date the Board decides the application, not the filing date. But that is a question for the Board's procedural rules and for a court if it is ever litigated.
Background and statutory framework
The Homeowners Recovery Fund was created by the General Assembly in the 1980s as a way to give residential homeowners a partial backstop against rogue contractors. Unlike industrial or commercial construction (where developers have insurance, sureties, and litigation budgets), residential homeowners often lack the means to pursue a contractor who has disappeared with their deposit or left a botched job. The Fund is a small pool but a real one.
N.C.G.S. § 87-15.6(a) states the Fund's purpose: "to reimburse homeowners who have suffered a reimbursable loss in constructing or altering a single-family residential dwelling unit." § 87-15.5(6) defines what counts as a reimbursable loss. The three elements are (a) dishonest or incompetent contractor conduct; (b) no payment by the contractor; and (c) no coverage by a bond, surety, or insurance.
Citations
- N.C. Gen. Stat. § 87-15.5(6) (definition of "reimbursable loss")
- N.C. Gen. Stat. § 87-15.6(a) (purpose of the Homeowners Recovery Fund)
Source
Original opinion text
N.C. Licensing Board for General Contractors
P. O. Box 17187
Raleigh, NC 27619
RE: Advisory Opinion; General Contractors; Homeowners Recovery Fund; N.C.G.S. § 87-15.5
Dear Mr. Selph:
You ask whether a homeowner who has suffered a monetary loss and has filed an application for reimbursement from the Homeowners Recovery Fund established pursuant to Article 1A of Chapter 87 of the General Statutes is entitled to any recovery from the Fund if he has received any monetary payment, regardless of amount, from the general contractor responsible for the loss.
For reasons which follow, it is our opinion that no payment may be made from the Fund to any applicant who has received any monetary payment from the general contractor responsible for the loss.
The Homeowners Recovery Fund was established "to reimburse homeowners who have suffered a reimbursable loss in constructing or altering a single-family residential dwelling unit." N.C.G.S. § 87-15.6(a). A reimbursable loss is defined in N.C.G.S. § 87-15.5(6) as follows:
Reimbursable loss. — A monetary loss that meets all of the following requirements:
a. Results from dishonest or incompetent conduct by a general contractor in constructing or altering a single-family residential dwelling unit.
b. Is not paid, in whole or in part, by or on behalf of the general contractor whose conduct caused the loss.
c. Is not covered by a bond, a surety agreement, or an insurance contract.
A reimbursable loss, therefore, is a monetary loss that, among other things, "is not paid, in whole or in part, by or on behalf of the general contractor whose conduct caused the loss." N.C.G.S. § 87-15.5(6)b. When construing the meaning of a statute enacted by the General Assembly, the cardinal rule of construction is that the intent of the Legislature controls the interpretation of a statute. Housing Authority of Greensboro v. Farabee, 284 N.C. 242 (1973). Moreover, it is presumed that the Legislature comprehended the import of the words employed by it to express its intent. Henry v. Leather Company, 234 N.C. 126 (1951). Where the words of a statute have not acquired a technical meaning, they must be construed in accordance with their common and ordinary meaning unless a different meaning is apparent or clearly indicated by the context of the statute. Lafayette Transp. Service, Inc. v. County of Robeson, 283 N.C. 494 (1973).
The question is, therefore, what was the intent of the Legislature when it prohibited an applicant from recovering anything from the Fund if the applicant was paid "in whole or in part" by the general contractor whose conduct caused the loss? Webster's Ninth New Collegiate Dictionary, (1987 Edition) defines the term "in whole" as follows: "to the full or entire extent." That same dictionary defines the word "part" as "something less than the whole." It is clear, therefore, that the Legislature intended that a person who receives any monetary payment from the contractor whose conduct caused the loss, no matter how small that payment might be, would not be entitled to any reimbursement from the Fund.
signed by:
Andrew A. Vanore, Jr.
Chief Deputy Attorney General