Lien Law §71-a

Lien Law §71-a is the New York State law that regulates how home improvement contractors must handle progress payments received before a job is substantially complete. The rule is blunt: contractors cannot treat homeowner payments as general business funds.

Under §71-a, a contractor must either:

1. Deposit all progress payments into a separate escrow account,

   OR

2. Provide the homeowner with a bond or Contract of Indemnity that guarantees the money will be properly used for the project or returned if not.

The law prevents contractors from collecting large upfront payments and spending them on unrelated expenses. It ensures those funds are reserved strictly for:

• Labor

• Materials

• Subcontractors

• Other direct project costs

DCWP requires contractors to disclose this rule in every home improvement contract, and violations can lead to fines, license problems, and civil liability.