The North Carolina Homeowners Recovery Fund

The Homeowners Recovery Fund reimburses monetary losses caused by dishonest or incompetent conduct by a general contractor in constructing or altering a single-family residential dwelling unit. It is paid for by contractors through a fee on residential building permits, administered by the licensing board, and it is a last resort reached only after civil remedies are exhausted.

It is not disaster or storm relief, and it has nothing to do with hurricane recovery programs that share similar names. It concerns contractor conduct and nothing else.

It is also not insurance. The statute excludes a loss that insurance or a bond already covers.

What the statute counts as a reimbursable loss

G.S. 87-15.5 defines the term, and all three limbs must be met:

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.

Each limb narrows it. The conduct must be dishonest or incompetent — “dishonest conduct” is itself a defined term in G.S. 87-15.5, covering fraud or deceit in obtaining a license or in the practice of general contracting. The building must be a single-family residential dwelling unit. And a loss already met by the contractor, a bond, a surety agreement or an insurance contract is not a reimbursable loss at all (G.S. 87-15.5).

G.S. 87-15.5’s third limb — that the loss is “not covered by a bond, a surety agreement, or an insurance contract” — is what makes the Fund a last resort rather than an alternative to the ordinary routes. The classification of work covered is at the Residential classification; cover that would displace a claim is at insurance and bonds.

The exhaustion requirement

The bar set by G.S. 87-15.8 is higher than a complaint. An applicant for reimbursement must have:

Has exhausted all civil remedies against the general contractor whose conduct caused the loss and, if applicable, the general contractor’s estate, and has obtained a judgment against the general contractor that remains unsatisfied. This requirement is waived if the person is prevented from filing suit or obtaining a judgment against the contractor due to the automatic stay provision of section 362 of the U.S. Bankruptcy Code.

Two elements sit inside that: civil remedies exhausted, and a judgment obtained and still unsatisfied (G.S. 87-15.8). The single stated waiver is the automatic stay under section 362 of the U.S. Bankruptcy Code.

This page describes that requirement. Whether any particular set of circumstances satisfies it is a legal question and is not decided here.

Payment is discretionary, and the statute says so plainly

G.S. 87-15.8 gives the board broad discretion and states the character of a payment in terms:

The Board shall investigate all applications for reimbursement and may reject or allow part or all of a claim based on the amount of money in the Fund. The Board shall have complete discretion to determine the order, amount, and manner of payment of approved applications. All payments are a matter of privilege and not of right and no person has a right to reimbursement from the Fund as a third party beneficiary or otherwise. No attorney shall be compensated by the Board for prosecuting an application before it.

That last sentence is quoted exactly as the statute has it and is not expanded on here.

The cap, and why it is not a fixed sum

No figure can be stated as the amount an approved claim receives, because the rule sets a proportion of a balance rather than an amount.

21 NCAC 12A .0910 provides: “Payments from the fund for an approved application shall not exceed an amount equal to 10 percent of the total amount in the fund at the time the application is approved by the Board. All applications considered by the Board at the same meeting shall be subject to the same limitation.”

The second sentence is the one that is easy to miss: the same ceiling applies to every application heard at one meeting, so the cap is not reset claim by claim within a sitting (21 NCAC 12A .0910).

Several categories are excluded from a monetary loss altogether under 21 NCAC 12A .0910 — consequential, multiple, punitive, incidental and special damages, civil or criminal penalties or fines, interest, and court costs.

Who actually pays for the Fund

Not homeowners. The money comes from a permit fee charged to the contractor, under G.S. 87-15.6:

Whenever a general contractor applies for the issuance of a permit for the construction of any single-family residential dwelling unit or for the alteration of an existing single-family residential dwelling unit, a city or county building inspector shall collect from the general contractor a fee in the amount of ten dollars ($10.00) for each dwelling unit to be constructed or altered under the permit. The city or county inspector shall forward nine dollars ($9.00) of each fee collected to the Board on a quarterly basis and the city or county may retain one dollar ($1.00) of each fee collected.

The collection trigger is residential, as the opening clause describes — the fee attaches to a permit for constructing or altering a single-family residential dwelling unit (G.S. 87-15.6). Nine dollars of each ten goes to the board quarterly and the locality may keep one.

The fee is not unconditional either. G.S. 87-15.6 lets the board suspend collection of it for a year in which it determines the amount in the Fund is sufficient.

What the Fund is not

It is not the board’s disciplinary process. The board’s power over a license, and the sworn-complaint route, are separate from reimbursement and are at the licensing board — and the board has no authority to impose civil fines or penalties at all.

It is not a remedy against an unlicensed person either. The Fund’s definition turns on conduct “by a general contractor”, and the criminal provisions that address working without a license are a different matter, at unlicensed contracting and its penalties.

Whether a particular contractor holds a license, and what classification and limitation it carries, can be checked on the public record — see checking a contractor’s license record.

For the licensing system as a whole, start at the main licensing guide.

This page sets out what the statute and the rule say. It is not advice about any particular dispute, it does not say whether a given loss qualifies, and it is not a substitute for advice from a lawyer.