A home improvement project can go wrong for many reasons. Unexpected costs, labor shortages, material delays, change-order disputes, and poor communication can cause a project to fall behind or remain unfinished. Although these problems may support a civil lawsuit for breach of contract, an unsuccessful project does not automatically mean the contractor committed a crime.
Under Tennessee law, a contracting dispute may become a home improvement fraud case when a contractor acts with an intent to defraud and engages in conduct prohibited by Tennessee Code Annotated § 39-14-154. This may include failing to return a homeowner’s payment after receiving a legally sufficient refund demand or materially deviating from agreed plans without written consent and causing substantial damage.
The line between a contractual disagreement and criminal fraud is not always clear. The outcome may depend on the work completed, how the money was used, what the contractor represented, whether changes were approved, and whether the statute’s notice and timing requirements were satisfied.
What Is Home Improvement Fraud Under Tennessee Law?
Home improvement fraud occurs when a new-home contractor or home improvement services provider acts with an intent to defraud and violates Tennessee Code Annotated § 39-14-154. The statute primarily covers two situations: failing to return money after a qualifying written refund request when the statute’s timing and nonperformance requirements are met, or materially deviating from agreed plans or specifications without written consent and causing substantial damage. An unfinished project, missed deadline, or breach of contract does not by itself establish the offense.
The law applies to a broad range of projects and providers:
What the statute covers | Examples |
Prohibited conduct | Failing to provide a required refund or making a material, unauthorized deviation from agreed plans |
Home improvement work | Repairs, remodeling, additions, roofing, driveways, pools, garages, porches, landscaping, and fences |
New-home construction | Design, engineering, permitting, financing-related services, and construction of a residence |
Agreements | Written or oral agreements for labor, services, or materials |
Potential defendants | Individuals and businesses that undertake, supervise, direct, bid on, or assume responsibility for covered work |
Licensing status | Licensed and unlicensed providers |
Depending on the facts, the statute may apply to a residential contractor, general contractor, subcontractor, architect, engineer, project supervisor, or business entity. A provider cannot necessarily avoid the statute because the agreement was oral or the provider lacked a Tennessee contractor’s license.
At the same time, the statute does not automatically criminalize poor workmanship, delays, unexpected cost increases, change-order disputes, financial problems, or an ordinary failure to perform a contract. The State must prove fraudulent intent and every requirement of the provision charged.
When Does a Contracting Dispute Become a Criminal Case?
A contracting dispute may become criminal when the State has evidence that the contractor intended to defraud the homeowner and committed conduct covered by the statute. Investigators may focus on allegations that the contractor:
- Accepted payment without intending to perform the promised work;
- Performed no substantial portion of the work and failed to provide a required refund;
- Materially deviated from the plans without written consent and caused substantial damage;
- Misrepresented the work or materials that would be provided;
- Diverted project funds to unrelated purposes; or
- Avoided the homeowner or made false statements about the project.
Some of these facts are not independent elements of home improvement fraud, but prosecutors may use them as circumstantial evidence of intent.
Financial loss alone does not make a contracting dispute criminal. Construction projects often produce legitimate disagreements over workmanship, schedules, material costs, subcontractor payments, and the scope of the agreement. Evidence that the contractor purchased materials, performed meaningful work, communicated about problems, documented expenses, or tried to resolve the dispute may support the position that the case is contractual rather than criminal.
The Requirements for Criminal Home Improvement Fraud
Tennessee’s statute creates two paths to criminal liability. Under either one, the State must prove that the accused was a covered provider and acted with an intent to defraud. It must also prove every requirement of the particular provision charged beyond a reasonable doubt.
Path One: Failing to Provide a Required Refund
The first path applies when a contractor receives money but does not perform a substantial portion of the agreed work. The State generally must prove:
- The homeowner paid money under a covered contract.
The payment must relate to home improvement services or new-home construction. - No substantial portion of the work had been performed.
This is evaluated when the refund was requested. The statute does not define “substantial portion” through a fixed percentage, making the amount, value, and usefulness of the work important. - More than 90 days had passed since the contractual starting date.
The relevant date is the starting date in the agreement, which may differ from the date of payment or the date problems began. - The homeowner made a qualifying written refund request.
The demand must be hand-delivered or sent by certified mail with a return receipt. The statute also addresses refused mail and mail returned because the contractor failed to provide a correct or forwarding address. - The homeowner sent a copy to the Consumer Protection Division.
A copy must be sent to the Consumer Protection Division of the Tennessee Attorney General’s Office. - The contractor failed to provide the refund within 10 days.
The period may begin when the request is accepted, refused, or returned under the statute’s address provisions. - The contractor acted with an intent to defraud.
Why notice matters: The written demand, approved delivery method, 90-day period, 10-day refund window, and notice to the Consumer Protection Division are statutory requirements. Informal calls, texts, or emails may not substitute for them.
Path Two: Materially Deviating From the Agreement
The second path applies when a contractor improperly departs from the project’s plans or specifications. The State must prove:
- The agreement contained plans or specifications;
- The contractor deviated from them in a material respect;
- The homeowner did not give written consent;
- The deviation caused substantial damage by reducing the value of the completed construction; and
- The contractor acted with an intent to defraud.
The statute identifies billing substantially more than the quoted amount and using substandard materials while charging for higher-quality materials as possible examples.
Not every cost increase or substitution is criminal. A higher price may result from an approved change order, and substitute materials may be used with written permission. The deviation must be material, unauthorized in writing, damaging, and accompanied by fraudulent intent.
Because intent is rarely proven through direct evidence, prosecutors may rely on the contractor’s statements, financial records, communications, use of funds, performance, and conduct after problems arose. However, incomplete or defective work alone does not establish fraudulent intent.
How Tennessee Grades Home Improvement Fraud
Tennessee grades home improvement fraud according to the financial value of the offense, using the same classifications that apply to theft. The total payment or contract price is not necessarily the criminal value.
The statute uses this formula:
Amount paid under the contract
− Value of work performed
+ Cost of repairing damage caused by the contractor
= Value used to grade the offense
For example, if a homeowner paid $30,000, received $18,000 worth of work, and incurred $4,000 in damage caused by the contractor, the statutory value would be $16,000. That amount would fall within the Class C felony range.
Calculated value | Classification | General imprisonment range |
$1,000 or less | Class A misdemeanor | Up to 11 months, 29 days |
More than $1,000 but less than $2,500 | Class E felony | 1–6 years |
$2,500 to less than $10,000 | Class D felony | 2–12 years |
$10,000 to less than $60,000 | Class C felony | 3–15 years |
$60,000 to less than $250,000 | Class B felony | 8–30 years |
$250,000 or more | Class A felony | 15–60 years |
The sentence in a particular case may depend on the defendant’s criminal history, offender classification, enhancement and mitigating factors, and other sentencing rules.
Valuation can be a major defense issue because a relatively small difference may change the classification. Disputes may concern:
- The value of labor already performed;
- Materials purchased, delivered, or installed;
- Design, permitting, demolition, or site-preparation work;
- Repair estimates that include upgrades;
- Damage caused by another person or a preexisting condition; and
- Whether proposed repairs are reasonable and necessary.
Tennessee may also permit aggregation of losses from multiple acts committed as part of a common scheme or purpose. Combining amounts from several projects or homeowners can result in a higher felony classification.
Developments in Tennessee Home Improvement Fraud Law
Tennessee has not substantially rewritten the elements of § 39-14-154 during the 2020s. The most recent amendments identified in the statute’s history occurred in 2017 and 2018. The 2018 amendment expanded the law to cover new-home construction beginning July 1, 2018.
More recent developments have involved expungement eligibility and appellate decisions interpreting the statute:
Year | Development | Significance |
2021 | Certain Class C and D convictions became eligible for petition-based expungement | |
2024 | Incomplete or substandard work did not, by itself, prove intent to defraud | |
2024 | Emphasized the offense date and the distinction between contractual misconduct and theft | |
2026 | Addressed the undefined phrase “substantial portion” and reversed a pretrial dismissal |
Expungement Eligibility
In 2021, Tennessee expanded conviction-expungement eligibility to include certain Class C and Class D home improvement fraud convictions. An otherwise eligible person generally must wait at least 10 years after completing the sentence before petitioning.
Expungement is not automatic. Eligibility depends on factors such as criminal history, the number and type of convictions, completion of the sentence, and other statutory conditions.
State v. Pardue
In Pardue, the Court of Criminal Appeals reversed a conviction because the evidence was insufficient to establish fraudulent intent. Although the contractor failed to complete the projects and performed some substandard work, he offered to discuss expenses, produce receipts, and sign a promissory note concerning repayment.
The decision reinforces that delay, defective work, and nonperformance may support a civil claim without proving a criminal offense.
State v. White
White involved a new-home construction contract from 2014 and 2015. The home improvement fraud count was dismissed because the statute did not cover new-home construction at the time. The Court of Criminal Appeals also reversed a separate theft conviction, finding insufficient proof of fraudulent intent.
The contractor had performed work and continued working after concerns arose, even though workmanship and unpaid expenses remained disputed. The case illustrates why courts must apply the law in effect when the alleged conduct occurred and distinguish poor business practices from criminal fraud.
State v. Angel
In Angel, decided in 2026, a contractor argued that the phrase “substantial portion” was unconstitutionally vague because the statute provides no fixed percentage or value. The trial court dismissed the charge, but the Court of Criminal Appeals reversed and remanded the case.
The appellate court did not establish a universal percentage. Instead, it concluded that the challenge required an adequate factual record showing what the contractor agreed to do and what work was completed. The value and usefulness of completed work therefore remain fact-intensive issues.
Defenses to Home Improvement Fraud Charges
Many defenses focus on missing or disputed elements rather than separate affirmative defenses. The strongest approach depends on the provision charged and the project records.
No Intent to Defraud
Lack of fraudulent intent is often the central defense. A project may fail because of poor management, cash-flow problems, labor shortages, material delays, unexpected site conditions, illness, subcontractor disputes, or inaccurate estimates.
Evidence inconsistent with fraudulent intent may include:
- Purchasing materials;
- Paying workers or subcontractors;
- Obtaining permits or inspections;
- Performing meaningful work;
- Communicating about delays or costs;
- Attempting repairs;
- Providing an accounting;
- Negotiating repayment; or
- Returning some of the homeowner’s money.
These facts may show a failed project or business dispute rather than a plan to defraud.
A Substantial Portion of the Work Was Performed
The refund provision applies only when no substantial portion of the work had been performed at the time of the demand. Relevant work may include design, engineering, permitting, demolition, site preparation, purchased materials, subcontractor labor, and other services included in the agreement.
Because the statute establishes no fixed percentage, the defense may use contracts, receipts, photographs, testimony, and expert analysis to demonstrate the amount and usefulness of the completed work.
The Refund Requirements Were Not Met
A prosecution under the refund pathway may fail if:
- The demand was not written;
- It was not properly delivered;
- The State cannot establish when it was accepted, refused, or returned;
- The 10-day refund period had not expired;
- The 90-day period had not passed;
- The parties changed the contractual starting date; or
- No copy was sent to the Consumer Protection Division.
Repeated informal requests do not necessarily satisfy the statute’s procedures.
The Homeowner Approved the Change
The deviation provision requires the absence of written consent. Approval may appear in a signed change order, email, text message, revised estimate, altered scope of work, or initialed drawing.
The defense may also dispute whether the original plans were definite enough to prove a deviation. Allowances, ambiguous specifications, verbal discussions, and evolving design decisions may create a contractual disagreement rather than criminal fraud.
The Deviation Was Not Material or Did Not Cause Substantial Damage
Minor variations, punch-list items, aesthetic disagreements, or readily repairable defects may not amount to a material deviation.
The defense may also challenge whether the change reduced the property’s value, whether the accused caused the alleged damage, or whether the repair estimate includes unrelated work or upgrades. Expert testimony may be important when construction standards, causation, or valuation are disputed.
The State Overstated the Value
Receipts, invoices, photographs, material records, subcontractor testimony, and expert estimates may show that the homeowner received more value than the prosecution credited. Repair estimates may also include unnecessary replacement, premium improvements, or damage caused by someone else.
Reducing the alleged value may lower the felony classification or place the charge within the misdemeanor range.
The Wrong Law or Defendant Was Charged
The defense should determine which version of the statute applied on the alleged offense date. New-home construction was not added until 2018, and later statutory language cannot be applied retroactively.
Questions may also arise about whether the accused was the provider responsible for the agreement. An employee, subcontractor, project manager, or corporate officer may dispute accepting the homeowner’s money, controlling the project, making the alleged representations, or possessing fraudulent intent.
Contracts, change orders, receipts, bank records, permits, photographs, certified-mail records, emails, text messages, and subcontractor invoices can determine whether a case involves criminal fraud or a civil construction dispute. Preserving these materials early allows the defense to reconstruct what was promised, paid, completed, and communicated.
Speak With a Tennessee Home Improvement Fraud Defense Lawyer
Home improvement fraud investigations may involve police interviews, subpoenas, bank records, restitution demands, and potential felony charges. Statements made early in the investigation can affect the case, so contractors and other accused providers should preserve their records and seek legal advice before speaking with investigators.
Barnes & Fersten defends home improvement fraud and theft cases in Knoxville and throughout East Tennessee. Contact our office by calling 865-805-5703 or filling out our contact form to speak with an experienced Tennessee criminal defense lawyer about your case.
Attorney At Law, Managing Partner
Brandon D. Fersten is an esteemed Knoxville attorney practicing DUI, criminal defense, and juvenile law. Known for his empathetic approach and commitment to his clients, he brings a record of favorable case outcomes including dismissals and not guilty verdicts at jury trials resulting in Brandon being recognized as one of the “Top 40 Under 40” in Criminal Defense, U.S. News’ Best Lawyers: “Ones to Watch,” and Super Lawyers’ “Rising Stars”. Brandon’s professional accolades, combined with his passion for justice, position him as a reliable criminal defense advocate in the East Tennessee legal landscape, including Knox County, Blount County, Sevier County, Loudon County, Roane County, Anderson County, Cumberland County, Hamblen County, Monroe County, and McMinn County.
