You have created a game plan for a long-anticipated and labor-intensive home improvement project. Now, the time has come to hire a general contractor to manage the project, including establishing a timeline, producing a budget, and recruiting independent contractors to handle the specialized requirements of your project. Working with a construction attorney can answer the questions you have concerning your home improvement project. Although we answer a wide variety of questions for clients, one question is critically important to know the answer to because of the legal implications.
Is it illegal to hire an unlicensed contractor?
California real estate law for contractors contains many strict statutes that, if violated, can negatively impact the legal status of both a homeowner and the general contractor working on a home improvement project. In California, a homeowner is prohibited from hiring an unlicensed general contractor, or any type of contractor for the matter. An unlicensed contractor not only cannot complete a construction project, but the contractor is also forbidden from developing the blueprints for the project as well.
A homeowner can get into legal trouble by hiring an unlicensed contractor, and the contractor faces legal consequences as well.
California business and commercial law makes it illegal for an unlicensed contractor to work on any type of residential construction project that is valued at more than $500. This covers virtually every type of residential construction and home improvement project. The $500 threshold includes the labor costs and the expenses associated with purchasing materials. California has passed a strict law covering unlicensed general contractors and the state consistently enforces the statute. The only exception to the unlicensed contractor law is if a contractor acquires a properly issued contractor’s license during the time the contractor worked on a construction or home improvement project.
Serious Legal Consequences for a General Contractor
A general contractor takes a huge risk bidding on a project, without obtaining a license to work in California. If you are a general contractor that does not have a license and the state discovers your unlicensed credentials, you can face a misdemeanor charge for violating California law. The misdemeanor charge carries a jail sentence of up to six months and/or a fine of no more than $5,000. A general contractor might face additional fines, depending on the type of project and the nature of the work completed. Additional fines can range between $200 and $15,000.
If a contractor gets caught a second time, the legal consequences become much more serious. The contractor must spend at least a mandatory 90 days in jail and pay a fine of $5,000 or 20 percent of the value of the work completed to date. If a judge invokes the 20 percent penalty, a contractor can face a fine that runs into tens of thousands of dollars.
Unlicensed Contractors May Be Required to Return Any Monies Taken
Business and Professions Code Section 7031(b) provides:
Except as provided in subdivision (e), a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract.
B&P Code Section 7031 was enacted by the Legislature to “protect the public from incompetence and dishonest in those who providing building and construction services…the licensing requirements provide minimal assurance that all persons offering such services in California have the requisite skill and character, understand applicable local laws and codes, and know the rudiments of administering a contracting business.” (See Wright v. Issak (2007) 149 Cal.App.4th 1116, 1123.)
If you hired an unlicensed contractor or you believe the contractor may be unlicensed for any reason, you may be entitled to recover all monies paid to the contractor pursuant to Business and Professions Code Section 7031. There are many nuisances to when a contractor may or may not be licensed. If you believe you have hired an unlicensed contractor, contact the attorneys at Alves Radcliffe LLP. There is a one year statute of limitations on these claims and homeowners are advised to seek out legal advice as soon as possible.
Alves Radcliffe, LLP — Construction Attorney
If you need assistance with an indemnity clause in your construction contract, call Alves Radcliffe, LLP at 916-333-3375 or send us an email. We have over 25 years of combined experience, and serve clients throughout Greater Sacramento, Northern California, and the San Francisco Bay Area.