Unlicensed Contractor

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Unlicensed Contractor

DAD’s Construction clients often tell of experiences with other contractors that were less than pleasant. In many instances, their unpleasant experience began with an unlicensed contractor.

What Is an Unlicensed Contractor?

An unlicensed contractor is someone who does repairs or makes improvements to your home without the appropriate license to do business in your state. Typically, unlicensed contractors work for less than licensed contractors because they avoid worker’s compensation and liability insurance requirements.  They also avoid background checks and building code oversight.  This places you, your family, and your home at great risk.

What Are the Risks of Hiring an Unlicensed Contractor?

An unlicensed contractor may provide you with a low price.  There are; however, many risks involved in dealing with unlicensed contractors.  Some of these are:  

  • Unlicensed ContractorCannot get permits, so their work is not inspected and may not be up to local code.
  • If they improperly install an appliance, such as a water heater that explodes, your insurance will not cover it.
  • Generally, use substandard materials and unapproved installation methods.  This results in structural and product installation failures.  The consequences range from aesthetically unpleasing to future expensive damage to your home.
  • If they install an appliance, such as a water heater, dishwasher, and so on, the product warranty may be voided.

How Can I Tell If My Contractor Is Unlicensed?

First, go to the Contractors State License Board Check A License website. Type in the contractor’s business name, personal name, and license number.  If any of these items do not prove valid, do not hire this impostor.  In similar fashion, compare these items to the contractor’s Pocket Card:

  • Business card
  • Work truck signs
  • Clothing
  • Web site

Everything should match.

Second, there are some signs that may suggest your contractor is unlicensed or lying about his license status.  They include the contractor:­

  • Unlicensed ContractorArriving in an unmarked vehicle.  California law requires that the Contractor’s full name, license number, and telephone number be permanently displayed on both sides of all vehicles.  No magnetic signage permitted.
  • Asks for a large down payment before work begins.
  • Makes multiple requests for money in the early phases of construction.
  • Tells you permits and inspections are not required or asks you to obtain the permits.
  • Gives a verbal contract only.  He is not willing to put terms in writing.
  • Does not have proof of insurance (Workers Compensation if required, General Liability, and bonded).
  • Only works weekends or after-hours.
  • Asks you to make checks payable to a person or “cash” rather than a company.
  • Accepts cash only as payment.
  • The contractor’s advertisements, vehicles, business cards, and so on do not display the contractors name, license number, and phone number.

Protect yourself from unlicensed contractors

Protect yourself by asking about a contractor’s license before hiring. Read What to Look for In a Contractor. Ask to see the license.  All licensed contractors have a government issued Pocket Card. It must be in their possession at all times. Also request they provide you with proof of worker’s compensation and general liability insurances. Go to the Contractors State License Board website to make reports of unlicensed activity.

What Happens If I Hire an Unlicensed Contractor and There Is a Problem?

Problems may occur during your construction project. Work may be low quality, the contractor may abandon the job, or you may refuse to pay the contractor. States handle such disputes with unlicensed contractors differently:

  • Unlicensed ContractorSome states follow a strict rule that does not allow an unlicensed contractor to recover on the contract. In those cases, contracts with unlicensed contractors are illegal and unenforceable by the contractor.
    • California public policy is clear.  The State does not want unlicensed contractors getting paid for work that should be performed by a fully licensed and insured contractor.
    • Unlicensed ContractorIt is illegal for an unlicensed person to perform contracting work on any project valued at $500 or more.  This $500 includes all combined labor and material costs.
    • Under California Contractor’s State License Law (CSLB), an unlicensed contractor may not “bring or maintain” any action for compensation for performing any act or contract for which a license is required; unless the contractor was duly licensed “at all times” during performance (Business & Professions Code § 7031(a)). This means that if an unlicensed contractor tries to sue someone who hired him/her for unpaid work, no California court will enforce payment!

Can an unlicensed contractor simply hire other people to do the work?

  • An unlicensed contractor cannot simply avoid these requirements by “subbing” out all the work to licensed contractors or subcontractors.
  • Other states follow a rule of substantial compliance.  If the contractor follows most of the rules a licensed contractor must follow, he can enforce the contract. Why? The public was not harmed by the violation as the contractor complied with the appropriate standards. These states may allow restitution to unlicensed contractors who are not paid if a licensed contractor supervised their work, the reason they have no license is minor (such as forgetting to renew), or the contractor posted a performance bond.
  • Some states say that if you knowingly enter into a contract with an unlicensed contractor, you are not allowed to use this fact as a defense for non-payment. An unlicensed contractor can still file suit for fraud and deceit if a customer knowingly hires an unlicensed contractor and then refuses to pay.

What About the Better Business Bureau (BBB)?

BBB is no guarantee. Some people recommend checking the contractor’s name and license number with the Better Business Bureau (BBB). This WILL NOT protect you against being scammed by illegitimate contractors. Also, many legitimate licensed contractors are not members of the BBB.

Homeowners need to understand that the BBB is NOT a government agency.  It has no power to enforce any laws. They are a private, not-for-profit organization that requires businesses to pay a membership fee in order to join. The same thing applies to local Chamber of Commerce groups. These groups are useless when it comes to verification of contractors being licensed. These associations are essentially pay-to-play organizations.

What About on-line Contractor Referral Services?

Many on-line referral sites require the contractor to pay a yearly or monthly membership fee in addition to “click fees”.  A click fee requires the represented business to pay a fee to the referral service each time someone clicks, calls, emails, or texts on the company’s information.  Here again, these are pay-to-play organizations (aka paid influencers). In exchange, the contractor receives preferential web site placement and customer referrals.  The contractor also pays for each referral in many instances.  In this arrangement, there is a financial relationship between the contractor and referral service.

The referral service relies on the contractor for its revenue.  Therefore, consider for a moment whose best interest the referral service has in mind – yours or the paying contractor memberships?  Services such as Facebook, Yelp, Angie’s List, Google, HomeAdvisor, Houzz, etc. use this type of model.

What about Home Improvement Store Referrals (big box retailers)?

Unlicensed ContractorMost charge the contractor a monthly fee in exchange for an exclusive territory.  They also require or expect the contractor to purchase the materials from the retailer itself.  This means you are getting what the retailer has to offer at typically a much higher price and lower quality than the contractor can get from wholesale suppliers.

How Can I Receive More Information?

If you would like more information on enjoying the best bathroom, kitchen, and interior remodeling experience in Orange County, call Dan at (949) 380-0177 or at dan@dadsconstruction.com for a free in home consultation.  DAD’s serves all of South Orange County California.  This includes Lake Forest, Mission Viejo, Foothill Ranch, Portola Hills, Ladera Ranch, Irvine, San Clemente, Dana Point, San Juan Capistrano, Rancho Santa Margarita, Coto de Caza, Dove Canyon, Laguna Niguel, Laguna Hills, Newport Beach, and Aliso Viejo.

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Daniel A. Derkum is the owner of DAD’s Construction, a leading South Orange County, California design-and-build remodeling and renovation contractor, https://www.dadsconstruction.com.  © DAD’s Home Services & Construction, Inc.  All Rights Reserved.