Updated on April 19, 2022
Thinking of not hiring licensed contractors to work on your home or office, etc? You may want to rethink that…
So many consumers put licensing as such a low priority. It is very important to use a licensed contractor for so many reasons. In fact, it is always the first thing our attorneys look for when vetting a contractor. It is surprising that other consumers don’t give that such high importance when the risks are high for not using a licensed contractor.
Many consumers care very little about a professional’s verified license status. They care more about recommendations, pricing, and reviews. Although licensure usually means that the professional has the minimum qualifications, it is still not a guarantee that he or she is the best person for the job. Because of that, the price and consumer reviews likely outweigh the licensing factor for an average consumer, especially if they are not aware of the hidden dangers that can arise out of using an unlicensed contractor.
Here is why it is important to try to select a contractor who is properly licensed:
First, the fact that you are hiring licensed contractors provides the minimal assurance that the person offering the services:
(1) have the requisite skill and character;
(2) understands the local laws and codes; and
(3) knows the basics of administering a contracting business.
For example, in California, to qualify for a license, a contractor must verify four years of journey-level experience in his or her trade and pass both a trade and license law and business examination. In addition, since 2005, all new contractors are required to pass a criminal background check. In other words, the fact that a contractor is licensed means that he or she is far more likely to have the requisite knowledge to ensure that the work is up to code and properly performed.
Second, hiring licensed contractors helps to minimize the risk toyour family’s financial security if a worker is injured on your property, your property is damaged, or if the work is incomplete and/or faulty. Few, if any, unlicensed individuals have a bond or workers’ compensation insurance since they are not required to. In fact, an unlicensed individual is unlikely to qualify for worker’s compensation and liability insurance. In California, anyone who performs construction work worth over $500 is required to be licensed.
Third, damage that arises from work performed by an unlicensed contractor may not be covered under your homeowner’s insurance policy. This means that you may be stuck with the bill for repairs, injury, and property damage without the benefit of insurance. And, using an unlicensed contractor is especially tricky, and can constitute negligence, if a third party is injured on your property as a result of the faulty work.
Given the potential dangers of using non licensed contractors, we definitely recommend making the professional’s licensure a higher priority. The first question should always be whether or not the contractor is licensed and current with its license requirements. A consumer should then research that contractor’s history to see if he or she has been subject to any disciplinary action. After that, we recommend weighing the price against reviews and recommendations.
As discussed above, the fact that they are licensed provides the minimal assurance that the person offering the services: (1) have the requisite skill and character; (2) understands the local laws and codes; and (3) knows the basics of administering a contracting business. This may vary from state to state depending on the requirements each state imposes, but this is generally a good rule of thumb.
When vetting a candidate, a consumer should ask: (1) whether or not the professional is licensed; (2) for the license number; (3) confirm that the license is up to date; and (4) determine the classification of the license to ensure they are qualified to do the specific work you need. They should also confirm that they have an up do date license bond, worker’s compensation insurance, and general liability insurance. In California, all of this information is public record and searchable on the Contractor’s State License Board’s website. If available, a consumer should then research that contractor’s history to see if he or she has been subject to any disciplinary action.
Consumers should also ask whether the contractor performs the work with employees or whether they use subcontractors. If it is the latter, make sure you also obtain information regarding the subcontractor to ensure they are licensed to perform the necessary work.
We also recommend that a consumer ask about the contractor’s experience with similar projects and see whether they have any photographs or references they can provide for that work.
I would strongly encourage homeowners to look elsewhere. In the long run, any up front cost savings may not be worth the headache later if someone gets injured on the consumer’s property or the work turns out to be substandard.
Finally, remember that permitting plays a key role in gaining protection. If you are using an unlicensed contractor, there is no doubt they will not get a permit. If they got a permit, after all, that would expose their unlicensed status to the permitting authority. That means that if you use an unlicensed contractor, then the odds are you will not be obtaining a permit or having the work inspection by the city. Permitting and inspections are very important for the homeowner because they provide a check on the quality of work that the homeowner may not otherwise be able to provide for themselves.
For any project, once you decide on a contractor, make sure to document your agreement in writing with a signed contract. The signed contract should include the exact scope of work and identify the materials for the project so that there is no ambiguity down the line. During the bidding process, it is also helpful to obtain written bids from the contractors so you can more easily compare what you are getting for the bid price from contractor to contractor.
Want to schedule a consult with one of our real estate attorneys in California? Send us a message through our contact form or call (310) 954-1877.