Know Your Licensing Requirements

Construction contracting is a highly regulated business.  This is even more true when it comes to home improvement work, a staple for small contractors.  The first step for anyone in the business is to get a contractor’s license in the right classification.  Unfortunately, the requirement is widely disregarded. 

The Contractor’s State License Board recently conducted a two-day sting in October 2014 to catch unlicensed contractors bidding home repair work after the earthquake in Napa Valley.  At least a dozen contractors were cited or arrested for providing bids for quake and non-quake repair work without a license.  Sting operations like this are not unusual. 

The penalties for contracting without a license are severe.  They range from criminal prosecution to the inability to collect payment for work performed.  The law goes so far as to allow a customer of an unlicensed contractor to seek reimbursement for payments already made, even if the work was performed well and there are no other disputes.  

Avoid these penalties by getting a license – and make sure it matches your business name and form of organization.  You can’t “borrow” a license, do business under your brother-in-law’s license, or start a corporation but keep using your personal license.  Pay attention to getting the correct license for the classification of work you want to do.  For example, a landscape license does not allow you to do line voltage electrical work.  And be sure to keep the license current throughout the course of your career.  If disputes arise on the job, one of the first things a savvy customer may do is look for holes in your license history, and use the leverage the law provides. 

The law imposes other obligations on contractors, including regulating the amount of the up-front payment that can be demanded from homeowners, terms of home improvement contracts, and content of advertisements.  Contractors also need to follow the EPA and OSHA regulations for lead renovation, repair and painting (the RRP rule), asbestos abatement and disposal of hazardous materials.  There are also rules controlling runoff of storm water from construction sites. 

Failing to follow these laws can lead to big problems and unhappy customers.  One of the best ways to stay on top of these rules is to join a reputable contractors’ association covering your line of construction.  These groups often provide legal updates and education to help you navigate the maze of regulatory requirements imposed on contractors.  Good material suppliers also offer education to customers.  Get informed and follow the rules.