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Using An Unlicensed Construction Contractor in California

Using An Unlicensed Construction Contractor in California

Many people, at some point in their lives, hire a construction professional — such as an electrician or general contractor — to do some sort of project, such as a home remodel or addition. California has licensing requirements for many professions (e.g. attorneys), including for those employed in the construction trades. For the construction trades, the main licensing agency in California is the Contractors State Licensing Board run by the California Department of Consumer Affairs.

California has too many construction-related licenses for me to go over in this post. What I am going to describe in this post, though, is one important statute that applies when a consumer hires a contractor or other construction professional who is unlicensed.

That statute is section 7031(b) of California’s Business and Professions Code, which 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.”

In other words, the mere fact that a contractor is unlicensed can allow his/her customer to sue for a full refund of compensation paid. For full context, however, we have to also look at section 7031(e) because that section provides some exceptions:

“The judicial doctrine of substantial compliance shall not apply under this section where the person who engaged in the business or acted in the capacity of a contractor has never been a duly licensed contractor in this state. However, notwithstanding subdivision (b) of Section 143, the court may determine that there has been substantial compliance with licensure requirements under this section if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure.”

In other words, if the contractor you’re dealing with doesn’t have a current license, it is possible that section 7031(b) might not apply if the contractor can show that he/she substantially complied with California’s licensing requirements. On the one hand, if the contractor never had a California license, that’s probably not going to count as substantial compliance. On the other hand, if the contractor had the correct license previously, tried reasonably and in good faith to maintain said license, and acted promptly and in good faith to remedy the licensing defect upon learning of the problem, that could count as substantial compliance with the licensing laws. Section 7031(b), therefore, would not apply.

If you’ve read section 7031(b) and felt that California law is a bit harsh on unlicensed contractors, I don’t disagree. That same theme is evident in other sections of the Business and Professions Code also. Case in point, section 7031(a), which says:

“Except as provided in subdivision (e), no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029.”

In other words, if you’re a contractor and want to sue a client for non-payment, for example, you first have to allege — and, of course, eventually prove — that you were properly licensed at the time you did the work. If you’re not properly licensed, not only can you not sue for non-payment, you can be sued for a refund of whatever payments you did receive.

As an aside, I’ll also mention that California imposes licensing requirements on many, many, many different professions. The good news, though, is that those licenses generally can be easily verified online. For example, the very first video I put out on my Youtube channel went over how to look up whether a person is indeed a licensed attorney in California. Here it is:

A contractor’s license can be verified on the Contractors State Licensing Board website (link here). If you’re looking to hire a construction professional for any sort of project, it might be prudent to verify their license or lack thereof beforehand and, hopefully, avoid any of the problems that might result.

Knowing all of this, if I was a construction professional of any kind, I’d save myself any potential headache and go get the proper license(s).

As always, I hope this post was helpful. It is not a comprehensive or exhaustive discussion of the topic(s) mentioned. If you’re going to rely on the information presented above, please do your own research because the authorities I refer to might have changed in the time between when I wrote this post and when you’re reading it. Finally, if you do have a situation involving an unlicensed contractor of any kind, please do find a lawyer in your area with whom you can discuss the specifics of your case.

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Andy Chen

Andy I. Chen is a lawyer licensed to practice law in California and New York. Andy maintains offices in Los Altos, California and Modesto, California. Under the New York Court of Appeals' 2015 decision in Schoenefeld v. State of New York, Andy does not accept cases from those in New York state. He does, however, know many lawyers in New York state and would be happy to make a referral.

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