Construction Defects & Construction Law Attorneys in California
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Homeowners are always seeking to improve their property, whether it be a new pool or backyard deck. For these renovation projects, professionals such as contractors, designers, and subcontractors are necessary to complete projects. The excitement of renovation projects can distract homeowners from assessing whether contractors are properly licensed and insured. The lack of preparation and information can quickly turn in unexpected costs for homeowners.
Contractors Must Be Licensed
California Business and Professions Code §7031(a) bars an unlicensed contractor or subcontractor from suing to recover compensation for any work he or she did under an agreement for services requiring a contractor’s license unless proper licensure was in place at all times during such contractual performance. Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882. Furthermore, a contractor must be licensed at all times during the performance of the contract. Substantial performance of a contract before licensure does not allow recovery for compensation, a licensed contractor is still unable to recover compensation for work performed prior to time license was issued. MW Erectors, Inc. v. Niederhauser Ornamental (2005) 36 Cal.4th 412.
This information is important for homeowners that may find themselves in contract disputes with unlicensed contractors. Unlicensed contractors may threaten homeowners with lawsuits or foreclosure if payment disputes are not resolved. Without the proper knowledge, homeowners are likely to pay to avoid legal action. Even though unbeknownst to them unlicensed contractors cannot legally recover the contract price that they contracted for or the value of labor and materials. Thus, remedies such as collection on a deed of trusts or a mechanic’s lien are not available to unlicensed contractors. The court simply holds these remedies as void as a matter of public policy regardless of the equities, California Business and Professions Code §7031 bars all actions, however they are characterized, which effectively seek “compensation” for illegal unlicensed contract work. Lewis & Queen v. N.M. Ball Sons (1957) 48 Cal.2d 14, 150, 152.
Contractors Should Have General Liability Insurance
Even though homeowners may be able to get out of paying unlicensed contractors, there are still significant risks when hiring licensed contractors. Although not required by law, licensed contractors should have general liability insurance. If a guest or neighbor is injured by the renovation project, the homeowner may be held liable for any injuries suffered if the contractor does not have insurance. On the other hand, California Business & Professional Code § 7125 mandates that a licensed contractor must procure worker’s compensation insurance for all persons who perform work for the contractor, including employees. If a contractor does not have worker’s compensation coverage it may result in an automatic license suspension. Wright v. Issak (2007) 149 Cal. App. 4th 1116. But more importantly, if a worker is injured onsite the homeowner may be required to maintain workers’ compensation insurance for the injured employee or face a potential lawsuit. Thus, it is critical not only to use licensed contractors but to ensure contractors have general liability insurance and workers compensation coverage.
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