Feb 03, 2019
The Top Ten Things a General Practitioner Should Know About the Regulation of Home Improvement Contractors
Feb 03, 2019
By David F. Feingold, Esq.
Regardless of your practice area, many of your clients are homeowners. Most also have hired or will hire a contractor to work on their home. They might have the foresight to educate themselves about the legal issues involved when embarking on a home improvement project. They may even ask you to look at the contract.
For any project involving large dollar amounts or potentially dangerous work, the proposal or draft agreement should be reviewed by counsel. That page of small print on the back of the proposal for services typically includes a number of booby traps, such as hold harmless and indemnity clauses heavily favoring the contractor, limitations of liability, and other exculpatory language. The standard form AIA contracts also should be reviewed and modified as necessary to protect your client. But I digress—the purpose of this article is not to analyze all of the issues raised in a construction contract. The purpose is to acquaint you, the general practitioner, with the “top ten” laws and regulations I think you should know about when dealing with home improvement contractors.
1. License Required: Any contractor who does home improvement work must be licensed by the Contractor’s State License Board (“CSLB”). (Bus. & Prof. Code § 7159, subd. (b).) (There is an exception for what is considered “minor work,” which is work that does not involve more than $500 in labor and materials.) “Home improvement work” is defined broadly and basically includes “the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property.” (Bus. & Prof. Code § 7151.) Almost everything, from landscaping to windows to HVAC systems to carpeting, falls under the “home improvement” definition.
2. Put It in Writing: If the total cost of a home improvement project exceeds $500, the contract must be in writing. (Bus. & Prof. Code § 7159.)
3. Spell It Out: Among other things, the contract must contain specific provisions, including when the work will start and end, a description of the work, how payments will be made, and cancellation rights. (Bus. & Prof. Code § 7159.)
4. Get a License Number: Every contractor must include his or her license number on all contracts and all forms of advertising. (Bus. & Prof. Code § 7030.5.)
5. Limitation on Deposits: It is unlawful for a home improvement contractor to require an advance payment of more than $1000 or 10% of the contract price, whichever is less. (Bus. & Prof. Code §7159, subd. (d).)
6. Honor the Contract Price: Failure to complete the job for the contract price constitutes a ground for disciplinary action against the contractor. (Bus. & Prof. Code § 7113.) Also consider whether a time and material contract for a home improvement project, with no guaranteed maximum price, is even legally permissible in California. The CSLB took the position in 2010 that it is not, and to my knowledge has not taken a different position to date. (See this CSLB newsletter article.)
7. Beware the Lien: Assuming proper and timely notice was provided to the owner, or notice was not required, an unpaid licensed contractor can place a “mechanics lien” on the owner’s property. This permits the contractor to foreclose on the property in order to be paid, but he or she must file a lawsuit to do so. (Civ. Code § 3110.)
8. Ninety Days to Sue: To enforce a mechanics lien, the contractor must file a lawsuit to foreclose on the property within 90 days of the date the lien was recorded. (Civ. Code § 3144.)
9. No License – No Hope: An unlicensed contractor cannot sue to recover money for work requiring a license. (Bus. & Prof. Code § 7031, subd. (a).) An unlicensed contractor may also be required to disgorge any money he or she received from the owner. Let me repeat that: An unlicensed contractor can be sued and required to give back all the money he or she has been paid. (Bus. & Prof. Code § 7031, subd. (b).) The license requirement is strictly construed and can have draconian results, as illustrated in Great West Contractors, Inc. v. WSS Construction, Inc. (2008) 162 Cal. App. 4th 581. In Great West, the subcontractor that signed the contract was a recently formed corporation. The subcontractor’s president, as an individual, held a valid contractor’s license at all times. However, the corporate entity was not licensed at the time it submitted its bid and performed some preliminary tasks but it did obtain its corporate contractor’s license shortly thereafter. Because the corporate entity was not licensed prior to beginning performance, it could not recover compensation because it was not licensed at all times. As if not being able to sue and being required to disgorge funds received was not enough pain, an unlicensed contractor causing injury or damage may be liable for three times the amount of damages (to a maximum of $10,000), plus costs and attorneys’ fees. (Code Civ. Proc. § 1029.8.) You can—and always should—check the status of a contractor’s license by contacting the Contractors State License Board. The easiest way is on the web.
10. Prove the License: If you represent a contractor in a suit, you must prove license status by producing a verified certificate of licensure from the Contractors' State License Board showing that the contractor held all necessary licenses during performance of the work. (Bus. & Prof. Code § 7031, subd. (d).) If you are representing an owner or other contracting party, have your motion for non-suit ready when the contractor misses this crucial step.
David F. Feingold, Esq., is a partner with the San Rafael law firm of Ragghianti Freitas LLP. His practice is focused on representing community associations, homeowners, and contractors in real estate and construction matters.