Does My Remodel Contractor Need to be Licensed and Insured? An Essential Guide for Homeowners: Part 1

Unlicensed and uninsured remodel contractors can often seem appealing because they offer services at discounts that seem almost too good to be true to the experienced remodeler. But a poor contractor choice that saves you a small percentage of cost in the short term could end up costing you thousands over the long term. Any reputable remodel contractor can tell you horror stories about remodel corrections and repairs they performed for work done by unlicensed and uninsured contractors. That’s not to mention the stories of thousands of homeowners who have wasted time and money, or been left with unsafe or unfinished remodel projects after using unlicensed and uninsured contractors. So how can you as a homeowner be informed about when your contractor needs to be licensed and insured and how will you determine if they are, in fact, properly licensed or insured? As one of the most crucial aspects of choosing a home remodel contractor for your project, over the next 2 posts we address licensing and insurance in detail, with this post focused on the importance of contractor licensing in particular.

What is Contractor Licensing?

A contractor’s license is the proof that they have met certain industry standards for the quality and safety of their work and that they are permitted to work in your area. Licensing ensures your contractor knows the local building codes and can complete your remodel safely. Licensing also allows your contractor to obtain the necessary permits to remodel your home, which unlicensed contractors cannot. Under California law, licensed contractors are also required to have a License Bond which protects their customers and ensures they adhere to other statutes and regulations.

Risks of Using Unlicensed Contractors

There are many significant risks to using unlicensed contractors. Firstly, because licensing is a required condition to be an independent contractor, unlicensed contractors can only ever be considered as an employee. This means that if you hire an unlicensed contractor there is a rebuttable presumption that the unlicensed contractor is considered an employee of the homeowner. This is especially true if the unlicensed contractor works for more than 52 hours or is paid more than $100 in a 90 day period. This makes the homeowner liable for worker’s compensation payments if the contractor is injured on the job, and also leaves the responsibility for all costs, repairs, accidents, and mishaps in the hands of the homeowner.
At the very least, even if the homeowner is not legally considered to be the employer if an unlicensed and uninsured contractor is injured on a remodel project, the hirer is left susceptible to being sued for significant medical costs and a lifetime of inability to work.

Secondly, because unlicensed contractors may not have the relevant knowledge of building codes and regulations for your local area and may not be able to secure the necessary permits, your new remodel could be completed in a substandard manner and could require costly repairs to bring your new home space up to code. Allowing unlicensed contractors to perform work in your home can also void your homeowner’s insurance policy in the event that a claim should arise because of that work. The costs of these consequences can clearly and significantly outweigh any savings made in hiring an unlicensed and uninsured contractor.

How Can I Check If My Contractor is Licensed?

The easiest way to assess if your contractor is fully licensed is to simply ask to see a copy of their license. You can also visit your local licensing authority and ask for a copy of the license there if necessary.

In our next post on understanding contractor licensing, bonding and insurance, we cover the details of contractor bonding and insurance, in particular, why it’s essential for your contractor to be bonded and insured, the costs it can save you and how to check if your contractor is bonded and insured.