Why You Should Never Hire an Unlicensed Contractor

When in doubt, do not hire an unlicensed contractor.

At some point in time, every homeowner has had (or will have) the “lovely” experience of requiring some sort of minor electrical or plumbing repair within his or her home.

Oftentimes, you ask your friends, neighbors, or family for the name of someone who would be interested in making a couple of extra bucks to handle the situation for you.

Your friend Ruth informs you she has a nephew named Bart who is currently “between jobs” and is “great with his hands”, and he would be happy to help. You figure you can remedy the situation by paying for the parts, slipping him a twenty, and everything is beautiful.

Well, maybe.

I suppose if Bart is state-licensed to work on electrical circuits or high-pressure water lines, you’ve just caught the deal of the month.

But if he doesn’t have a card-sized piece of paper that says he can work on these things, you are setting yourself up for something that could be potentially dangerous and possibly quite expensive in the long run.

Here at GreatBuildz, a free service that connects homeowners in Los Angeles, Orange County, Ventura & San Diego with reliable general contractors, we sometimes get asked if it’s okay to hire an unlicensed contractor – here is what we tell them.

If you are considering a remodel project in your home, I implore you – please play it smart. There are many reasons to require a license when you hire a contractor.

Liability

First of all, if you hire an unlicensed contractor, you will open the door to the ugly world of liability. A licensed contractor has insurance for himself and his employees, covering them for any damage to your home. This insurance will also cover injuries they could sustain while doing construction work on your property.

In addition, he would also carry workers’ compensation insurance, which would reimburse an injured worker for the work time they could miss due to that injury.

If the contractor is unlicensed, the homeowner would be responsible for these costs.

Unfortunately, the unlicensed contractor and his employees aren’t the only people you need to consider though. Any passerby or bystander and their property would be your responsibility as well.

If construction debris dings the car of a neighbor, I would imagine he or she would be handing you an estimate from a body shop for the repair.

Building Permits

Another important reason not to hire an unlicensed contractor is they can’t pull building permits. Whether you are adding a deck, finishing an unfinished basement, or updating the electrical in your home, a permit is crucial.

It sounds like quite a hassle, but it really is for your protection. When you pull a permit, an inspection is required at the end of the process. So if there is no permit pulled, and the contractor makes an error along the way, you may find out at the worst possible time.

Also, it is quite difficult and potentially costly to attempt to sell a home with unpermitted additions. As a matter of fact, that question will be asked of you when you try to sell your home. The authority having jurisdiction can even make you completely remove everything you didn’t have a permit to do. Plus, you won’t get the value increase documented after the remodel.

Contractor’s Bond

An unlicensed contractor will also not be able to produce a contractor’s bond.

In short, a contractor’s bond is a document between the contractor, the homeowner, and a third party (generally referred to as a surety), which assures that the contractor will meet the contractual agreement.

Please don’t move forward with your remodel without having this document!

To understand the importance of contractor bonds, read our blog about why contractor bonds are crucial.

State and Local Contractor Regulations

There are several states which don’t require general contractors to have a license at the state level. However, you should check with the local authority having jurisdiction to see what they require, as some states handle such matters at the local level.

For instance, don’t assume that if you live in Texas, Ohio, Kentucky, Wyoming, or several other states, that a contractor’s license isn’t required, because that may, unfortunately, not be the case.

According to the California State Licensing Board, “It is illegal for an unlicensed person to perform contracting work on any project valued at $500 or more in combined labor and material costs.” Keep this in mind when planning your project and deciding which contractor to hire.

Shady Business Practices

Not only is it illegal, but it’s common for someone who offers unlicensed contracting to also be involved with other illegal activities and construction scams.

After all, it’s unfair to all the hard-working contractors out there who have worked hard to get licensed and make the necessary investment to be bonded and insured.

A license invokes an immediate sense of trust when working with a contractor, which doesn’t exist if a contractor has you sign a contract without a license.

“it’s unfair for all the hard-working contractors out there who have worked hard to get licensed…”

If you identify that you’ve accidentally hired a contractor without a license, the smartest action you can take would be to file a complaint with your state license board. It isn’t worth the headache (and expense) if anything goes wrong.

Oh, and one final tip. Don’t be shy about asking to see the license of a potential contractor when you are interviewing them for your project. Those folks pay annual fees to carry their licenses and sometimes, through my own experiences, I have found that they love showing them off.

I can remember the first inspection I had after I got my license from the California State Licensing Board, I couldn’t wait for the inspector to ask me to show him my license. I was kind of proud that I had it. It sounds a little stupid, but the test was quite difficult. I felt like it was a big accomplishment. I was proud that I could legally do contracting work on my own, rather than as an apprentice for my old boss.

It’s easy to verify that a license is active too. Every state or county has a public record that you can search by name, company, and license number. For example, you can check a California State Contractor’s License on this CSLB page: https://www.cslb.ca.gov/OnlineServices/CheckLicenseII/CheckLicense.aspx

Conclusion

I get the inclination to work with an unlicensed contractor…its always about the cost. They are invariably cheaper than other contractors…and we all like to get a good deal. Here’s my advice on this: If you have a small job/project, use a handyman. They will be cheaper than a contractor. If you have a large project, don’t take the risk of using an unlicensed contractor.

You should be suspicious if a price is too good to be true…like you would be with any other product you purchase. If the lettuce is half the price, you can assume it’s old and rotten. If a car is half the price, you can assume it’s got a salvaged title or has been in a major accident. You can use the same logic when considering a contractor.

Remodeling your home can be an intimidating undertaking. But if you do your homework and get the right people involved, it can be an extremely wonderful and enlightening one.