By Nathan Low, Attorney at Law, Watkins Firm
The Watkins Firm, APC, has represented and advised many homeowners in serious disputes with contractors hired to remodel their homes here in San Diego and across Southern California. Homeowners often feel compelled to acquiesce to a contractor’s demands because they do not know how strictly California law regulates home improvement contracts and contractors. This article lists and briefly explains a few basic legal principles governing home-improvement contracting to help homeowners speak more knowledgeably with their contractors and recognize when it may be time to seek legal counsel.
Is My Home Remodel Contractor Properly Licensed?
California construction contracting is governed by the Contractors’ State License Law, beginning at section 7000 of the Business and Professions Code. When the work requires a license, performing it without proper licensure has severe consequences. Subject to narrow statutory exceptions, the contractor cannot sue to collect payment, and the homeowner may sue to recover all sums paid. (Bus. & Prof. Code, § 7031.) Under Code of Civil Procedure section 1029.8, a homeowner injured by qualifying unlicensed work may also recover three times the actual damages, with the increase over actual damages capped at $10,000, subject to statutory exceptions.
What Happens if My Contractor Does Not Have Required Workers’ Compensation Insurance?
A contractor’s failure to obtain or maintain required workers’ compensation insurance for employees automatically suspends the contractor’s license by operation of law. (Bus. & Prof. Code, § 7125.2.) Performing work during the suspension can expose the contractor to the payment bar and refund remedy under section 7031.
Hiring an unlicensed contractor creates risk for the homeowner because, in California, an unlicensed contractor is automatically deemed to be the homeowner’s employee. (Lab. Code § 2450.5.) If the contractor is injured while doing the work, the homeowner is liable for corresponding workers’ compensation benefits to the contractor (and his or her employees). Also, the homeowner may be held liable for injuries the contractor causes to others. (
Rosas v. Dishong (1998) 67 Cal.App.4th 815, 817.) For these reasons, it is always advisable to confirm that the contractor you intend to hire is licensed. This may be done by checking the records of the California’s Contractors State License Board (“CSLB”) at cslb.ca.gov.
What Does California Law Require in a Home Improvement Contract?
Unfortunately, we often see cases involving home improvement contractors who choose to omit terms and disclosures required by law. For example, Business and Professions Code Section 7159 generally requires a written contract when home improvement work will exceed $500. The contract should include the price of the work to be accomplished, draw and payment terms, a thorough description of the work, notices required by California law, and the approximate dates the project is to begin and be completed.
As a homeowner, you are entitled to a copy of this completed, signed, and dated contract, and you should make sure you have it before work begins. California’s Contractors State License Board (“CSLB”) oversees these matters. Failure to fulfill the contract terms may result in discipline by the Board, but it does not relieve the homeowner’s legal obligation to pay for work performed.
Can I Cancel a Home Improvement Contract After I Sign It?
Business and Professions Code section 7159 and California’s Home Solicitation Sales Act, Civil Code sections 1689.5 through 1689.14, provide cancellation rights for many remodeling contracts entered into at your home. For a covered home improvement contract, you generally may cancel without penalty through midnight of the third business day after receiving a signed, dated copy containing the required cancellation information. Buyers age 65 or older generally receive five business days. Saturdays ordinarily count; Sundays and specified holidays do not. Certain disaster restoration contracts carry a seven-business-day cancellation right. Exceptions apply, including to qualifying emergency and service-and-repair transactions.
How Much Can a Home Improvement Contractor Require Me to Pay in Advance?
The down payment for home improvement generally work may not exceed $1,000 or 10 percent of the contract price, whichever is less. Beyond the down payment, contractors may neither request nor accept payments exceeding the value of work actually performed and materials actually delivered. (Bus. & Prof. Code, § 7159.5.) Ordinarily, then, you may refuse a demand to pay in advance for work not yet performed or materials not yet delivered.
What if My Contractor Fails to Obtain Permits or Performs Defective Work?
Contractors must comply with applicable state and local building permit requirements. (Bus. & Prof. Code, § 7110(h).) They must perform their work with reasonable skill and care, consistent with the contract, plans, applicable building codes, and accepted industry standards. Willful violations of building laws and specified material departures from plans or accepted trade standards are grounds for discipline by the CSLB. (Bus. & Prof. Code, §§ 7109, 7110.)
California law also recognizes an implied covenant in every construction contract that the contractor will perform work in a good and competent manner. (
Kuitems v. Covell (1951) 104 Cal.App.2d 482, 485.)
What if My Contractor Abandons the Project or Stops Working?
Contractors may not abandon a job without legal excuse. (Bus. & Prof. Code, § 7107.) A contractor’s willful failure or refusal, without legal excuse, to proceed with reasonable diligence is also grounds for discipline when it causes material injury to the homeowner. (Bus. & Prof. Code, § 7119.)
What if My Contractor Made False or Fraudulent Representations?
If a homeowner is induced to sign a home improvement contract in reliance on knowingly false statements, the homeowner may recover a $500 statutory penalty, reasonable attorney fees, and any damages caused by the deception, provided the statutory requirements are met. (Bus. & Prof. Code, § 7160.)
Can I File a Complaint or Make a Claim Against the Contractor’s License Bond?
Homeowners may file complaints with the Contractors State License Board at cslb.ca.gov. They may also submit claims to the contractor’s license-bond surety for qualifying losses. The contractor’s license record on that website includes bond and surety information. The standard $25,000 license bond provides limited funds, which may be subject to competing claims.
Will the Contractor’s Liability Insurance Cover My Losses?
Homeowners can file a claim seeking compensation for property damage or even bodily injury. California does not generally require contractors to carry general liability insurance, with limited liability companies being the exception. However, established and trustworthy home improvement contractors typically carry some form of commercial general liability insurance. Often, these policies only cover damage the contractor causes to your home or property, or physical injury to people. They may not cover things like completing the project, redoing defective work, or recovering excessive payments.
What Should I Do if My Home Remodel Project Is Going Wrong?
We know it is frustrating when your contractor demands premature payment or repeatedly delays the work. Whether or not you consult an attorney, document the demands and delays, request a written completion schedule, and compare each payment request with the work performed and materials delivered. Photographs of the work are often helpful. Obtain legal advice before terminating the contract or withholding payments that may actually be due. We are available to help you through these kinds of disputes.
We invite you to review our podcast Episode 11 – Resolving Business and Construction Disputes as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
About Nathan Low
Nathan Low has decades of experience in the areas of
business,
real property, and
employment law. In the area of business law, Mr. Low assists clients with
contract,
business tort, and
construction defect issues in both litigation and transactional capacities. Mr. Low also helps with a wide variety of real property matters, including easements, title, mechanic’s liens,
water run-off,
trees, nuisance, lease, and landlord-tenant issues as to both residential and commercial properties. With respect to employment law, Mr. Low represents and advises employers and employees in contract, employee handbook, severance, discrimination, harassment, and
wage and hour matters.
Mr. Low is very active in the San Diego County legal community, and enjoys volunteering in worthwhile matters of public concern. He is a member of the North County Bar Association and The Honorable Fiorenzo V. Lopardo American Inn of Court in Vista, California. He has served as chairman of both the real property and employment law sections of the North County Bar Association. Nathan Low is currently on Board of Trustees of the San Diego County Public Law Library; and he provides volunteer mediation services for the Small Claims Department of the San Diego County Superior Court, North County Division. He also serves as court-appointed counsel as needed in pending cases under the Service members’ Civil Relief Act.
San Diego, California Attorney Nathan Low has represented clients in business, real property and construction-related disputes for nearly 30 years (December 1996). California State Bar No. 185714.
California Business & Professions Code: Section 7109:
https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=7109
California Business & Professions Code: Section 7110:
https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=7110
California Business & Professions Code: Section 7119:
https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=7119
California Business & Professions Code: Section 7160:
https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=7160
