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. 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 explains a few of the basic legal principles to help homeowners speak more knowledgeably with contractors and recognize when 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 a license is required, performing work 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.) Work performed during that suspension can expose the contractor to the payment bar and refund remedy under section 7031.
What Does California Law Require in a Home Improvement Contract?
Home improvement contractors sometimes use contracts that omit legally required terms and disclosures. Business and Professions Code section 7159 generally requires a written contract for home improvement work exceeding $500, including a description of the work, the contract price, payment terms, approximate starting and completion dates, and required notices. The homeowner is entitled to a completed copy, signed and dated by both parties, before work begins. Failure to comply may subject the contractor to discipline by the Contractors State License Board, but does not automatically relieve the homeowner of the 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?
Subject to a narrow statutory exception, the downpayment for home improvement work may not exceed $1,000 or 10 percent of the contract price, whichever is less. Beyond that downpayment, a contractor may neither request nor accept payments exceeding the value of work actually performed and materials actually delivered. The statutory exception applies to both restrictions. (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. (Bus. & Prof. Code, §§ 7109, 7110.)
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 enter an improvement contract in reliance on false or fraudulent representations, or knowingly false statements, the homeowner may recover a $500 statutory penalty, reasonable attorney fees, and 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. Bond and surety information is available through the contractor’s license record on that website. 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?
If the contractor carries commercial general liability insurance, homeowners may present a third-party claim for potentially covered property damage or bodily injury. Coverage depends on the policy and the facts. The cost of correcting defective work, completing unfinished work, or recovering overpayments may not be covered.
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 you consult with an attorney or not, you should 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.