ONLY hire a Licensed Contractor! Here’s Why…

It makes sense to look for the most affordable contractor available to install your fence. And it could be true, an unlicensed contractor may provide a bid that is much lower than bids from licensed contractors and promise to do the same work. It sounds so appealing to save money but still get great workmanship that many people fall into the trap and hire the unlicensed contractor. However, the cheapest contractor might be the one that will cost the most in the long run!

It is not surprising that an unlicensed contractor would be less expensive than a licensed contractor. They do not have to pay licensing fees, they do not have to obtain a bond to protect their work, and more often than not they do not purchase liability or workers compensation insurance. Without these added expenses the unlicensed contractor can provide their services at a rate lower than the legitimately licensed professional.

It is true that having a contractor’s license is not a guarantee that the work will be done well, or even properly. Since there is no guarantee that a licensed contractor will do a better job why should a homeowner or association care if the contractor has a license? The answer is simple–to protect the homeowner or association from a myriad of problems that could arise.

When is a License Required?

The Contractors State License Board, a division of the California Department of Consumer Affairs, governs the issuance and supervision of contractors’ licenses. The State License Board requires a fence contractor can only legally perform the work associated with the classification of the license they hold. A contractor must hold a valid contractors license for any work that will cost more than $500 in labor and material for any work that would fall into the classifications set by the License Board.

Basic Protection

The general goal of professional licensing is to ensure that the person in the profession has a minimal level of competence in their field. Hiring a contractor that has a license also provides an avenue of grievance if a dispute arises. California Contractors State License Board requires mandatory arbitration for disputes1 under $12,500 (consequently the same amount that is required for the mandatory bond). A licensed contractor must participate in the mandatory arbitration in an attempt to resolve the dispute. With disputes between $12,500 and $50,000 the licensed contractor can opt for voluntary mediation to resolve the dispute. A voluntary dispute resolution process can be a much cheaper and less time consuming venture than litigation. If a dispute arises with an unlicensed contractor your only recourse would be to file a lawsuit. And if the unlicensed contractor is particularly shady, good luck finding them or collecting any award you might obtain.

The California Contractors State License Board keeps records and publishes any complaints against a contractor. This actually does a number of things. First, any prospective client can go to the Contractors State License Board’s website and research a contractor. Filed complaints or sanctions imposed on a contractor will be listed for anyone to see. Secondly, if there are enough complaints the contractor can lose the license they worked hard and spent a lot of money to obtain. It is a powerful incentive to do a competent professional job if your future livelihood depends upon it.

Further, since unlicensed contractors rarely have liability insurance or a bond, there is nothing to guarantee that there will be money available to repair any defects in construction that are found after the contractor is paid and the construction completed. This would mean that the entire burden of fixing the mistake could fall on the homeowners.

Protection from Injury to Contractor or Workers

A licensed contractor must have workers compensation insurance for its employees, or show the State Licensing Board that the contractor does not have any employees. Why is this important? In California under Insurance Code §2750.5 an unlicensed worker performing services for which a license is required is not an independent contractor. This means that when an unlicensed contractor is hired by a homeowner or homeowners’ association that contractor, and potentially any employees of that contractor, is considered to be an “employee” of the homeowner or homeowners’ association.

The implications of this are obviously critical. If a serious injury were to occur to an unlicensed contractor the person that hired the unlicensed contractor could potentially be liable for paying the workers compensation benefits. This could turn a simple $1,000 repair into a bill for tens of thousands more.

Protection from Damage to Third Parties

The implications of using an unlicensed contractor go beyond the risks associated with the property worked on and injury to the workers. A homeowner or association that hires an unlicensed contractor can also be liable for the negligence of the contractor. A neighboring property, a passerby or other property that is negligently damaged by the contractor can lead to liability to the person that hired the contractor. As the contractor’s employer the hiring party is responsible for the contractor’s actions during the course of that employment.

The bottom line for a homeowner or homeowners’ association is to protect yourself and your assets. When you hire anyone to work on your property make sure that they are a licensed professional. You can check the status of a contractor’s license in California by visiting the Contractors State License Board on the web at:

If something seems too good to be true, it probably is!