By Shauna Krause & David Kalb, Capitol Services, Inc.
With more than 30 years assisting contractors you might think we have heard it all, but that’s not likely to happen. Our first question is a good example of why we never rest on our reputation but always look for changes in practice or interpretation of contractor’s regulation. Like France has a different word for everything, each state has it’s own rules for contracting…
Q: I've recently read an article at your cutredtape.com website which stated in part: “…According to the Board, the practice of paying “inducements” or what are often called, ‘finder’s fees’ is apparently prevalent in several industries…The Board’s Enforcement staff held a sting operation in Riverside in March and all 9 contractors (licensed and unlicensed) who showed up to bid clearly stated that referral fees would be paid once the “homeowner” signed a contract…”
I was interested in finding out more about this as I have couple friends who are interested in having me help them find leads for construction. They have licenses but I don't know if the above applies, as I would only be handling the leads sort of like what a national Service company does. Any information or direction that I can take to find out more would really be appreciated.
A: We cannot tell you how this national “service” company handles referrals or “leads”; however, our guess is that their business model has been reviewed by the CSLB and deemed to be proper (i.e. not involving "inducements"). That said, if you enter into a home improvement contract with a homeowner that involves kickbacks or inducements with other contractors, you might be subject to a fine. If you have not already done so, I would suggest checking out the CSLB web site link on this subject (http://www.cslb.ca.gov/Newsletter/2010-Fall/page3.htm).
You also want to be careful that you're not operating as a "home improvement salesperson" for these contractors. If "finding these leads" involves visiting a person's home and or negotiating the work to be performed, this could trigger the HIS rules and require you to be registered with one or more of these licensed contractors. If you have any further questions, I would suggest contacting the CSLB and asking them for a second opinion. You'll want to tell the Board exactly what you intend on doing to gather these leads and how you will be compensated for locating them. Good luck in your endeavor.
Q: You helped me get my Nevada license about a year ago. I’m not sure if you remember but I had some difficulty with the application process specifically because I was a new start-up company with little financial strength and as you know, Nevada has very strict financial requirements. I was able to get the license with a minimal bid limit, but I have had a difficult first year financially. My problem is that the Nevada Contractors Board sent me a request to review my financial information again even though I’m not up for renewal until next year. Is this normal? Will they pull my license if my financials aren’t as strong as they were a year ago when I originally applied?
A: You are not alone in having difficulty with the financial requirement in Nevada, we hear from contractors every day in the same predicament! Nevada requires that all residential contractors in which the qualifying party has been a qualifier for less than two years in Nevada provide financial information on an annual basis. If your financial statement and bank forms do not support the bid limit you currently have, you have the option to lower your bid limit or possibly have a financial review hearing. The financial review hearing officer will give you some other options such as indemnification, or he/she may even just accept your information as it stands. Good luck!
While knowledge is power, knowing where to go for the answers is half the battle. Get expert assistance immediately when you call 866-443-0657, email info@cutredtape.com, or write us at Capitol Services, Inc., 1225 8th St. Ste. 580, Sacramento, CA 95814. Research past columns at www.cutredtape.com.
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