Kalb's Q&A for Contractors - Week of September 26, 2011

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By David Kalb, President of Capitol Services, Inc.
You don’t have to get a tattoo when you want a contractor’s license in California, but you do get ‘inked’. That’s often where the trouble starts.  An out-of-state builder doesn’t think he needs a license but his lawyer does. Our last contractor inquiry gets a full 100% answer for his ‘ten percent’ question…
Q:  I want to apply for a contractor’s license; however, I was convicted of a felony about 8 years ago.  I’ve heard that someone with a criminal record will likely not be given a license.  What do they look at?
A:  According to a recent report released by the CSLB, the Criminal Background Unit has received more than 242,000 transmittals from the Department of Justice since the CSLB’s fingerprinting program began in January 2005.  Of the applicants fingerprinted, they have received “hits” on over 41,000 applicants or about 17%. The Board has denied just over 1,000 applications and issued nearly 1,100 probationary licenses.
The CSLB considers a number of factors when evaluating someone’s criminal background.  Among other things, they’ll look at when the crime was committed; is someone a repeat offender; what crime was committed and how recent was the offense.  In your case, with only one incident in your background, I would say you have a very good chance of ultimately being issued a license.
Q: My attorney told me I need a contractor’s license. I have an upcoming project in California where I need to sign a contract, however I don’t plan to self-perform the work.  In my home state, no license is required unless you actually handle the construction.  Could you confirm whether in fact a license will be necessary? I don’t want to go through the hassle if I don’t need to.
A:  One of the primary reasons your attorney told you to get a license is because it’s not worth the potential financial consequences if your construction project runs into problems. The key is whether you have a signed contract with the owner to handle the construction.  Whether you decide to self-perform all or none of the work has little bearing on whether a contractor’s license is required.
Acquiring a license may look like a “hassle” in the short run but failure to do so could cost you dearly down the road.  For instance, a dispute may develop where you need to go to court.  Without a license your case could be tossed out so any money you hoped to collect will be out the window.  Further, if it’s determined a license was required to work in CA and you don’t have one, the other side in this theoretical dispute could ask the court to order the return of all monies you’ve already been paid. Welcome to CA Code Section 7031.
Q:  I have what I hope to be a pretty cut and dry question...We are General contractors who do a lot of business with subs.  Legally how much can a subcontractor ask for work they "plan" to do?   My understanding is that no one can charge for work that had not been completed. Does the 10% down payment rule apply in this case?
A:  As it relates to home improvement contracts, B&P Code Section 7159.5(a) is pretty ‘dry’.  In response to your first question, yes, subsection (5) clearly states that except for the down payment a contractor may “neither request nor accept payment that exceeds the value of the work performed or material delivered”.  Your second question is clearly addressed in Subsection (3): “… the down payment may not exceed $1000 or 10% of the contract amount, whichever is less.”  As the General contractor, the down payment would relate to your contract with the home owner, regardless of whether you self-perform or hire subs to do the work.

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 me at Capitol Services, Inc., 1225 8th St. Ste. 580, Sacramento, CA 95814. Research past columns at www.cutredtape.com.