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Harsh Penalties for Contractors

A contractor needs to takeall steps necessary to keep a license current. The penalties associated with failure to have a license are dramatic andsevere for in California if you are performing construction work without alicense. If you are not licensed, you have no ability to bring any type of legalaction with respect to the construction work performed.  An unlicensed contractor cannot sue an ownerfor lack of payment if the contractor is unlicensed.  California Business and Professions Codesection 7031 provides that an unlicensed contractor cannot sue for compensationfor work performed.  California codes and cases has taken this principle one stepfurther.  For example, a contractorcannot sue for compensation even in the contractor was unaware that he was unlicensed.  Business and Professions code section 7025provides that a contractor automatically loses his license if he fails to makerequired Worker's Compensation payments. In the case of Wright v. Issak (2007) 149 Cal App 4th 1116, acontractor did not pay required work comp premiums. Thereafter, the contractor brought a lawsuitagainst an owner for non payment.  Theowner claimed the contractor was barred from bringing a claim because hislicense was effectively revoked when he did not make work comp payments.  The Court concluded that even though thecontractor had  received no notice andwas unaware that his license was suspended, this lack of notice did not allowhim to avoid the harsh penalty of section 7031.

   A recent case takes this principal a stepfarther.  In the case of Alatriste v. Cesar's Exterior Designs, Inc. (2010) 183 Cal.App. 4th 656, anowner hired a contractor knowing that the contractor was unlicensed.  The contractor performed the work, and by allaccounts the work was performed with no problems.  However, the owner refused to pay for thework, claiming that the contractor was unlicensed.  The Court held that even though the ownerknew from the start the contractor was unlicensed, and even though the work wasperformed without error, the contractor had no standing to seek compensation.

    The bottom line is that a contractorwithout a license has no ability to recover compensation for work performed.

    Feel free to contact us at 1-866-870-2020or at [email protected]with any questions or for a free consultation about any construction law issuesyou have.

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