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Upon finding out your contractor wasn’t licensed, you might think your only avenue is to try to get your money back through negotiation or file a legal claim for the poor quality of the work. California law may give you a much stronger remedy, however. Knowing how B&P code § 7031 lets owners recover everything paid to an unlicensed contractor can help you know what additional options may be available to you.
For owners of Costa Mesa property, this rule can change the potential outcome of a construction contract dispute.
Why Licensing Is Important for Contractors
The Contractor State License Board (CSLB) received 20,092 complaints from both licensed and unlicensed contractors in 2024. That year, the department also closed 20,484 complaint investigations. Additionally, there were a total of 23,525,72 license checks on the CSLB website.
California law requires contractors who perform construction work to be licensed. Business and Professions Code § 7025 prohibits anyone from acting as a contractor without a license when a license is required for the type of work being performed. These construction laws protect owners against contractors who take money for construction work without the qualifications that a license secures.
If construction work does not go as planned, the licensing issue can become very important. An owner may be concerned about incomplete work, construction defects, delays, or budget overruns. However, those issues can become considerably worse when the contractor lacked the necessary license at the time of the work. California law provides a forfeiture remedy that can apply.
What Recovery Is Available Under B&P Code § 7031?
Business and Professions Code § 7031 includes two important owner protections. First, the law prohibits an unlicensed contractor from suing to recover compensation for work that required a contractor’s license. The law also allows the person who used the contractor’s services to sue to recover all compensation paid.
So if an owner paid $100,000 to an unlicensed contractor, the contractor cannot argue that the owner should only recover its profit because $60,000 was used to pay for labor and materials. Instead, if this law applies to the situation, the owner could potentially recover all money paid to the contractor.
What if the Contractor Was Somehow Licensed?
It is possible that a licensing issue involves something other than a contractor who was totally unlicensed at all times. The contractor might have allowed its license to expire during the project. There might also be an issue with the type of license or the specific business entity that applied.
The focus rests on the contractor’s licensing status during the job, with the onus falling on the contractor to prove their legitimacy if challenged. There is also a partial exception for contractors who substantially complied with the law. That exception might apply if the contractor previously held a California license, made a reasonable and good faith effort to maintain it, and took prompt action to fix the problem.
When to Hire a Construction Contract Lawyer
If you’re facing an unlicensed contractor who’s suing you, threatening a lien, asking for more cash, or refusing to return your payments, it’s a good idea to hire a construction contract lawyer to get involved. A construction contract attorney can research the contractor’s license history, evaluate whether the work required a license, analyze the contract and payment records, and identify whether the law provides a claim for recovery.
Providing your attorney with all contracts, invoices, payment records, correspondence, photos, permits, and other project documentation is the most effective way for them to evaluate a construction claim. This paperwork can establish what work was done and how much money was paid.
Why Choose Engels-O’Brien?
Engels-O’Brien handles construction contract cases and contract disputes. Chris Engels worked as a construction contractor for 25 years before becoming an attorney. He understands the complexities of construction projects and how disputes arise between contractors and property owners. We can help you understand your options and advocate on your behalf.
Construction disputes in Costa Mesa may be heard in the Orange County Superior Court system. The Costa Mesa courthouse is known as the Justice Complex, and its address is 3390 Harbor Blvd., Costa Mesa, CA 92626.
FAQs
Can an Owner in California Get Their Money Back if the General Contractor Uses Unlicensed Subcontractors?
An owner in California may not always get their money back if the general contractor uses unlicensed subcontractors. The law states that an owner can recover compensation paid to an unlicensed contractor for work that required a contractor’s license. Whether that law applies when a licensed GC hires an unlicensed subcontractor depends on the parties and facts.
Can a Contractor Put a Lien on Your Property Without a Contract?
A contractor can potentially put a lien on your property without a contract. Under California’s mechanic’s lien regulations, subcontractors, laborers, and material suppliers might still hold lien rights, even without a contract directly with the owner. Those lien claimants must meet statutory requirements, such as sending a lien claimant’s notice and meeting applicable recording deadlines.
What Is the Maximum an Unlicensed Contractor Can Charge in California?
There’s no dollar limit on how much an unlicensed contractor can charge in California. However, the law prohibits an unlicensed contractor from filing a claim to recover compensation for work that requires a license. Additionally, the party who paid the contractor can sue the unlicensed contractor to recover the compensation it paid, with some exceptions.
How Do I Recover Money From a Contractor?
How you recover money from a contractor depends on why you believe you are entitled to the repayment. Potential remedies involve demanding a refund, reporting the issue to the Contractors State License Board, filing a claim for broken contract terms, or taking legal action as allowed by state law. Before taking steps to recover money from a contractor, preserve your contract, payment records, correspondence, photos, and other documentation related to the project.
Request Your Consultation Today
If you have become a part of a dispute involving an unlicensed contractor, Engels-O’Brien can look at the facts of your case and inform you of your options. Contact us today for a consultation.
