Hiring a Contractor in California

In 2011, BBB received more than 30,000 complaints nationally against contractors. While there are many trustworthy and reliable local contractors, there are always those unscrupulous few that end up charging too much and doing too little, or nothing at all.

License Requirements

If you are considering hiring an individual or company to complete repair or remodel work and the cost for labor and materials exceeds $500, it is important to verify the contractor is licensed by the Contractors State License Board. California requires contractors be licensed for the specific work they perform. For example, a potential electrical contractor should have an electrical classification on his or her license. If you are seeking roof contracting, the contractor should be licensed as a roof contractor.

The CSLB offers 43 different classifications for contractors, including general building contractors. When choosing which classification to seek, consider the work to be done. If you are seeking just one single job to be completed, seek a contractor with that specific classification or a general contractor with a separate classification in that area. If there are several different projects in need of completion, a general contractor can be hired to complete the work he or she is classified to do and then subcontract any work that the general contractor is not classified to do.

You can look for a contractor's license on the Contractors State License Board website (www.cslb.ca.gov/consumer/hireacontractor).

If the contractor has employees, ensure the company currently holds workers' compensation insurance. If a worker is injured on your property and the contractor does not have workers' compensation insurance, you may be held liable for any injuries incurred. You can verify the insurance policy by viewing the policy information on the CSLB licensing page. Some contractors may claim exemptions from workers' compensation but employ workers. Regardless, if your contractor plans on bringing additional labor to your job be sure they have the proper insurance.

After verifying licensing, research the background of the company. Does the license report any judgments against the contractor? Do they have a report with Better Business Bureau? What is their complaint history?

Estimates and Permits

Before agreeing to any work, obtain at least three estimates from licensed contractors. Ensure you thoroughly understand the reasoning behind each estimate - lowest is not always best. Also consider whether the contractor will obtain the needed permits. If you are responsible for obtaining building permits, realize that you are assuming the role of owner/builder. Before agreeing to secure any permits, read the CSLB advice on the risks of being an owner/builder.

Contracts

Once a contractor has been chosen, keep in mind specific rules California bares regarding contracts. The contract should include a detailed description of work to be done, including specific brands of products to be used, color choices, quantities and model numbers. Include an estimated start and finish date in the contract.

Find out if a down payment is required. In the case of home improvement, the down payment should never exceed 10 percent of the contract price or $1,000, whichever is less. If you are retaining a pool contractor, the down payment should not exceed 2 percent of the contract price or $200, whichever is less. The only exception to this down payment maximum is if the contractor has obtained a Blanket Performance and Payment Bond, which can be viewed on the contractor's license. If this bond is secured, the contractor can ask for the entire contract amount upfront.

If payments are to be made before the project is completed, a schedule of these progress payments should be stated in the contract, along with the date and amount of work to be completed when the progress payments are made. Check all work and confirm the contractor is meeting the terms of the contract before making all payments.

If your project costs more than $25 or is negotiated at your home, the contractor must provide you with a three-day right to cancel. To cancel the services within the three days, supply the contractor written notice of your decision to not be bound by the contract.

The only exception to the three-day right to cancel is a service and repair contract requested by a consumer on short notice. These are generally emergency repairs and the contract will state that it is a service & repair contract. The total cost is required to be less than $750.

Subcontracting

If your project involves several different areas of work to be completed, you may choose to hire a general contractor who may then subcontract out some work to specialty contractors.

First, check up on the history of your prime contractor. Search public records through your local law enforcement agencies to check for any law suits related to unpaid work. Then, obtain a list of all subcontractors your prime contractor intends to hire. Make sure the subcontractors are licensed by CSLB, check their complaint history and verify that, if they have employees, they have workers' compensation insurance.

The written contract between yourself and the prime contractor should include the specific start and end dates for each segment of work to be completed, along with payment schedule; and lists of the subcontractors and suppliers for each segment of work.

If your prime contractor fails to pay any subcontractor, the subcontractor possesses the right to file a mechanics lien against your property. This means that they could cause your property to foreclose if payment is not made to them.

In order for a subcontractor to file a lien against your property, they must file a preliminary 20-day notice. This filing states that they did or will provide services on your property and can file a lien claim if these services or products are not paid for. If this 20-day notice is not filed, the subcontractor cannot file a lien.

To avoid a lien being filed, pay for the work done by subcontractors with joint checks. Put both your prime contractor's name and the subcontractor's name on the check. If this is done, both parties must endorse the check in order for it to be cashed, increasing the probability that the subcontractor will be paid.

Also, obtain a signed conditional lien release from each subcontractor before you make a payment. After paying, ask your contractor to obtain signed unconditional releases from the claimants paid for that portion of the work. You are allowed, by law, to withhold the next payment for your project until you receive an unconditional lien release for the previous payment.

After work is completed, file a Notice of Completion with the County Clerk Recorder's Office. This lessens the amount of time a contractor and subcontractor has to record a mechanic's lien.

Finally, ensure any changes made to the work agreement are made in writing. Putting all agreements in writing may lessen the chance of future disputes.