Risks of Hiring an Unlicensed Contractor

  
     
May 05, 2015

When getting recommendations from friends and family for contractors, you may come across one that is unlicensed. A bid from an unlicensed contractor may be much lower than those from licensed contractors promising to do the same work. It may sound appealing to save money if you can still get great workmanship, but this is where many consumers fall into the trap. Hiring the cheapest contractor may cost you more in the long run.

In most circumstances, unlicensed contractors offer lower quotes because they do not pay a licensing fee, or obtain a bond to protect their work, and in many cases, don’t purchase liability or workers compensation insurance. Without these expenses, the unlicensed contractor can offer a lower rate. 

Although, a licensed contractor may not do better work than an unlicensed one, the risk of hiring an unlicensed contractor is too great for homeowners. Here’s why: 

Basic Protection

Acquiring a license in a specific field demonstrates that the person has at least a minimal level of competence in that field. That doesn’t mean that a licensed contractor will be the absolute best, but it does show that the person working on your home has more experience than that gained from simply watching TLC and Discovery programs on home renovation and thinking they can do that type of skilled work. Would you hire a doctor or lawyer that was unlicensed? 

A licensed contractor is required to participate in arbitration hearings if any disputes arise. The California Contractors State License Board keeps and publishes complaints against contractors. This is important because it allows perspective clients to research a contractor and read about other consumer experiences. In addition, if a contractor receives enough complaints the contractor could possibly lose their license. 

Protecting Property Values 

Many home projects require permits to complete the work, but unlicensed contractors may not always apply and obtain the proper paperwork for projects. This could be very detrimental to the homeowner. When selling a home, specific facts must be disclosed to the buyers. Unpermitted work, especially if it’s not to code, could impact the value of the property and failing to disclose information could lead to liability of the seller. In addition, since an unlicensed contractor rarely has liability insurance or a bond, if any work needs to be re-done, the burden falls on the homeowner. 

Injury Protection 

An unlicensed contractor may not have workers compensation insurance, and if hired by a homeowner, the homeowner then becomes the employer and is responsible for any injuries or accidents that occur on their property. A simple home improvement project could turn into a bill for tens of thousands more, all because the homeowner hired an unlicensed contractor. 

Protection from Damage to Third Parties

Not only does hiring an unlicensed contractor come with risks to the homeowners property and injury to workers, but can also make the homeowner liable for the contractor’s negligence. A contractor that is negligent of a neighboring property, a passerby or other property that is damaged may result in the homeowner being responsible for the contractor’s actions while employed.

The most important thing for a homeowner to remember is to protect themselves and their assets, which is why it’s so important to hire a licensed professional. To find a licensed and accredited contractor, visit bbb.org, or call (858) 496-2131.