These are tough economic times.  So it might be that remodeling your house isn’t in the cards.  Then again, contractors are seeing tough times, too, so they’re more willing to cut profit margins to get a job.  During tough times, you might be tempted to let an unlicensed contractor do your remodel.  After all, they don’t buy liability insurance and they don’t pay workers’ compensation insurance.  Since workers’ compensation insurance can be as much as 50% of labor costs, you stand to save a lot…or do you?

            Although I get cases where licensed contractors make mistakes, they pale in comparison to the problems I find with unlicensed contractors.  And, if there is a problem, it is far more likely that the licensed contractor will remedy the problem.  Indeed, in my 18 years of practicing law I cannot remember even one time when an unlicensed contractor either fixed a problem or was able to pay to fix a problem he had caused.  One local client gave a long time friend, unlicensed of course, $50,000 to roof his house.  (You read that right, $50,000.)  The friend needed all of it up front.  First, $50,000 was way, way too much for this roof.  Second, the law forbids a down payment of more than 10% of the total cost or $1000, whichever is less, for a home improvement project.  As you might guess, my client has yet to see a shingle or a dollar of his money returned.  In another case, my client hired his neighbor, again unlicensed, to design and build a deck that looked out over the redwoods in his backyard.  The unlicensed contractor so badly over spanned the joists (supporting timbers) that the deck bounced like a trampoline.  In addition, he used untreated Douglas Fir, which is far cheaper than Redwood or synthetic decking, but has nowhere near the rot resistance.  The deck started rotting in the damp climate of the San Lorenzo Valley after just one Winter.  Friends like this make enemies redundant. 

            Could I sue these unlicensed contractors?  Of course, and I would certainly get a judgment against them, but there is very little chance of collecting that judgment.  For some reason, unlicensed contractors never seem to have a steady job and rarely own a house or any other assets.  Despite occasionally getting large checks from trusting homeowners, the money flows right through them and there’s never anything to collect against.  Perhaps there is money stuffed under a mattress someplace, but the law is very poor at locating mattresses stuffed with money.

            How does one find a good contractor?  Your first line of defense is to make sure that the contractor is licensed.  A simple check on the Contractors State License Board website tells you if they’re licensed.  www.cslb.ca.gov.  Although vendors, such as lumberyards, don’t like to favor one contractor over another, you can often get a vendor to say which contractors have been long time clients and promptly pay their bills.  This gives you some sense of their business practices.  My experience has been that the contractor who does his paperwork is also a better builder.  Does he strike you as professional?  Does he show up in a ratty truck?  A beautiful new truck is no guaranty of quality, but a dilapidated truck suggests that he is not very good at what he does.  Check those references!  Ask to see a portfolio.  Many good contractors keep a portfolio of projects.  The most expensive bid is not a guaranty of the best job, but a bid that is low by a substantial margin is often an indication of an inferior contractor.  Does the contractor use a “home improvement contract”?  It has many consumer protections and is required by law.  For a great guide of all that’s required in a home improvement contract go to this website.

            One more horror story.  A local client doing a large project was faxed a bid for $1,600,000 which was hundreds of thousands less than the next closest bidder.  My client was immediately suspicious, but he checked around and even did a follow up with a key vendor.  Unfortunately, the vendor endorsed this contractor without ever having done business with him.  After the contractor walked off the job it was discovered that the frame he installed was badly out of square.  It cost my client more than $2,000,000 to correct the work and finish the job.  This was after he had paid the crummy contractor over $1,000,000.  The minor silver lining is that at least this contractor was licensed and wants to stay licensed.  We sued him and he will either pay the judgment or lose his license forever.  My client was very sophisticated and did all his homework.  The moral is that a bad contractor can sneak up on even cautious homeowners, but you have a much greater chance of avoiding lawyers and coming out ahead if you do your homework up front.

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