Contractor Bonds & Family License Waivers

If a faucet says ‘off’ it can’t be ‘on’, but in the complex world of contractor’s licensing you may be surprised to learn ‘minimum’ can also be the ‘maximum’. Keeping a construction business in the family can be subject to some special options in licensing. I will share the ‘truth’ with one contractor who has discovered ‘consequences’ about license bonding…Q: We’re looking to expand into the construction market and found someone that has the bonding we are looking for. Since our existing Responsible Managing Officer (RMO) only has the minimum $12,500 bonding, do we have to replace him with a new RMO? Can we reduce him to an RME? We are using his license so we would like to keep him on in some capacity.A: The $12,500 Bond Of Qualifying Individual (BQI) for your RMO is required since he owns less than 10% of the corporation. This is not only the “minimum” bond amount but also the “maximum” bond accepted by the CSLB (with a few exceptions). Virtually any active contractor is required to carry a $12,500 Contractors Bond. If the license is qualified by a RME, or as in your case a RMO with minimal ownership, an additional BQI is required.If your Qualifier is no longer an “Officer”, then you’ll need to change his status to RME. Your company will need to file an application for replacing the qualifying individual. If your Qualifier becomes a RME, this triggers at least one new requirement: he must work at least 32 hours or 80% of the time the business is active — per week. Keep in mind the CSLB only allows one Qualifier per classification on each license.Q: My husband has been working for his parents family-owned company for the past ten years. My husband is interested in starting up his own business seeing as his parents will be retiring within the next few years. I read somewhere that he would be able to work under a “grandfather” license. I haven’t really been able to find out too much information about the process and what he needs to qualify or how to go about doing that. Any advice would be appreciated.A: There is no formal “grandfather” license. I think you’re referring to a law (7065.1) that allows a close relative to take over an existing license. If the family owned business is a sole proprietorship, this is commonly referred to as a “family waiver”. This would allow your husband to become the new Qualifier — with a likely exam waiver — while effectively “starting up his own business”.On the other hand, if the family business is a corporation, your husband can apply to replace the present Qualifier (his father or mother) with a waiver. In this scenario, if your husband were to become the new Qualifier, he could eventually apply for his own business. Once a waiver is granted on one license it can be carried over to other licenses.Q: What are the consequences for failing to renew both contractor bonds on a timely basis? Both our license and qualifying individual bond expired last month.A: It appears from my research that both your bonds are still in good standing. Generally, contractor bonds stay in effect until cancelled by the bonding company. They must notify the CSLB in writing (or electronically) that a bond has been cancelled and in turn the Board will send you a letter stating this fact. They will likely give you a set amount of time to resolve this problem before suspending the license.If it turns out there was a “cancellation”, have your bonding company rescind this. The CSLB will accept such a notice up to 90 days from the – license suspension date. The ‘truth’ is if this were done on a timely basis, there would be no lapse and therefore no negative ‘consequences’.

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