HIC & Owner Purchases, Partnership Licensing and NV Bid Limits

A new year brings new opportunity to learn, grow and profit. We work together here to help find answers to common problems and give contractors a resource they can count on in building their business. Every year also brings new regulation, changes in interpretation, and greater complexity in understanding how to work as a licensed contractor. Sometimes those rules create problems of their own requiring a little ‘creative’ thinking, while a Nevada contractor finds no amount of ‘slicing or dicing’ will trim a project to his bid limits…

 

 

Q:   I understand that under the CA Home Improvement Act, a contractor must state the amount of compensation as a sum certain, as opposed to “time and materials” or cost-plus arrangements.  Many of my clients find this problematic, especially when they must purchase large material quantities in excess of the $1,000 deposit limit, such as lumber drop-shipments.

I am not aware of any way to get around this problem.  However, it occurs to me that if contractor and homeowner decide to exclude the lumber purchase from the contract, such that contractor is not charging profit & overhead on the materials, then it should be acceptable for the owner to purchase the lumber from the supplier directly.  I ‘m not asking you for a legal conclusion, but are you aware of any specific prohibition against this approach?

 

A:  It’s a good question and one that has been raised in the past by Capitol Services’ clients.  According to the CSLB, the owner may purchase the material directly from the supplier without running afoul of the 10%/$1000 limit.  Other options would include having a joint check from the owner to the contractor AND material supplier (although the direct check is cleaner); or a payment and performance (i.e. blanket) bond similar to what a “big box” store carries which allows the contractor to receive payment prior to the materials being supplied.

 

I would recommend contacting the CSLB if your clients want to investigate posting such a bond specific to a given project.

 

 

Q:  We’re going to start a partnership with three partners.  My two primary questions are: A) What happens if one of the partners leaves; and B) Is Worker’s Compensation coverage required by the CSLB if we have no employees?

 

A:  If any one of the three partners leave the license for any reason, the company (or one of the partners) has 90-days to notify the CSLB.  The Board will cancel the license but will allow the remaining partners to complete jobs in progress if such a continuation request is made in writing.  As for Worker’s Comp being required, this should not be necessary unless you have employees.  Our understanding is that the three partners will not require coverage; however, it is best to confirm this with your insurance carrier.

 

Q: We currently have a Contractors License in Nevada with a bid limit of $100,000.  We are looking to bid a tract with 30 units but no one home is more than $100,000.   Are we okay to bid on this since each unit is less than $100,000?

 

A: The monetary limit is the maximum contract a licensed contractor may undertake on one or more construction contracts on a single construction site or subdivision site for a single client.  The job in question is 30 separate units, but it appears to be one single project for a single client, so you cannot bid on the project if the total amount for all units is over $100,000.  Bidding one ‘slice’ isn’t going to buy the whole cake, so to speak.

 

Nevada does allow you to request that your limit be raised for the purpose of one project, or you can also apply to raise it permanently.  In either case you would be required to provide a new financial statement.

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