Recent Changes in Home Improvement Contract

While contractors bid, build and work their businesses daily it can be difficult to stay ahead of changes in licensing rules and regulations. Changes occur through new legislation, new interpretation of rules and Board policy. Some recent changes in home improvement contract requirements are a good example. Can you ‘give’ your license to a child when you’re ready to call it quits? I will also give contractors the ‘keyword’ to quick answers on a wide range of licensing and industry issues just a keyboard away…

Q: Can my daughter, who has worked with me in this company since 1990 get her own license? I am looking to retire and would like for her to take over the business.

A: Thank you for your email. Based on the information you provided, I would say your daughter could get her own license if she is taking over “the family business”. 7065.1(b) allows “immediate family members” to qualify for a contractors license with a waiver of the license exams if they’ve “been actively engaged” in the licensee’s business for 5 of the previous 7 years. A part of this code section states “the license is required to continue the existing family business in the event of the absence or death of the licensee”. The Contractors Board has determined that “absence” includes retirement.

Q: I just completed a contract on a home. Some of the area to be repaired was in the sub-floor and walls so I could not tell how much repair would be needed before I began the job. Therefore, the contract was for time and materials. Now the homeowner is complaining that some of my time was “overstated”. It wasn’t; however, he refuses to pay the full amount. What can I do?

A: You are the third person this week to call me with a “time and materials” question. B&P Code Section 7159 details the requirements for Home Improvement Contracts. Much of this code section is very precise and includes some exact language and even the type sizes for some wording. One of the items required is the “Contract Price” which must be followed by the amount of the contract in “dollars and cents”. Since “time and materials” is open ended — and therefore unacceptable — the homeowner may have a legitimate basis for refusing to pay the entire amount.

In the future, you might consider stating a price with the understanding that there will likely be additional work. This can be covered on a “change-order” form, yet another requirement in 7159.

Q: I have a criminal record from 2002. The court expunged it last month. Can I still apply for a California contractor license? How long will it take? Do I still need to tell the State about this issue? I have the required 4 years work experience.

A: You can certainly apply for a license and just as certainly you should divulge all information about your criminal background. The FBI and CA Department of Justice retain information even if a record is expunged. I cannot tell you how the CSLB will ultimately decide on your application; however, it will likely take them 5-6 months to conduct a review due to this criminal record. If they deny your application, you can appeal their decision.

Remember a topic in a past column but cannot recall when it appeared? Now at www.cutredtape.com, readers can search nearly a decade of prior ‘Capitol Connection’ columns by KEYWORD. This column has always been about helping the contractor. Now it is even more user friendly.

CSLB Meeting

Your seat at the CSLB meeting is waiting. You could have, should have and would have attended, except…something else always comes up. Let me share some of what you missed. I also help a contractor discover how wrong some advice can be, if not taken in context with a greater understanding of the ‘big’ picture…

Q: A company in the Bay Area ‘drew’ my immediate interest when they advised me that I could get a waiver of the exams if I had someone sign for me and replaced that person on an existing contractor’s license. I did as they said and received an exam date. What’s wrong with this ‘picture’? Was I given wrong information? Or did the Contractors Board make a mistake?

A: Yes, and no. You are referring to B&P Code Section 7065.1(c). This allows an applicant who is a corporate officer or supervisory employee to replace the existing qualifier with a waiver of the law and trade exams. In reviewing your application as filed with the CSLB, it appears you were not (with apologies to Paul Harvey) given “The Rest of The Story” by this Bay Area ‘advisor’.

To be eligible for this waiver, the license itself must have been in existence and in good standing for 5 of the previous 7 years. The replacement application you filed shows the license was only issued about a year ago. While you showed 7 years supervisory experience, this was with another company – not the one where you’re replacing the RMO. The CSLB was correct in scheduling you for both exams.

Your Seat at the CSLB Board Meeting:

At a recent CSLB Committee meeting, a contractor asked the Board some pointed questions regarding their general policies. He also made some statements regarding one local government in Northern California that knowingly contracted with an unlicensed contractor. According to the contractor, “the Board members were very attentive and have been responsive to my concerns”. I was told he had received three calls from three different Board employees as a follow-up to his various issues and concerns. He said he was surprised at how quickly he received a response.

It doesn’t surprise me that the Board was responsive to this contractor. What was most surprising was this contractor took an entire day off to attend a Contractors State License Board meeting. He is to be commended. I can tell you from personal experience, very few contractors attend — let alone address — a Board that has a very powerful say in the overall operation of the construction industry. According to the CSLB web site, “Board meetings are held quarterly; Committee meetings are scheduled on a ‘as needed’ basis; all meetings are open to the public; (and) agendas are posted (on their web site) at least 10 days before the meeting date”.

Every Committee and Full Board meeting has a “Public Comment Session” as one of the first agenda items. The next two CSLB meetings are scheduled for February 9th in Emeryville and May 10th in Riverside. Most of the Committee meetings are held in Sacramento several weeks prior to the Full Board meeting.

California Contractors License Questions

Here’s a quick quiz for contractors. How many licenses can a corporation apply for? If you’re not sure, you may be surprised by the answer given to one of our contractor inquiries. Unfortunately, another contractor will be disappointed to learn there is little help in his situation. Don’t let this happen to you. How much of the company do you need to own to have your license number assigned to a corporation as the RMO? Those answers and more in this “Capitol Connection”

Q: Please remind me: What is the process for adding a “dba” to an existing corporate license? Is there a limit to the number of “dba’s” per license? If so, how many are allowed for each license?

A: A corporate contractor’s license can have a “dba”. If the company wants to conduct business under a second or third “dba”, each must have a separate license number. For instance, say you company has three classifications and you want to conduct a separate business under each one. You can keep the existing license and add a “dba”; apply for a second license with a different classification using a second “dba” and then apply to ‘do business as’ (DBA) under a third license name style.

Since each “dba” would be tied to the same corporation, there is no limit on the number of licenses a company can apply for. This is not the case if each entity were a unique corporation with a separate corporate number. Then there is a limit of three licenses that can be qualified by any one individual in a given year.

Q: I don not understand why my bond is being cancelled on my partnership license. Could you look into this for me? PLEASE HELP!

A: I wish I could help you on this; however, my research indicates your license expired over 6 years ago. After 5 years, a license is no longer renewable. If you want to reapply for this license the partners must be the same. Any changes and it won’t work.

You may want to contact the bonding company and find out why they cancelled the bond now, or more importantly, why they kept issuing a bond on an expired license? Since an expired license cannot legally contract, there is no reason to have a bond.

Q: Can a “B” contractor do a home improvement (remodeling) project and sub out everything except the ‘finish’ carpentry?

A: Only if he is from Finland! Just kidding, yes a General Building (“B”) contractor can handle a home improvement project if it involves 2 or more unrelated trades (or only includes rough or finish carpentry). There is no problem self-performing the finish work and sub-contracting the remaining trades.

Q: At the end of the licensing process, will the CSLB issue our company a NEW contractor’s license number or will we be issued the Responsible Managing Officer’s (RMO) EXISTING (inactive) license number?

A: When someone qualifies as the RMO on a license, the company is almost always issued a new license number. The qualifier’s existing license remains as is. The only exception would be if the RMO owned 51% or more of the company and choose to have his sole owner license re-issued to the corporation. As we discussed, this is not the case in your situation, as the RMO only owns 2% of the voting stock.

A Middle Showing

While this column is a contractor’s interactive resource featuring questions and answers based in real-world experience, the ‘Q&A’ also sometimes can tell a ‘story’. This time the questions begin with getting a California license, a middle showing how to help make it work and grow for you. And ends with, taking your license beyond the border and back again. While the questions don’t usually lineup in some, or any, ‘story’ form, there is always something valuable to learn…

Q: I’m currently in the process of filing applications for an Original Contractor’s License in California and Nevada. However, I have two individuals that would like to sit for the exam under one corporation. Will I have to submit two separate applications or can both men’s information be submitted on one application?

A: Nevada allows applicants to file one application and list two qualifiers. Each will need to show the requisite 4 years experience in his trade. Unfortunately in California, under the situation described, you cannot submit one application with two qualifiers. When an exam is required, the CSLB will only allow one person to be listed as the qualifying individual. Also, the Contractors Board will not accept two applications for a corporate license at the same time — with the same classification.

Q: I have been a licensed CA contractor for 7 years. I hold the “B” classification and would like to expand my business into Nevada. One of my customers has asked me to look at a job there. Can I use my CA license? If not, will I need to take the NV state exams?

A: You cannot use your CA contractor’s license in NV; however, since CA and NV have a reciprocal licensing agreement, you should be granted a waiver of the general building exam. Each state honors the others qualifications for a number of classifications if the applicant has been a licensed contractor in good standing for 5 of the past 7 years, Likewise, both states still require that applicants pass the business management (law) test.

Q: I’m a California contractor and have been thinking of moving to Arizona. How can I use my qualifications from CA to get a license there?

A: See above response! California, Arizona and Nevada (as well as Utah) have a reciprocity agreement that allows a contractor in one state to get a license in one of the other states with no trade exam. While most classifications are honored, there are a several exceptions unique to each state.

Using / Renewing Your License

Like so many situations in life, applying for, using and/or renewing your contractor’s license often depend on your individual history. While the rules and regulations are applied generally, every ‘problem’ can help illustrate the flexibility these laws provide individual contractors, as our first questions for 2007 demonstrate. I will also offer my ‘two cents’ on the ten percent rule for home improvement contracts and revisit the issue of licensing LLC’s…

Q: I had a California contractor’s license issued around 1975. It expired some time ago although I have been working in the building industry continuously for over 30 years. I have been a general superintendent and project manager and would like to know if there’s a way to renew or reissue my old license without the cost and time to study and take the exam?

A: Based on the information you provided, it would appear you would need to reapply to get your license back. If the prior license was yours as a sole owner, you can request that the number be re-issued. If a license has expired for more than 5 years (and you have not been a qualifier on any other license), it cannot be renewed without re-taking and passing the law and trade exams. If you have been a qualifier on another license within the past 5 years, you can reapply with no testing.

Q: After looking at a couple of painting contractors advertisements in the yellow pages, I am curious to know how they can advertise waterproofing and roof coating. I am a “C-39” (roofing) contractor and perform the type of work they are offering. Can painters offer waterproofing? Can they then also do other roofing work?

A: It is very likely they CAN perform waterproofing and roof coating legally under a “C-33″. Part of the definition of the Painting classification is…”for the purposes of decorating, protecting, fireproofing and waterproofing”. They cannot however, repair or replace shingles, roof tiles, etc. or handle other work typically performed by a “C-39” since this would go beyond the scope of a painting contractor.

Q: I know there is a requirement concerning home improvement contracts that limits the amount of money a contractor can collect up front to ten percent (10%) or $1000, whichever is less. I was wondering if there was some type of limitation or requirement about collecting money up front on other types of contracts?

A: I am not aware of any limitations on how much a contractor can collect up front for other type of projects (Commercial, institutional, public works, etc.) Only home improvement projects have this “10% or $1000, whichever is less” provision.

Q: Two friends and I are considering forming a LLC in order to service and install solar panels and solar energy units. We understand a “C-10” license is needed. We want to start business right away and were told we could find someone with a “C-10” license that could be a Responsible Managing Officer (RMO) or Responsible Managing Employee (RME). Our main question is can we get the business started this way?

A: First, since the CSLB will not license a Limited Liability Company (LLC) you will need to form a corporation or partnership to include all three of you. Second, if applying for a license to install solar panels and solar energy units, either the “C-10” (electrical) or “C-46” (solar) classification would be acceptable. Third, as we discussed, if you find someone who has the proper classification, your qualifier’s present license will need to be inactivated.