California Partnership License; General Engineering Contractor

I have been told ‘eyewitnesses’ don’t always report seeing the same thing. It’s a matter of perspective. When reading the regulations for licensed contractors your interpretation, or ‘vision’ needs to be accurate and complete. Individual viewpoints are often different and yours may not always mesh with what the Board actually requires. That different ‘viewpoint’ can give you an incomplete ‘look’ as our first unfortunate contractor will learn…

Q: Our qualifying partner sent the Contractors Board a form since he has left the license. As one of the general partners, I now want to take over so we can continue in business. We want to keep the same license number and understand we have 90-days to complete this. I checked the CSLB web site and the license shows “cancelled”. How do I correct this error?

A: If by “error” you mean the cancellation, this is not a mistake. When a partner leaves a partnership, the CSLB cancels the license as of the date of disassociation. Your company can request a continuance to complete work in progress and will need to apply for a new license (and new license number). Unfortunately you may not pursue new projects under the continuation.

Q: We’re starting a new California Corporation. I am the President and do not qualify for obtaining a contracting license; however, the Vice President of our new startup is currently licensed and designated as the Responsible Managing Officer (RMO). He also qualifies another corporation and is not giving up this first business. We understand he can be designated RMO with up to 3 companies.

We filed a new application (with him as the RMO) and sent in to CSLB. We have also applied for our surety bond.

My question is: are we legally able to begin working while utilizing his current license number or must we wait for a new license number from the State to begin?

A: It sounds like you’re proceeding in the right direction. You are correct that a RMO can qualify up to three licenses in a given one-year period. You may not however, use the current corporate license number for the new start-up company. You must wait for the new license number to be issued by the CSLB. Before a license is issued your application will need to be reviewed, the required bond and proof of Worker’s Compensation (or exemption) will need to be filed and all listed officers must meet the Board’s fingerprinting requirement.

Q: I’m a bit confused about what type of work an “A” contractor can do. I know from my experience and reading the CSLB definition, there are some obvious projects like roads, utilities, recreational facilities, earthwork, power plants, etc. Does this mean an “A” can take a contract for just a small portion of these types of jobs? I have read some of your prior columns and would appreciate some clarification.

A: According to a current, up-to-date CSLB Information Guide for Building Officials, “a General Engineering (A) contractor can contract to perform all or ANY PART (emphasis added) of a project that falls under the “A” classification”. This means for example, that since a general engineering contractor can (under Section 7056 of the B&P Code) build a highway or bridge or airport including pouring concrete or putting up fencing, they can take a portion of the job (such as concrete or fencing) as long as it was originally — or currently – part of this type of ‘fixed work’.

Fire Protection (C-16) Contractor in CA

As we all cope with the downturn in our economic reality, contractors are ready, willing and able to provide the services you may need. For anyone who profited in the last ten years, now is a great time to give your local contractors a chance to update that landscaping, repaint the house, build the deck you always wanted, install ‘green technology, add that media room and help ‘stimulate’ the workforce. Improvements made today are investments in our communities, our state and our nation’s future economic wellbeing…

Governor Schwarzenegger has launched a new web site focusing on the American Recovery and Reinvestment Act signed into law February 17th by President Obama. This site (www.recovery.ca.gov) carries daily updates and information on how and where these funds are being spent in CA.

For instance, recent highlights touted $625 million in Stimulus funding for 57 Transportation projects and another $410 million for weatherization funding and energy efficiency grants. According to the Governor, these infrastructure projects alone are estimated to create over 11,000 new jobs.

Two bills recently introduced by Assembly-member Eng would impact contractors both unlicensed and licensed. The first, AB 370 would increase the penalties for unlicensed activities. This bill would require third or subsequent convictions of unlicensed activity to be punishable by BOTH a fine and imprisonment in a county jail. Present law gives discretion to the Court to impose a fine, imprisonment or both.

AB 484, as introduced would require the CSLB and other state governmental licensing entities, to provide the Franchise Tax Board with the name and social security number or federal taxpayer identification number of each individual licensee. If that licensee fails to pay taxes and a state tax lien is recorded, this bill would provide that their professional (ie contractors) license SHALL be automatically suspended, until the unpaid tax payment is satisfied. Both bills are awaiting their first Committee hearing.

Q: Thank you for your articles appearing in our local Builder’s Exchange Newsletter, I find them very informative. I have a situation where our local County Fire Marshall is requiring a licensed “C-16” (Fire Protection) contractor to install the vertical component of a fire hydrant lateral off a water main system. We are a General Engineering (“A”) Contractor and have never faced this requirement, nor do we believe such a requirement is valid. Thank you for your time and advice.

A: I have received several recent inquires from contractors who are having similar issues with local governments. If I understand the project correctly, it involves laying pipe (likely cement lined and cast iron), excavation and backfill of the pipeline, and water main tie-ins. Right or wrong, it is ultimately up to local government officials to determine the “correct” classification for work within their jurisdiction. This being said, I agree with your assessment that the Fire Marshall should also accept an “A” for this project. While the “C-16” is proper so too should be the General Engineering classification.

My opinion is based on B&P Code section 7056 that defines what General Engineering contractors can properly handle. In part, this code specifies that an “A” contractor is involved with fixed works requiring engineering knowledge and skills. This includes water power or water supply projects as well as excavating, grading, trenching, paving, cement or concrete in connection with these fixed works.

Contractor License Bonds in California; Solar contractor

Now you see them, now you don’t! Has your bonding company ‘disappeared’? With all the recent emphasis on ‘green’ tech, it is no surprise to many that the CSLB is ‘shining’ its light on solar energy contractor’s regulations. As licensed contractors you have the right to work in California. You also have an obligation, really a self-serving need, to make a call on suspect contractors knowing SWIFT action will follow…

Tens of thousands of contractors carry bonds through Surety Company of the Pacific (SCP) — or at least they did until a few weeks ago. Effective March 2nd, SCP was merged into American Contractors Indemnity Company (ACIC). As a result of the merger, ACIC has directly assumed the surety bond obligations of SCP, which no longer exists as a separate surety company.

According to the Contractors Board, all SCP bonds are now ACIC surety bonds. Therefore, as a result, the CSLB has updated its bonding history to reflect this change. If you had a bond through SCP, and you visit the CSLB web site, you’ll see that your SCP bond was cancelled effective 3/2/09 and replaced with a new ACIC bond with the same effective date. Not to worry, this did not create a gap in your license bond since your old bond was automatically converted. The CSLB has emphasized that for contractors caught in this change, there was “no interruption in coverage”.

Yet, more important news from the CSLB.

There is a move afoot to simplify the “C-46” (solar) definition. As presently written, this classification covers all manner of solar systems including “forced air, forced circulation water, thermosiphon, integral collector/storage….” You get the idea. As proposed, the new definition would replace a lengthy paragraph to read: “a solar contractor installs, modifies, maintains, and repairs thermal and photovoltaic energy systems.” As it relates to the solar industry, CSLB issued a statewide Consumer Alert to warn unsuspecting property owners of scams in the popular “green” contracting trades.

In good times and bad, scam artists prey on unsuspecting homeowners – often senior citizens. For the vast majority of hard working contractors these relatively few unethical or illegal operators cast a bad light on the industry. It is therefore in everyone’s best interest to be aware of potential unlicensed activities and report these to the CSLB as quickly as possible.

For example, according to the CSLB, an anonymous tip led to the arrest of a Clovis man who was allegedly scamming an elderly homeowner in Fresno County. Quick action by the Contractors Board and the Fresno County District Attorney’s Office apparently stopped an 82-year-old hearing-impaired property owner from losing thousands of dollars. At the site, District Attorney investigators discovered that the homeowner was told he was getting a deal with materials left over from another job. But, he was not given a price for the project until after work had begun and was then told that the price was thousands of dollars more than he expected.

Authorities arrived before any money was paid and determined that the suspended license being used on the job actually belonged to someone in another state. The contractor was arrested and charged with illegally using another’s license, contracting without a license, illegal advertising, and Worker’s Compensation violations. Fresno County authorities also seized his equipment.

A common contracting scam used by transient paving crews is to take exorbitant amounts of money for substandard materials and work, and then quickly move on to more victims. They often ask for payment up front, and will cash checks and leave the area before victims suspect they’ve been ripped off.

Investigators from the CSLB’s Statewide Investigative Fraud Team (SWIFT) believe there may be similar traveling crews and have asked that any suspect activities be reported to SWIFT investigators immediately at (916) 255-2924.

California Contractor Licensing for Corporation and Sole Owners

I assist a contractor’s family that ran into a ‘brick’ wall when trying to ‘dig’ up answers to questions they had about licensing. While regular readers know how complex the rules and regulations for contractors can be, looking ‘in’ from outside the world of licensed contractors is even more daunting for one attorney who needs some basic help…

Q: My uncle is a licensed contractor in California and currently holds two classifications (“C-27” and “C-29”). He wants to form two corporations and wants each one with a name that describes the type of work that is being performed for each license. I spent a few weeks trying to find solutions on the CSLB website but I simply end up with headaches and unanswered questions. I even called the Board and after being on hold forty-five minutes, the representative was unable to help. Is there any way my uncle can do this? Thank you for your time.

A: It can sometimes be difficult to navigate the CSLB web site or get through on the phone. Sometimes people are connected with a representative right away while other callers have told me they end up waiting quite a while as you did.

Your uncle can separate his two classifications using one to qualify each new corporation. There is no requirement that a contractor must use both (or all) classes on each license he holds. For example, his “C-27” company could be “Can-You-Dig-It Landscaping” while simultaneously operating the “C-29” corporation as “Another-Brick-in-The-Wall Masonry”.

Q: A colleague in my law office gave me your name as someone who might be able to answer a simple question regarding contractor licensing. We have a client who has an individual contractor license and who wanted to associate it with a corporation (which he owns 100%). I understand there is a simple form by which a sole proprietor can have their license re-issued to a corporation, which he or she owns, but then that license cannot be re-issued to them at a later point in time.

Is there another way for a contractor to obtain a license for his or her corporation without giving up their individual license (e.g., inactivating their current personal license and somehow qualifying their corporation for a new license)? I apologize if this question is simplistic or perhaps Licensing 101 but would appreciate any input you can provide. Thanks.

A: When dealing with the CSLB, or for that matter any state government agency, there are no simplistic questions.

When an individual applies for a corporate license — and owns at least 51% of the company — the CSLB requires that the applicant complete the form “Licensed Sole Owner Applying For Corporation”. This simply asks the contractor to check the box marked “YES – Reissue my sole owner license number” or “NO – DO NOT reissue my sole ownership license number … Please issue a new license number to the corporation”. You are correct that if the sole owner elects to have his license number reassigned, it will forever be tied to the new corporation. The Board will not re-issue it back to him in the future.

A common misconception within the construction industry is that in order for a sole owner to qualify any new license he or she is in effect moving the license into the new entity. Rather, he is only “moving” his ability to qualify the license. There is nothing in the law requiring that his sole owner license be re-issued to the new entity and as owner of 20% or more of the company stock, there’s no requirement to inactivate his existing license.

Woman Owned Business and DVBE in California

While the voters passing Proposition 209 changed the rules for minority-owned companies in California, bid goals remain for some contractors. Is there a contract ‘advantage’ for your company? I shake the ‘foundation’ of another contractor’s ideas before ‘wading’ into a plumbing question…

Q: Where can I sign up for the women-owned business? Seems I can’t find it on the Internet.

A: There is no longer a specific Woman Business Enterprise (WBE) or Minority Business Enterprise (MBE) program in California as there had been for many years. The Caltrans Civil Rights Office does however administer Disadvantaged Business Enterprise (DBE) opportunities that encompass what you are looking for.

For disabled veterans, there are also specific goals for including you in contracts & bids including incentives reducing the final cost. The non-profit California DVBE Alliance provides information and assists with the certification process free for disabled veterans. The statewide group also provides a ‘keyword’ search on their website to locate veteran-owned companies for contractor bids.

I have linked these sites on my Resources page: www.cutredtape.com

Q: My local Builders Exchange recommended you with respect to a question about the “B” license “rule of 3.” Their Executive Office said they use you to answer many contractors licensing question and you’ll do so for free.

Do you have any further information about the number of trades a “B” license must be performing to obtain a building permit, other than what is on the CSLB web site? We know some “B’s” that would like to install state approved foundation systems under existing mobile homes. They do some carpentry, but do not, in most instances, perform other trades. Some local governments have begun requiring the “C-47” unless they are doing two other trades. Would you consider that appropriate? Thanks for your help and any information.

A: I appreciate your email and am always happy to respond to questions of this nature. I receive many inquiries from builder exchange members throughout the State.

There were a number of amendments in the “B” classification about a decade ago that changed the “rule of three” to the “rule of two”. This came about as a result of a Court decision involving Home Depot.

A “B” contractor must handle at least two unrelated trades (not including carpentry) on a given project. Using your example, the CONCRETE foundation would be one trade; however, since you may not include CARPENTRY as the second trade, I would not consider this appropriate under the State’s general building definition.

Local government’s that are requiring the “C-47” (general manufactured housing) classification appear to be correct. In part, the “C-47” is defined as installing, altering or repairing any type of manufactured housing including accessory structures and foundations. I hope this helps. Please call me if you have any further questions.

Q: My question relates to repair contracts. Since homeowners have a three-day right to cancel a contract what protections do I have if I am performing an emergency plumbing repair requested by the homeowner?

A: “Service and Repair contracts” are defined within the multitude of requirements related to home improvement contracts (B&P Code 7159). Basically, the 3-day Right to Cancel is overruled if: a) the work amounts to $750.00 or less; b) the home owner initiated contact with you as the contractor; c) you do not sell the homeowner goods or services beyond what is necessary to fix the problem; and d) no payment is due until the work is satisfactorily completed.