Security Installations, “C-10” & “C-46” & Corporate Disassociation

While many trades have become more specialized others have ‘drifted’ into portions of other skilled work. That has raised the confusion levels among many contractors about what is now allowed within their scope of work. Sales and installation of some products have also triggered misunderstandings about who can do what with which license. That’s why we’re the experts answering those questions because, as we have always noted, knowledge is power…

Q:   As you know, you are assisting us with obtaining a Contractor’s License and as we move forward with it, I do have an urgent question from my business for a current opportunity.  Can we sell security cameras in California WITHOUT a special low voltage license?  Just selling the “hardware” – no services involved, no installation involved.

A:   A contractor license is not needed for selling these.  If you are signing the contract for the installation portion or self-performing the installation then a contractor’s license is required by law.

Q:   I currently have a “B” General Contractor’s license and I recently applied to add the “C-10” Electrical classification.  The CSLB rejected my application stating that I need to show proof of performing at least four years of work experience in the “C-10” trade.  I have performed electrical work as part of my General Building projects for many years.  Does this not qualify me?

A:   Lately the CSLB has been scrutinizing experience much more than in the past and it has become increasingly difficult to prove experience in certain trades when you are performing them as part of another trade.  If you want to add the “C-10” classification you must show that you performed electrical work every day for 4 full years for approximately 8 hours per day.

 

Q:   Are you able to confirm if a “C-46” (Solar) Contractor can subcontract out all of the installation work to subcontractors?  (We have an affiliate who has applied for a “C-46” license, and will just be selling and advertising Photovoltaic systems, and then plans on subcontracting out all of the installation).  Can they subcontract the installation to a “C-10” Electrical Contractor, or can they only subcontract out to another “C-46”?

We have inquired with the CSLB classification deputy, however we were told that it may be up to six weeks to get a response. However, since the “C-46” and “C-10” can both do the entire project, I do not see why the Solar could not sub to the Electrical.  See the CSLB industry bulletin below, and we’ll let you know more in another column.

http://www.cslb.ca.gov/generalinformation/newsroom/industrybulletins/industrybulletins2010/industrybulletin20100630.asp

Q:   We received our license renewal application and realized that we never updated the CSLB with the current officers listed on the corporation.  Only one of the officers listed on the renewal application is still with the company

A:   At least you have one officer available to sign!  I would suggest sending in the renewal signed by the current Officer as well as the Qualifier in order to get the license renewed in a timely manner.

Next, to update your Officers with the CSLB you will need to file Disassociation Notices for each Officer no longer with the company, and applications to add an Officer for each new person to be added to the license.

Becoming a LLC, RMO & Qualifying Individuals

Many contractors are taking advantage of California now allowing operations as a Limited Liability Company. However, keeping the license number you had for years might be an issue. But first, another contractor discovers a way to ‘waive’ the exam in qualifying a new corporate license…

Q:  We are currently exploring the options to obtain a Class “B” contractor’s license. My father is currently serving as an Officer under a Corporate license (also a “B)” and has been since Jan. 2008. He currently does not have a license himself and is looking at his options to obtain one. Due to his limited English he has struggled with examination itself, and from my own understanding he potentially qualifies for an examination waiver.
Unfortunately that’s where my confusion begins. It seems there are a variety of options, particularly replacing and becoming the new Responsible Managing Officer (RMO). But before I go further let me explain our intentions. We intend to incorporate a new business and run a separate company entirely once his license is obtained, as we no longer plan on working with the individuals that are part of the current Corporate contractor’s license, and we are all in agreement to dissolve the current corporation in the future.

So my question is what exactly are our options to make my father the RMO of the new corporation?  What is the cost?

 

A:  Since your father has been listed on the current license as an Officer for over five years he can apply to replace the Qualifier and request to waive the exams.  I understand that your intentions are to apply for a new corporate license, however in order to waive the exams your father will need to first replace the Qualifier on the existing license.  Once he is listed as the RMO, he can then go apply under a separate company as the qualifying individual without needing to take the exams since he will already be considered “Qualified”.

The State fee to replace the Qualifying Individual is $75.00.  The State fee for the new corporate license is $480.00 for one classification. If you, or anyone else, needs help with this process just give us a call.

Q:  We currently have a corporate contractor’s license that we want to change to a Limited Liability Company (LLC).  Are we required to convert the corporation to an LLC with the Secretary of State in order to keep the same contractor’s license number, or can we form a new LLC while keeping the existing corporation in existence?  We want to have the license number transferred from the corporation to the LLC, but we want to keep the corporation in existence with the Secretary of State in order to keep selling our product.  The corporation will not be doing any installs.

A:  The CSLB allows a corporate license number to be reissued to an LLC if the following conditions exist: 1) The corporate license is in good standing immediately before its cancellation in connection with the application for an LLC license; 2) The LLC was formed by a corporation to continue the business of the corporation subsequent to the cancellation of the corporate entity’s license, and; 3) The personnel listed for each entity are the same.

The law does not stipulate that it must be converted, so as long as you meet the three requirements above, you can keep your existing corporation in place to use for other purposes not related to performing construction work and transfer the corporation’s license number to the newly formed LLC.

Another Look at ‘Finder Fees, Rewards, Inducements or Kickbacks’

Having assisted contractors with licensing and other industry issues for more than 30 years, the questions that come into the office remain interesting and unpredictable. Sometimes the question comes from rumor, mistaken understanding or simple wishful thinking. In this instance, despite our appreciation at being asked, the answers can sometimes be clear, but also disappointing when we have to set the record straight…

Q:  What an amazing resource! Thank you for all of the information you’ve provided over the years. I have referred innumerable industry professionals to your services -some of whom you have helped become licensed contractors.
Which is apropos my point. I would like to begin procuring work for a contractor with whom I have worked as a skilled carpenter in the past (it should be noted that I am not a licensed contractor). As a Sole Proprietor,  he does not have the financial means to employ me as inside sales so what is the best way to be remunerated for these sales endeavors if “kick backs” and “finder’s fees” are illegal? I understand that the current governance by CSLB does not prohibit fees paid to non-contractors for such services, but it is unclear if a) this is considered ‘unethical’ and b) what the industry standard fee would/should be/is.

Your clarification/tutelage/perspective/guidance on this point is GREATLY appreciated!

A:  Certainly appreciate your enthusiasm and those referrals, but this may not be what you want to hear. Nonetheless, B&P Section 7157 has the answer. That section, Prohibited Inducements, addresses your question. This is also commonly referred to as a “kick-back,” as example when it was used in a 2010 CSLB Newsletter headline:

“Remember that it is illegal for contractors or subcontractors to accept or pay referral or “kick-back” fees in order to secure construction or remodeling projects. Violators may face fines or disciplinary action against their license.”

Now the question is at what point are these ‘inducements’ proper or illegal from the contractor’s and your standpoint as his “representative”.  Subsection (b) prohibits a contractor from giving anything to prospective ‘customers’ that is more than $5.00 and subsection (a) does not allow a person to “promise or offer to pay, credit, or allow to any owner, compensation or reward for the procurement or placing of home improvement business with others.”

Since you are neither a ‘customer’ or ‘owner’, so far so good. However, when looking at Subsection (c) I would say that both you and the contractor would be on very shaky ground.  In part, this states: “No salesperson or contractor’s agent may accept any compensation of any kind, for or on account of a home improvement transaction, or any other transaction involving a work of improvement, from any person other than the contractor whom he or she represents with respect to the transaction”.

You say you will be going out and about (maybe even door-to-door) in your words “procuring work for a contractor”, yet will NOT be a registered Home Improvement Salesperson (HIS) or employee of any sort. It has always been Capitol Services opinion, and I believe the CSLB opinion, that kickbacks or referral fees or finder’s fees, whatever they may be called, are improper regardless of how you couch them.  Nevertheless, if you decide to move forward with this endeavor, I would recommend that you consult with a construction attorney who could provide you and the contractor with legal advice.

 

License Number Advertising, Experience Credit & LLC Insurance

While it’s certain contractors need to be licensed, some other ‘players’ must also ‘ante up’ if they want to be in the construction ‘game’. What seems like a simple mistake, you might also be making, could leave another contractor in ‘suspense’ if he doesn’t act quickly to correct it, because, as Oliver Wendell Holmes said, ‘ignorance of the law is no excuse’…

Q: I am a construction consultant.  I don’t do any building work, but basically design the structure, make sure that the job runs smoothly and on budget, and I sometimes arrange for contractors and their crews to perform the job.  I don’t have any experience in the field but I do have a degree in Architecture.  I was recently told that I need a contractor’s license to consult on these projects.  My first question, am I required to be licensed?  And secondly, how would I obtain a license with no field experience?

 

A: Yes, construction consultants are required to be licensed with the CSLB. B&P Code Section 7026.1 addresses this issue and states that ‘anyone who oversees bids and construction projects and/or arranges subcontractor work and schedules is in fact acting in the capacity of a contractor and is required to be licensed.’

To answer the second part of your question, you would not be able to qualify for a contractor’s license with no field experience.  In order to qualify for a license you are required to show four years of full-time work experience in the trade you are applying for, with one of those years being hands-on field experience.  However, the CSLB will give you credit for your architectural degree.  Without the hands-on experience though, you may want to consider hiring an individual who does have the General Building experience to act as your qualifying individual.

 

Q: I have a landscaping license in CA and I have the phrase “Licensed and Bonded” on my business cards.  I recently read an article online that stated that it was against CSLB policy to refer to your bond in advertising.  What is the penalty for this?  I’ve unknowingly had this on my business cards for years.

 

A:   Obviously my first suggestion would be to get new business cards printed without the reference to your bond ASAP.  Any reference to your bond in advertisements is grounds for suspension of your contractor’s license.  I am not aware of any further penalties.

Q:  We are in the process of obtaining a Contractor’s License for our company, which is an Limited Liability Company or LLC.  We submitted our insurance certificate to the CSLB and they rejected it stating that our insurance carrier is not acceptable.  Can you shed some light on this for us?  We are not sure what they are looking for.

A:   B&P Code section 7071.19 (c) requires that; LLC liability insurance policies be written by insurers that are “duly licensed by this state or an eligible surplus line insurer.”  According to the legal office of the California Department of Insurance (CDI), the only insurers that are duly licensed by the State of California are admitted insurers that are licensed by CDI.  You can call us for further assistance or visit the CSLB’s website for a searchable list of approved carriers at https://www2.cslb.ca.gov/OnlineServices/InsuranceSearch/WCRequest.aspx

“B” Solar & Roofing, “C-53” & CA Green Energy

We’ve all had our own computer problems but when government has a software issue it can impact thousands of offices throughout the state. For contractors who must deal with complex governmental rules and regulations on a daily basis any little adjustment, change or alteration can also impact your business.  We “alert” you to several such changes as well ‘adjust’ an answer on General Builder’s to clarify a previous inquiry…

In a recent column, we pointed out that a “B” General Building contractor could perform solar work alone since the CSLB has determined that this involved two or more trades (Board rule 832.62).  The question involved doing this solar work in conjunction with “new roofing and/or roof flashings”.  Please note that if a “B” contractor were to perform ONLY one trade on a project (other than solar, framing or finish carpentry), this could be a problem if readers didn’t grasp the original question that was answered.

 

Q:  I have decided to sell my pool business, which holds a “C-53” license in California.  It’s a Sole Proprietor license.  Will I be able to give my license number to the buyer?  He was hoping to use the same name and license number due to its credibility.

A:  Unfortunately no, a Sole Owner or Proprietor license cannot be transferred except in certain circumstances that involve a family member taking over the business.  If a Sole Proprietor business is sold, the license number is not part of the sale.  The buyer will be required to apply for and obtain their own license before they can legally operate in the State.

Contractor’s Alert:

As is the case with some government regulation, original effective dates may need to be adjusted for a variety of reasons. Due to unanticipated delays in developing complete performance compliance software for 2013, The California Energy Commission (CEC) has postponed the effective date of several Title 24 provisions of the California Building Standards Code. Originally slated to become effective on January 1, 2014, the new effective date is now July 1, 2014.

The California Building Standards Commission (CBSC) and Contractors State License Board (CSLB) have both issued Information Bulletins outlining which portions of Energy Code, Administrative Code and 2013 CALGreen were impacted.

For a copy of The CBSC Information Bulletin 13-07 or CSLB Bulletin #14-02, you can contact these respective agencies or Capitol Services.

 

Keeping ‘Low’ License Numbers, “B” Solar & Roofing & NV Financials

Is having a ‘low’ or three-digit license number important? It can speak volumes about longevity in business, something many look for in choosing a contractor.  Another contractor helps us sort out some of the confusion about ‘unrelated’ trades on General Building licenses and we share some good news about Nevada licensing …

Q:  Our company has had a Contractor’s License in California since the 1930’s.  The company is going to be merged out and a new corporation will be formed, however it is very important to us that we don’t lose our license number since it’s a 3-digit number.  Is it possible to transfer the license number from one corporation to another or will we have to get a new license number since the corporate entity number will be changing?  We plan to keep the same Qualifying Individual.

 

A:  There are certain conditions that will allow for a corporate license number to be reassigned to a different corporate registration number.  B&P Code Section 7075.1 outlines the conditions that allow for reassignment but based on your scenario, the only two that may apply is either a) The parent company has merged or created a subsidiary, or b) The subsidiary has merged in to the parent corporation.  The CSLB typically defines a “subsidiary” as any firm in which at least 20 percent of the equity is owned by another firm.

Please note that you are required to submit an application for a new contractor’s license along with a written request asking for the license to be reassigned to the new entity. Those decisions are made on a case-by-case basis.

 

Q:  I have a General Building (“B”) license and I was wanting to know if it would be acceptable with the CSLB if I did Responsible Managing Officer (RMO) work for a corporation doing roofing and solar? Some of the jobs are newer houses and do not need new roofs and only need roof flashing installed. Would doing roofing and/or roof flashing along with solar fall into the category of 2 or more unrelated trades?

A: Yes that is acceptable and would be considered 2 or more unrelated trades.  In fact, the CSLB has determined that “B” contractors can perform solar work alone and it qualifies as 2 or more unrelated trades.

Q:  I recently changed jobs and I was the Qualifier on my previous company’s Nevada license.  I disassociated from the license but I wanted to obtain my own personal license and keep it on Inactive status so that in case I want to utilize it in the future I won’t need to re-take the exams.  My problem is that my financial statement is going to reflect negative equity.  Is there any way to bypass the need for a financial statement if I plan to have my license on inactive status anyway?

A:  There is no way to bypass the financial statement requirement even if you don’t plan to have an active license.  The good news is that you have five years from the time you disassociate in order to re-apply for the license without having to re-take the exams so you have some time to build up some equity

“A” vs “B”, License Exemptions for Sales & Installations

Demolishing misunderstanding while building real knowledge of contractor license law is the idea here.  Two contractors’ today show why not being correct is truly not an option…

Q: Am I inaccurate with regards to my company having the “A” (General Engineering) License versus the “B” (General Building) license? The issue has come up and we need to get clarification.  Our understanding was that Class “A” was the highest we could get and that it would cover “B” activities.  Please advise if this is or is not the case.

A:  Actually that is not a true or accurate statement.  Unlike ranks, as in the military, one license classification is not “higher” than any of the others they just allow you to perform different types of work.  The “A” license is General Engineering and it allows you to perform heavy construction such as highways, roads, streets, sewage systems, power plants, parks and other recreational areas, excavating, trenching, etc.

The “B” license allows you to construct and build any type of structure from the ground-up such as residential homes, office buildings, retail spaces, etc.  With the “B” or General Building license you must be doing at least two unrelated trades on the same job.

There are certain instances where a General Engineering project will include some “B” work, such as construction of power plant that would also have some structural buildings on site.  The “A” contractor would be permitted to construct the buildings, even without holding a “B” classification, since it is part of the overall General Engineering contract.

 

Q:  My question involves exemption from the State’s licensing requirements.  If our company installs communication equipment (including satellite internet) on private structures are we required to hold a contractor’s license?  I was reading the CA license law book and discovered code section 7045 which says, “this chapter does not apply to the sale or installation of any finished products…that do not become a fixed part of the structure…” Since, in theory, anything we install can be removed from the building at a later date, do we really need a contractor’s license?

A: B&P Code Sections 7040 – 7054.5 address a wide variety of exemptions from the CA license law.  For instance, these include license exemptions for public utilities regulated by the PUC if they’re working on their own property (7042.1); a home owner who builds or improves a structure on his or her property (7042.1); and “any person registered under Chapter 20 if that person’s activities consist only of installing satellite antenna systems on residential structures or property” (7054.5).

 

I believe the primary function of the Code section you quoted –7045 – is its application “to a material supplier or manufacturer furnishing finished products, materials, or articles of merchandise who does not install or contract for the installation of those items”.  The CSLB would very likely rule that simply because you install communication equipment on a building which can “in theory” be removed years later would not entitle you to an exemption from licensure.

For example, a person purchasing drapes or awnings or wallpaper or metal gutters who will not be installing these products would be exempt from licensing.  On the other hand, the person who is installing these same products would be required to have a “C-61” license.   You could make an argument that each of these may be temporary and subject to removal; however, you would still need the proper license (assuming the job is $500 or more).  Likewise, installing communication equipment such as satellite dish antennas or cell receivers, would fall within the State’s licensing law

I would strongly recommend that you apply for a “C-7” (Low Voltage Systems).  While in theory you might ultimately be able to make your argument stick in an administrative hearing or court of law, do you really want to take that chance?