What Is The Value of A CSLB Contractor’s License?

Every contractor performing construction work should ask themselves the following question:

What is the value of being properly licensed with the California Contractors State License Board?

California Contractors State License Board

Every contractor performing construction work should ask themselves the following question:

What is the value of being properly licensed with the California Contractors State License Board?

The answer, according to California Business and Professions Code §7031,¹ is the contract price for any job the contractor is performing at the time the contractor is unlicensed.²

B&P §7031 addresses whether a contractor is entitled to payment for construction work on any project—which includes residential, commercial, industrial, and public works projects.

B&P §7031(a) prevents an unlicensed contractor from recovering monies owed for construction work—even if the work is executed perfectly.

B&P §7031(b) allows a property owner who contracts with an unlicensed contractor to “recover all compensation paid to the unlicensed contractor.”

B&P §7031 is designed to discourage unlicensed contractors from performing work without a license. White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 519-520)

Unlicensed Contractor

By “discourage” the court means punish the unlicensed contractor by:

(1) Prohibiting the contractor from collecting monies owed for construction work, and
(2) Requiring the contractor to pay back ALL monies received for work performed.

A popular belief is that §7031(b) does NOT apply when the property owners KNOWS the contractor is NOT licensed. This is simply not true.

A California appellate court affirmed the harshness of B&P §7031 in a case called Alatriste v. Cesar’s Exterior Designs, Inc. (2010) 183 Cal.App.4th 656.

In Alatriste, the plaintiff hired Cesar’s Exterior Designs Inc. to provide landscaping services. At the time the contract was entered into, Alatriste was informed by the owner of Cesar’s that they were in the process of obtaining their contractor’s license. The owner thus knew that at the time the contract was entered into, Cesar’s did not possess a contractor’s license.

The court held that knowledge of a contractor’s unlicensed status does not stop the property owner from collecting all monies paid to the contractor.

B&P §7031(e)—which codifies the judicial doctrine of “substantial compliance”—may allow a contractor to escape the harsh penalties of §7031. However, this exception applies in limited circumstances and should only be relied on by contractors after-the-fact and as a last resort.

In conclusion, California’s statutes and case law have made it abundantly clear: the value of being properly licensed is the contract price for any job that the contractor is performing at any given time.

¹  B&P §7031 only addresses the civil consequences of being unlicensed. The CSLB can also initiate criminal investigations against unlicensed contractors.
²  There are many ways a contractor which has a contractors’ license can be considered unlicensed by law. Subsequent articles will discuss this in more detail.