California Construction Law Contractor Protection

Scholefield Associates, P.C.


Don't Get Ripped-off by Unlicensed Contractor Scams!

At the end of this section are useful links to guides and pamphlets. They are provided for your use.


The recent firestorms in Southern California have been unfortunate. Most people are genuinely interested in helping those in need, but there will always be the few that are looking for the opportunity to take advantage of the situation. Unfortunately there are those who prey on the misfortune of others in unscrupulous and often illegal ways

Our goal is to help you protect yourself with enough information and advice to avoid the scams. Because many situations require emergency service to restore your electricity, plumbing, gas lines or structural integrity, you may feel rushed into making agreements with contractors. Don't do this.

It is in the best interest of both homeowners and legitimate, licensed contractors to protect homeowners from scams by unlicensed contractors.

Things to remember:

Over $500.00 requires a licensed contractor. Work done on your home for over $500.00 for the total project price requires a licensed contractor. NO EXCEPTIONS!

There are some very good reasons to use a licensed contractor, even if you think you can save a few dollars by accepting an unlicensed contractor's offer. It is cheap insurance using a licensed contractor.

Exposure to unexpected liability. If the homeowner contracts with an unlicensed person or company, then the homeowner can be held liable for on-the-job injuries sustained by that unlicensed person's or company's employees. This does not seem fair, but this is the way the law works. Sometimes even homeowner's insurance will not cover this, all because the contractor is unlicensed. This exposes you, the homeowner to liability you never dreamed of, all because the contractor lied to you about being licensed.

Protection. Using a licensed contractor offers protection to the homeowner in the following ways:

A. The contractor knows his or her trade, and has been tested and is bonded for this.

B. They must post a $12,500 bond, which is some monetary protection against violations of State Contractor's laws.

C. The California State Contractor's License Board (CSLB) will help investigate claims and disputes against licensed contractors at no cost to the homeowner.


BBB is no guarantee. Some people recommend checking the Contractor's Name and license number with the Better Business Bureau (BBB). This WILL NOT protect you against being scammed by illegitimate contractors. Also, many legitimate licensed contractors are not member of the BBB.

Homeowners need to understand that the BBB is NOT a government agency, and has no power to enforce any laws. They are a private, not-for-profit organization that requires businesses to pay a membership fee in order to join. The same thing applies to local Chamber of Commerce groups. These groups are useless when it comes to verification of contractors as being licensed or not.


The Scam

What has been happening lately is that scam contractors present credentials (license numbers, business cards, etc.) of legitimate licensed contractors, even though they are not affiliated with these businesses. When a homeowner checks on the legitimacy of the business with the BBB, they check out ok, and the scammer has been able to pull off the first part of the con. The homeowner now feels comfortable working with a "legitimate" contractor.

From there, the scam contractor will try to get money up-front for work to be done. There will be excuses such as needing materials, supplies and such. There may be promises of getting at the top of the list, or discounts because their equipment is already in the area if you act immediately, and of course hand over money. Once the money is in their hands, you have lost.


Confirm the contractor

The best way to confirm that a contractor is who he says he is, is to follow the procedures outlined below:

A. Verification. Go directly to the California State Contractor's License Board and verify first that they are a licensed contractor. either by the contractor's license number or the name of the company. You can try calling the CSLB number, but getting through is difficult because of recent budget cutbacks. This alone is not good enough.

B. Name and telephone. At the CSLB site, you will be able to get information on whether or not they have up-to-date insurance and bonding, and usually the owner or contact person as well as a telephone number that is legitimate.

C. Confirm the contact person. Call the telephone number that you obtained from the CSLB site and confirm that the person you are dealing with is a legitimate employee of the company.

D. Expect additional documentation. Sometimes the information on the web site is not up to date (such as insurance or bonding information), so it is still best to require the contractor to produce a copy of both the contractor's bond and workers' compensation insurance (only if they have employees).



To protect yourself, you as a homeowner MUST DEMAND that the contractor prove to you:

A. Bona Fide Employee or Owner. That the person you are dealing with is truly an employee or owner or authorized agent of the contractor.

B. Documentation. Be sure that the contractor has all the proper insurance and bonding documents.

**Keep in mind that any legitimate contractor will NOT be offended if you demand (politely of course) that they provide proof of license, bonding, insurance and references before you enter into any type of agreement. They expect this, and it is these requirements that keep unlicensed contractors from taking advantage of the unsuspecting homeowners.**

Now that you have taken the time to confirm that the contractor that you are dealing with is legitimate and passes the above listed requirements, you can move on to the next phase.

GET IT IN WRITING. Obtain a firm WRITTEN quote from the contractor detailing the exact work to be performed, the exact cost for the work, the date the work will begin, and the time it will take to complete the work.

GET AN EXACT PRICE QUOTATION. DO NOT sign any contracts or agree to pay a contractor based on "open time and materials" needed to perform the work. GET AN EXACT PRICE. Time and materials is vague and unclear as to how much it will cost, and the contractor has no incentive to finish quickly or efficiently.

GET ALL CHANGES IN WRITING. Just as with the original contract, DO NOT approve changes in the price or scope of work verbally. Insist that all changes in price or scope of work be in writing signed by both the contractor and the homeowner.

YOUR RIGHT TO RESCIND. DO NOT waive (give up) you 3 day right to rescind the contract unless the work you need done is truly an emergency that cannot wait to be started for 3 days. DO NOT fall for "getting the work done at a discount because the contractor just happens to be in the area". This is an old trick that the homeowner falls for thinking he will be getting a price break.

DOWN PAYMENT. By law, the contractor cannot ask for more than 10% of the entire contract price or $1000.00 (which ever is less) for a down payment before any work is done. DO NOT allow anyone to talk you into deviating from this.

ADVANCE PAYMENTS. By law, the contractor cannot ask for payments for any work that has NOT YET BEEN DONE. DO NOT prepay for materials not yet delivered either. As a requirement for getting a contractors license, the CSLB requires that all contractors have enough money or credit (at least $2500) to be able to fund the project at the beginning. Also, any legitimate contractor will have credit terms with suppliers, usually 30 days before they have to pay the invocies. It is possible to pay for materials directly, which should be a bargaining point since you are now financing the contractors project.

WAIVERs AND RELEASES. DEMAND that your contractor provide an "Unconditional waiver and release" from all their material suppliers and subcontractors used by the contractor for the work you have already paid for BEFORE you pay for any more work. Even if your contractor gives their own written guarantee that its suppliers and subcontractors have been paid, those suppliers and subcontractors may still record a "Mechanics Lien " against your property if your contractor fails to pay them. This is very important, DO NOT let the contractor talk you out of these. It is for your protection.

PAYMENT and PERFORMANCE BONDS. If the work to be done is significant, the homeowner should consider requiring the contractor to obtain a payment and performance bond This is above and beyond the $12,500 bond required by the CSLB for all licensed contractors. The principal cost of the bonds may have to be paid by the homeowner (which is a percentage of the value of the work to be performed taking into consideration specific factors relating to the contractor). However, it is a red warning flag if the contractor has trouble qualifying for the payment and performance bonds, or if the premium required is higher than the average premium.


The list above is a MINIMUM that you should do to ensure that you will not become prey to unscrupulous contractors. If you have any questions, or would like us to verify any contractors you may have in mind, contact us immediately.


All Require Adobe Acrobat Reader Click here to get Adobe Acrobat Reader

"Don't Get Burned After a Disaster" The California Department of Insurance guide:  for handling post disaster rebuilding: In addition to contractor issues, this document also covers insurance, adjusters, identifying scam artists, etc.

"What You Should Know Before Hiring a Contractor" CSLB booklet covering aspects of every construction project. Written for the homeowner, it offers a detailed overview of all the necessary elements.

Abbreviated version in Spanish

Abbreviated version in Chinese

Abbreviated version in Korean

Abbreviated version in Tagalog

Abbreviated version in Vietnamese

"After a Disaster, Don't Get Scammed" CSLB tips on how to prevent consumer scams attempted by unlicensed contractors.












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