The Top Ten Things a Community Association Manager Should Know About the Regulation of Building Contractors
August 29, 2013
This article lists the top ten things managers should know about contractors.
*Please note: The article reprinted here is informational only, and has not been updated. Do not rely on any of the information set forth herein without obtaining legal advice as to current law and the particular circumstances of your situation.
About the Regulation of Building Contractors
by: David F. Feingold, Esq.
It seems that a day doesn't go by without a Community Association Manager handling an agreement between an Association and a building contractor. For any project involving large dollar amounts or potentially dangerous work, the proposal or draft agreement should be reviewed by counsel. That page of small print on the back of the proposal for services typically includes a number of booby traps, such as hold harmless and indemnity clauses heavily favoring the contractor, limitations of liability, and other exculpatory language. The standard form AIA contracts also should be modified to protect the Association and its manager.
However, the purpose of this brief article is not to analyze the various issues raised in a construction contract. The purpose is to acquaint the manager with the California Business and Professions and Civil Code provisions which govern contractors performing "home improvement" work. Hopefully, this will also assist the manager in dealing with contractors and simple proposals for services. Here are the "Top Ten" regulations you should know about:
1 License Required: Any contractor who does home improvement work worth more than $500 (labor and materials) must be licensed by the Contractor's License Board (Bus. & Prof. Code §7030 (b)). "Home improvement work" is defined broadly and basically includes "the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property" (Business and Professions Code §7151). Almost everything, from landscaping to windows to HVAC systems to carpeting, falls under the "home improvement" definition.
2 Put It In Writing: If the total cost of a home improvement project exceeds $500, the contract must be in writing (Bus. & Prof. Code §7159).
3 Spell It Out: Among other things, the contract must contain specific provisions, including when the work will start and end, a description of the work, how payments will be made and cancellation rights (Bus. & Prof. Code §7159).
4 Get A License Number: Every contractor must include his or her license number on all contracts and all forms of advertising (Bus. & Prof. Code §7030.5).
5 Limitation On Deposits: It is illegal for a contractor to require an advance payment larger than $1000 or %10 of the contract price, whichever is less (Bus. & Prof. Code §7159 (d)).
6 Honor The Contract Price: Failure to complete the job for the contract price constitutes a ground for disciplinary action against the contractor (Bus. & Prof. Code §7113).
7 Beware The Lien: An unpaid licensed contractor can use a "mechanics lien" to secure his or her interest in the property. The contractor can foreclose on the property, but must use a lawsuit to do so. (Civil Code §3110). However, as to a Community Association, a contractor can only lien if there has been express consent for the work as to a particular unit. For example, if a unit owner contracts for work, even if that work is done in part to Common Areas, the contractor can only lien the property owned by the unit owner who contracted for the work. However, if the Association duly authorizes work on the Common Areas, consent of all owners is deemed given, and the contractor may lien all Common Areas. However, if that occurs, a condominium owner can remove the lien against that owner's unit upon payment of his or her proportional share of the lien amount (Civil Code §1369).
8 Ninety Days To Sue: To enforce a mechanic's lien, the contractor must file a lawsuit to foreclose on the property within 90 days of the date the lien was recorded (Civil Code §3144).
9 No License, No Pay: An unlicensed contractor cannot sue to get paid for work requiring a license (Bus. & Prof. Code §7031). An unlicensed person causing injury or damage may be liable for three times the amount of damages (to a maximum of $10,000), plus costs and legal fees (Code of Civil Procedure §1029.8).
10 Always Check Status: You can check the status of a contractor's license by contacting the Contractors State License Board (CSLB). They can be reached by telephone at (800) 321-2752. The CSLB also has a useful "self-serve" web site at www.cslb.ca.gov
David F. Feingold, Esq., is a partner with the San Rafael law firm of Ragghianti, Freitas, Macias, Wallace,and serves community associations in the Bay Area as general and litigation counsel.
Document Download: toptencontractorregulations.pdf