If you are hiring a contractor to perform work on your home or property, it is essential that you hire a contractor who is both licensed and bonded. When you hire an unlicensed contractor to perform work, there are several significant risks that you take, including the risk that you will be subject to a lawsuit as well as the potential that any implied warranties afforded by state law will be void.
What Does Licensed Mean for a Contractor?
While the laws for contractors' licenses differ by state, in most cases, a license is required to do any sort of skilled labor on another person's home or property. For instance, an electrician, a plumber or a drywaller may be required to have a license. Someone performing a variety of different tasks may need to obtain a general contractors license. In order to obtain a license, the state imposes specific requirements such as minimum education or work experience. The state may also require that the contractor take an examination and may provide for different levels of licensing that give the contractor the right to do different size jobs.
In addition to proving their knowledge of the area in which they obtain a license, a contractor may have to meet some additional requirements as well depending on state law. For instance, contractors may be required to have an active worker's compensation insurance policy in order for a license to be issued. In many states, being bonded is also a prerequisite to obtaining a license.
What Does Bonded Mean for a Contractor?
Being bonded is different from being licensed, although the two are sometimes related. When a contractor is bonded, this means he has purchased a surety bond. This is a type of insurance policy that protects a property owner. The bond provides a certain amount of liability protection and if the contractor fails to complete a job as required or contracted, then the bond can provide compensation to a property owner.
Typically, in order for a bond to pay out to a homeowner, the property owner must first win a claim with the state contractors board by proving that the contractor failed to perform the work required. The homeowner may also need to try to first collect money from the contractor before making a claim against the bond. Whether the bond will be sufficient to pay the claim depends on the size of the bond that the contractor had and on whether there are other claims against it. The Oregon Construction Contractors Board (CCB) warns customers that the bonds required in the state of Oregon may only provide a limited amount of financial security for property owners because the bonds required in Oregon are often small compared to the volume of work performed by contractors. However, this may differ from state to state and your contractor may sometimes buy a larger bond than is required by law. To determine the amount of protection available to you by hiring a bonded contractor, it is best to speak with a lawyer prior to entering into a construction agreement.
Why Hire a Bonded and Licensed Contractor?
There are several important reasons for ensuring you hire a bonded and licensed contractor. First, since unlicensed contractors are usually breaking the law by working without a license, there's a good chance they also will not comply with other laws including permit requirements and inspection requirements. This can result in your project not being up to code and needing to be repaired or removed if your home is inspected or before your property is sold. Second, it can be much harder to determine if an unlicensed contractor will provide you with quality workmanship since the contractor has not had to submit to any examination or review of his knowledge by a licensing board.
Aside from the increased possibility of receiving poor workmanship from an unlicensed contractor, you may also give up your right to make warranty claims when you hire someone without a license to do a job. While most states impose implied warranties on contractors for bad workmanship, these implied warranty laws often require that the contractor be licensed in order to apply. Further, your state contractor board will not typically help you to make a warranty claim against an unlicensed contractor, so if you are to try to recover at all, you will need to go to civil court. Even if you win in civil court, without a bond, there's a good chance the unlicensed contractor will not be able to pay your damages.
Another important consideration when hiring an unlicensed contractor is you could be setting yourself up for liability. While licensed contractors typically must have worker's compensation insurance, unlicensed contractors may have no protection from injury at all. If they harm themselves on your property, this means that you could be subject to a lawsuit and responsible for paying their damages.
Avoiding these potential hazards of hiring an unlicensed contractor is important and you should check with your state licensing board before hiring any contractor to determine if his license is in good standing. A lawyer can help you to make appropriate inquiries if you are uncertain as to whether hiring a particular contractor is a good idea.