Are Unlicensed Contractors in California Allowed to Receive any Compensation?

By Eric T. Hartnett

Several years ago California courts decided and the California legislature codified that “a person who utilizes the services of an unlicensed contractor may bring an action...to recover all compensation paid to the unlicensed contractor for performance of any act or contract.” [California Business and Professions Code §7031(b).]

California Appellate Court case White v. Cridlebaugh recently dealt with the question of whether the compensation that was to be repaid by an unlicensed contractor could be offset for materials and services provided.

The White family hired Mr. Cridlebaugh to build a house for them. Mr. Cridlebaugh agreed to the handle the job as a representative of JC Master Builders, Inc. However, Mr. Cridlebaugh was an unlicensed contractor and JC Master Builders, Inc. did not hold a valid contractor’s license either.

After JC Master began its work, the relationship between JC Master and the Whites deteriorated and the parties sued each other. The Whites sued for all monies paid (roughly $84,000) and JC Master sued for breach of contract and foreclosure of a mechanics’ lien previously recorded against the Whites’ property for $13,561.

The trial court found in favor of JC Master. The Whites appealed. The Appellate Court found that the Whites are required to be reimbursed for all compensation paid to the unlicensed contractor. The Court found that the reimbursement could not be offset for materials and services provided.

This ruling is not an endorsement for hiring an unlicensed contractor with the hopes of getting construction work done for free. There are many factors one must consider when hiring a contractor, such as whether the homeowner owes a legal duty to compensate for the injuries of people working on their property.

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Peter N. Brewer established the Firm in 1995. The Firm specializes in real estate and mortgage lending law. Clients of the firm include homeowners, real estate professionals, mortgage brokers, loan servicers, real estate appraisers, real estate developers, construction professionals and investors. The firm takes pride in its highly successful insurance defense practice on behalf of real estate brokers, brokerages, agents, appraisers, mortgage lenders, title companies and foreclosure trustees. Additionally, Peter and his firm represent clients in creditor’s rights in bankruptcy, breach of contract matters, judgment enforcement and other litigation and transactional work.

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