Licensed Remodeling Contractor Basics for Homeowners

Licensing is—or should be—one of the first issues when speaking to a remodeling contractor about an upcoming project. Contractors often arrive at the meeting with a portfolio that contains copies of credentials like insurance, bonding, workman's comp, and maybe a printout showing a clean record of consumer complaints, penalties, or fines.

The first and most important item will be a copy of a state remodeling contractor, general contractor license, or some type of current license that permits them to do this work. Is this license a guarantee of superior work, past and future? What should you look for? Is a license always required?

What a Licensed Remodeling Contractor Is

Some states in the U.S. offer a remodeling contractor license for contractors who work on existing homes that require a certain number of unrelated trades or crafts for a single project.

California, for example, has a B-2 Residential Remodeling Contractor license for contractors who work with three or more trades (like drywall or painting) in one project. Other states license contractors for work that includes home remodeling, but the license is a general contractor license.

Benefits of Hiring a Licensed Remodeling Contractor

• Remodeling licenses help to separate compliant contractors from those who are fined or barred from conducting further business.
  
• Licensing gives the consumer a mechanism for checking up on the contractor via an online database.
• Workman's compensation insurance is usually required with contractor licensing. As a homeowner, workman's comp helps to protect you from liability.
• Licenses typically mean that the contractor holds a surety bond or declares an Assignment of Account (a bond alternative that allows the contractor to put up cash without the bond broker).
• Liability insurance coverage is usually a requirement of contractor licensing.
• Licensing keeps contractors aware of contractor rules and policies, as well as changes to those rules and policies.

When a Remodeling Contractor License Isn't Required

Several states have statutory exceptions that allow a person to perform a degree of remodeling work without a license.

Long called a "Handyman's Exception," this legal exception refers to any person who does light home improvement work such as installing a single window or sanding a floor. With this type of exception, the person might be able to perform home remodeling work that stays below a certain limit, while fully complying with the law.

For example, Arizona allows anyone to commercially work on a house as long as the total cost of the labor and materials does not exceed $1,000 or if a permit is not required. If a permit is required, the cost exception does not apply. So, a permit would be required to install a water heater, a commonly permitted activity, even if the combined cost is below $1,000.

What a Remodeling Contractor License Doesn't Do

It should give you some degree of confidence that the contractor is licensed and that there are no complaints or fines. Yet a remodeling license is not a stamp of approval. Things that a remodeling contractor license will not do for you include:

• Guarantee good work: A remodeling license does not necessarily translate to great work. Your contractor might perform a kitchen remodel that results in odd-looking ceilings or blotchy wall paint, all while remaining within the building code. While this may constitute bad work, it doesn't affect the remodeling contractor's license.
• Permitting: Building permits are completely separate from contractor licensing. Permits are usually handled by a different office, and even in different branches of the government. Contractor licensing may be handled at the state level, while permits are handled by your city or county.
• Consumer advocacy: The mandate of licensing agencies is to address the needs of everyone, industry and consumers alike. While licensing agencies do provide useful information for consumers, they also take care of the needs of the industry.

How You Can Check on a Remodeling Contractor

If your state has a licensing system, this is a fast way to check if the contractor is licensed. In some cases, you can check online regarding consumer complaints and penalties or fines.

Consumers with complaints have multiple avenues to air their griefs and woes. Therefore, you sometimes need to take a record of complaints with a grain of salt.

Don't automatically discount a contractor with a complaint or two on record with a state agency. More important is the aggregate number of complaints and the type of sanctions.

Summary

• Not every state licenses remodeling contractors.
• Even states that do license remodeling contractors may have licensing exceptions
• The bar to licensing is extremely low in some states—just register and post a bond.
• State licensing agencies are not primarily consumer advocates, though they may have a complaint component.
• Licenses do not guarantee superior work.