In a recent ruling relevant to construction law in California, the Court of Appeals, in White v. Cridlebaught, held that under California Business and Professions Code section 7031(d) the person or company who hires an unlicensed contractor to perform contracting work is entitled to recover all compensation paid to the contractor for the unlicensed work. The Court of Appeals further held that “all compensation” means that the unlicensed contractor is not entitled to an offset for material and services provided in connection with the unlicensed work.
This opinion clarifies the viewpoint expressed in certain secondary authorities that created the impression that an unlicensed contractor may assert offset as a defense to the liability imposed by Business and Professions code section 7031(b) for unlicensed contractors.
The penalties imposed on unlicensed contractors are in line with The Contractors‟ State License Law (CSLL), section 7000 et seq., which is a comprehensive legislative scheme governing the construction business in California. The court, in White v. Cridlebaught explained “The CSLL provides that contractors performing construction work must be licensed unless exempt. (§ 7026 et seq. & 7040 et seq.) ‘The licensing requirements provide minimal assurance that all persons offering such services in California have the requisite skill and character, understand applicable local laws and codes, and know the rudiments of administering a contracting business. [Citations.]’ (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 995.) The licensing requirement and the penalties for violating that requirement are designed to protect the public from incompetent or dishonest providers of building and construction services. (Ibid.)”
This opinion is important because it clarifies the remedy available to consumers who hire unlicensed contractors. Homeowners, businesses owners and other now clearly know that not only do they not have to pay the contractor for the unlicensed work, but the unlicensed contractor is not entitled to an offset for the materials purchased in connection with that unlicensed work.