What If The Contractor You Hired Is No Longer In Business?

By
Real Estate Broker/Owner with Lazarus Realty

Fresno California

When your purchasing a home there is a good chance that either your agent or the agent may hire a contractor to do work on the home prior to closing.   Contractors in California (and probably most other states) don't need to be well capitalized  in order to start up a business to begin with.  They are only required to have to have $2500.00 in liquid assets, so its no surprise that so many of them go under, especially in this market. 

So what do you if the contractor that was hired to do work on the home is no longer in business? 

The single most important thing that you need is the contractor's license number. Hopefully the agent who hired the contractor verified the license was active and in good standing when the work was performed.  This previous blog on the subject provides some good information on doing a license check.

Keep in mind that the bigger the contractor's license number the newer it is.  For example my contractor's license was issued in 1989 and the number is 555829. When you see a number that begins with 8 you know its a more recent issue.

So let's assume that the contractor had a valid license when he performed the work.  Let's say, for the purposes of discussion that the contractor did a 3 year roof certification and its year 2 and the roof springs a leak.  Your client calls the contractor to come out and honor the certification (REPAIR THE LEAK).  The number no longer works!

OUCH!

What do you do?

Go to the Contractor's State License Board website and do a license check on the contractor.  It may be that they have changed their number, moved, or even changed their name.  It's all quite possible that they have gone out of business.

When you look up the license you will see a page that looks like this:

 

 

There is some very important information on that page.  Specifically the bonding information.  Look at the  "Effective Date" and the "Cancellation Date."  Make sure that your work was done during the period that the license was Effective.

Every contractor in the state of California must have a bond in the amount of $12,500.00 in order to have their license activated.  

Get the name of the bond holder and policy number.  

Contact the bondholder and make a claim against the bond.  If previously claims have not exhausted the $12,500.00 the amount of the bond you stand a good chance of getting money from the bonding agent.  Bear in mind that the bonding agent doesn't like to part with the money so you may have to wrestle for it, but is probably the only means of satisfaction.  

In the case of say a leaking roof, you would probably have to take care of the damage out of pocket and then make the claim for reimbursement.

Good Luck!

 

 

Lazarus Realty
Lazarus

Direct:
Fax:

559.301.1647
559.438.7475

1319 W Bullard #4 -- Fresno CA -- 93711

© Randy "Lazarus" McAtee

 

 

 

 

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Rainer
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Andrew Haslett
Van Warren Home Inspections, NAHI CRI - Fort Knox, KY
Heartland of Kentuckynulls, Best Home Inspector

Randy, interesting post topic. This is a very real situation, whether in California, or elsewhere (although in Kentucky, you don't need a license to build a home).

I didn't think about the bonding aspect.

Apr 29, 2009 05:22 PM #1
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Rainmaker
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Randy "Lazarus" McAtee

Owner/Broker, Lazarus Realty, Fresno California
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