The Court in Alatriste v. Cesar’s Exterior Designs, Inc. (2010) 183 Cal.App.4th 656 found that a homeowner was allowed to sue to recover all monies paid to a contractor who began performance of work while unlicensed, even though the contractor obtained its license during the performance of the work. The landscape contractor had previously done work for the client and contended that the client knew it was unlicensed. The contractor contended that it may not be able to recover for work done while it was unlicensed but should be able to obtain payment for work done after it obtained its license. The contractor also contended that even though it may not be permitted to recover for the labor it supplied it should be paid for materials supplied. The appellate court disagreed with all the contentions by the contractor.
The homeowner sought reimbursement for $57,500 under Business & Professions Code § 7031(b) because the contractor was unlicensed when it began the work. The lower court granted summary judgment against the contractor and awarded the homeowner the full amount he had paid the contractor plus interest totaling $66,762.25. The Appellate Court held that even if the hiring party had actual knowledge of the contractor’s unlicensed status it could nonetheless recover all of the moneys paid to an unlicensed contractor. The Court also held that the contractor must be licensed at all times or qualify under the substantial compliance provision of the code or it can not be paid any part of the cost of the work even if it obtained its license during the work of improvement. Finally, the Court ruled that “all” means all and that the contractor must repay all the funds that it was paid by the hiring party, even thought the property owner is unjustly enriched and gets to keep both the labor and materials without paying for them.
So, if you are a contractor, do not let your license lapse and do not start a job if it has until you get it reinstated or the harsh reality might be that you will do the work and provide the materials for free. If you have questions about licensing or your status with the California State Contractors Board call a us or another knowledgeable construction attorney.