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A New Assembly Bill Protects Contractors

A new Assembly Bill 1386, sponsored by the California Landscape Contractors Association (CLCA), prevents project owners from using a legal loophole to unjustly supplement themselves at the expense of contracts has been recently signed into law.

For decades, there have been legal provisions that basically stipulate that a consumer is not required to pay an unlicensed contractor, regardless of whether the construction job was done properly or not--which is extremely detrimental to contractors who have even the briefest lapse in licensure. An assembly member, in the 2000-01 legislative session took this payment issue forward another step. At that time Assembly Bill 678 stipulated that an owner could recover compensation paid to an unlicensed contractor - regardless of whether the job was done well or not. Unfortunately, this law did not include a substantial compliance exception. Therefore, any licensed contractor who failed to renew a license on time could have been forced to give compensation back to the project owner for the entire payment of a construction job.

This encouraged project owners to take advantage of contractors who inadvertently allowed their license to lapse during the course of a project. In addition, the law was illogical. If a contractor in substantial compliance can successfully bring a lawsuit against an owner to recover money owed for work performed, then the contractor also should be allowed to assert substantial compliance as a defense to a lawsuit brought by the owner to recover money already paid.

The new AB 1386, which went into effect on January 1st, fixes this problem by applying a substantial compliance test to both instances, which requires a contractor to demonstrate that he or she acted promptly and in good faith to reinstate his or her license upon learning it was invalid--in order to meet substantial compliance of licensure requirements.

Source: California Landscape Contractors of America

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August 17, 2019, 10:51 am PDT

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