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SACRAMENTO, Calif. -- California Governor Gray Davis has signed into law a bill sponsored by the California Landscape Contractors Association that prevents project owners from using a legal loophole to unjustly profit at the expense of contractors. According to the CLCA, for decades there has been a provision in law essentially stipulating that a consumer does not have to pay an unlicensed contractor, regardless of whether the construction job was done properly or not. This provision has long been tempered by another provision that defines substantial compliance with licensure requirements. This is important because it prevents licensed contractors who inadvertently become unlicensed for a brief period from being penalized by a law geared toward unlicensed operators who habitually violate the law. During the 2000-01 legislative session, a bill was introduced that took this payment issue another step. The bill said that an owner could recover compensation paid to an unlicensed contractor -- regardless of whether the job was done well or not. This legislation did not include a substantial compliance exception, however. Therefore, a licensed contractor who failed to renew a license on time could have been forced to give back to the project owner the entire payment for a construction job. As a result of the 2001 bill, project owners could take advantage of contractors who inadvertently allowed their license to lapse during the course of a project. The CLCA also believed the 2001 act was illogical. If a contractor in substantial compliance with licensing can successfully bring a lawsuit against an owner to recover moneys owed for work performed, the CLCA argued, 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 law, which goes into effect January 1, fixes this problem by applying a substantial compliance test to both instances. In addition, it modifies and clarifies the existing substantial compliance test. Under previous law, the contractor had to show that he or she did not know or reasonably should not have known that he or she was not duly licensed. However, that law did not specify a point in time when this knowledge had to be evident. With the new law, a contractor with a lapsed license can claim substantial compliance as long as he or she did not have knowledge that the license was invalid when work commenced.

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August 17, 2019, 11:01 am PDT

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