Should all landlords hire only licensed contractors to do rental home repairs?

Question

A law passed in California says hiring independent contractors must pass the ABC test, or else you need to hire licensed contractors. I have done a lot of research on this, but cannot conclude whether hiring a handyman to do small repairs costing less than $1000 fails prong B of the ABC test. Does anyone know of case or legal consensus on this matter--Prong B issues when landlords hire handymen?

Should mom and pop landlords hire only licensed contractors to do rental home repairs to avoid failing prong B?

Thank you for you time,

T

Should mom and pop landlords hire only licensed contractors to do rental home repairs to avoid failing prong B?

Thank you for you time,

T

Henry T. · Answer

There's still landlords in California? I would do whatever works for me.

Andrew Postell · Answer

@Ty Seav I'm going to tackle this from a little different angle if you don't mind.  BP is a great site but sometimes, since it's national, we get a lot of people not in my area (like me) commenting on things that I really need local advise for.  So, for this question, let's try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Those are for the "in person" meetings.  Those are really valuable.  But even facebook might have some good local groups for you that you can network with virtually. Some of those California facebook groups have tens of thousands of members. The priority is consistent recommendations from active investors.  Oh, eventbrite too. But post locally for this. That’s the best bet.

Colleen F. · Answer

@Drew Sygit depends on what you have people do.  The guy who comes to fix the door knob and show the tenant the dishwasher isn't broken I'm not too worried about his license and insurance.  ( And yes, that was an actual job).   Roofers, electrical and plumbing definitely insured.  You would be hard pressed to find a licensed contractor to do some jobs, it just isn't worth it for them to bother.

Colleen F. · Answer

@Drew Sygit   I understand your position that everyone should have a PM to manage their property and all the repairs should be done by licensed repair men. Not easy to miss. For Reference they could only used a screwdriver but I am sure there are suits involving a screwdriver or even a pencil.   I find the best protection is screening tenants and the people who work for you. As a Property Manager you can spend client's money as you choose and also you MAY have employees on call to promptly do small jobs. And yes you are also right if I am paying a property manager the % on rent requested and the uptick on repairs I am going to want top notch service and nothing better be on me, but that was not my PM experience.

Drew Sygit · Answer

And yet no one is discussing requiring contractor liability insurance:(

Actually, probably more important than licensing!

Uninsured contractor falls off YOUR roof and is critically injured or dies - who do you think the family is going to sue? - How fast do you think your homeowners insurance company is going to deny the claim?

Yet, I'm going to guess 95+% of landlords hire uninsured handymen & contractors.

James Jones · Answer

This is a great question, and it’s one a lot of California landlords have been wrestling with since AB5 and the ABC test went into effect.

Here’s the simple version of how most landlords and property managers are navigating it:

1. The ABC test isn’t about the dollar amount, it’s about the type of work.

Prong B is where landlords run into issues.

It asks whether the worker is performing work that is in the usual course of your business.

If you’re a landlord, then yes, property maintenance is considered part of the “usual course” of operating rentals.

That’s why so many attorneys and PM companies treat recurring handyman work as something that can fail Prong B, even if the job is under $1,000.

2. The $500 / $1,000 handyman limits relate to contractor licensing, not the ABC worker-classification test.

California contractor rules say:

Jobs over $500 (labor + materials) require a licensed contractor

Jobs under $500 can be performed by an unlicensed handyman

This has nothing to do with the ABC test.

You can pass the $500 rule and still fail ABC.

3. How most “mom & pop” landlords protect themselves:

Not legal advice here, just what you’ll see across CA landlord groups, PM companies, and attorney guidance:

Option A: Work with licensed contractors for anything beyond minor repairs.

This is the safest route because licensed contractors are automatically treated as independent businesses.

Option B: Use a professional property management company.

They carry the liability, manage the worker classification, and hire licensed vendors.

Option C: Use a handyman only for truly minor, infrequent, under-$500 tasks.

But make sure the handyman:

• Has a business license

• Has their own insurance

• Controls their schedule

• Works for multiple clients

This doesn’t guarantee you pass ABC, but it strengthens the argument that they’re an independent business.

4. Are there cases about landlords failing Prong B for handymen?

There isn’t a big, headline case specifically about a landlord, but attorneys in CA have been warning owners about Prong B exposure because:

Real estate ownership is considered a business

Repairs are part of operating that business

Routine maintenance work looks like an “employee relationship” under AB5

Most landlords don’t realize this until an EDD audit happens.

5. So should landlords only hire licensed contractors?

If you want the lowest-risk path in California, yes.

Hiring licensed contractors virtually eliminates Prong B issues because they are clearly operating a separate business.

Many landlords still use handymen, but they’re taking on risk, especially if the handyman works mainly for them.

Under $500 = okay for unlicensed handyman

ABC test = separate issue, and that’s where landlords get tripped up

Licensed contractors = strongest protection against misclassification problems

If you’re doing more than occasional light repairs, the safe move in California is to stick with licensed contractors or push the maintenance through a PM company.

Colleen F. · Answer

Absolutely if you decided to rent in California you should  get networked in California because from a rental standpoint sometimes it can be like a completely different country.  Your other option is when in doubt err on the conservative side and use someone licensed.

Colleen F. · Answer

@Ty Seav  I had to look up this ABC but B is The worker performs work that is outside the usual course of the hiring entity’s business.   As a landlord isn't your business providing housing?  Unless things are different in California a handyman would pass the test for B.

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Should all landlords hire only licensed contractors to do rental home repairs?