Non-Licensed Contractor

28 Replies

Can someone inform me of the dangers of using a non-licensed contractor for a rehab? I have a contractor who does excellent work, is vet professional, and an excellent communicator, which in my opinion is hard to come by, but he is not licensed. Is this a deal breaker?

*very professional - not vet

Yes ...especially if someone reports you...which for some reason folks around here love to do...I know it costs more upfront but go with licensed and insured and make sure they pull all the proper permits ...

It is my understanding, that you take the chance of them getting hurt and suing you. But if they are insured you do not run that risk. I wouldn't say it is a deal breaker for me.

Not sure in Baltimore, but here in Florida if you buy a property under your name. You, the owner can act as the Contractor pulling the permit and calling for inspections. 

You are responsible for making sure the job gets done right but inspectors will also check the work.

That way you use the handyman you want to do the work.

Another option is to hire a Contractor to pull the permit and supervise your handyman. You get your handyman to do the work, but also have to pay the contractor to supervise the job and pull the permits and pass the inspections.

Unless it's illegal in your area for contractors to take on work without a license, or local code prevents a GC from pulling permits, the only real disadvantage is that the contractor can't be censored or punished by the licensing body, which usually takes the form of loss of license and fines. Most places that I have lived or worked in the northeast do not require licensing. Others do and in those areas I comply. Much more important is a general liability insurance, worker's compensation coverage, and a rock solid contract reviewed by your attorney. Lastly, check the GCs references carefully.

He is required to have a home improvement licence in Maryland . 

What can happen ,he gets hurt , you claim he is a independent contractor ,he claims he is your employee . You will lose

Originally posted by @Rachel Gill :
Can someone inform me of the dangers of using a non-licensed contractor for a rehab? I have a contractor who does excellent work, is vet professional, and an excellent communicator, which in my opinion is hard to come by, but he is not licensed. Is this a deal breaker?

 Look at owner-builder specs on your city/state, then hire him as a worker. I see it as a small savings with a big lawsuit. The dangers are enormous the savings is limited. Deal breaker? will 20% of your rehab cost break your deal? If not, just have it done by a contractor.

Big Risk!

Must be insured and I want to be an additional insured on his insurance policy with related work.

Think WORST CASE SCENARIO! FIRE, INJURY or DEATH!

Thank you for all of the input.  Definitely major concerns that don't seem worth the risk.  @Michael Noto I work for a real estate group and he does all of the repairs/rehab work on all of the properties we list and does an excellent job, but definitely appears that there is too much at risk in this situation to hire him without him being licensed.  

You can act as the owner builder, essentially you are the contractor. However you cannot do work that otherwise will require you to carry a workman's comp policy to cover anyone getting hurt. However a workman's comp insurance company can provide an owner with a policy at a cost of course. The problem comes with a person being your employee, you cannot sue them or you cannot have them rework any faulty work without paying them again. You accept ultimate responsibility for quality and they do not have to guarantee or warranty their work, not legally anyway. 

You are also responsible to pay them overtime if they do work overtime. You are subject to all the employment laws and tax withholding etc. You essentially become an employer. They must get the right number of breaks paid, and you must have restrooms or water for them to drink etc. check employment laws in your city or area. They cannot pull permits. However you as the owner can pull permits. 

Allot of people use workers  that are known to them. However from the legal view point it is better all around to use licensed and insured contractors. If anyone were to ever get hurt or suffer due to the work someone that is under you does you are liable. Here is the other point. Unlicensed people like handy men are limited to the amount of work they do and the amount of money involve including materials and labor. In my area or state it is not over $500.00. 

Remember this is a business. Protect you business for liability. In some states like California if a licensed contractor has not done the work then you as the owner are not allowed to sell your house for at least one year after the work in completed. However if you do use licensed contractors you can sell your house at any time because all the work is legally under warranty. Contractors by law here have to guarantee their work. Here contractors have to have a state license, in other states not so but in some cities like Chicago that city has its own licensing procedures and enforcement. 

No one can tell you what to do but just remember from a legal stand point you may put yourself at risk and make yourself legally liable as well as be subject to all state and federal employment laws, regulations, and rules.

You have to ask yourself , Why doesnt he get the license ? In Md its an open book test , its contract law , selling , and performance questions . There are no questions on any type of building.   I took it and passed it at 23 years old , needed it to do landscaping .

@Rachel Gill He sounds like he is a very valuable cog in what you have going on. 

I know here in Connecticut there is not a ton that goes into getting your HIC license. 

Why not see if he's open to obtaining that before resorting to letting him go? 

My point is to try and figure out a creative solution to keep him in the mix. Contractors that do good work and are reliable are very hard to find. 

@Matthew Paul Brings up some great points and even some insight into what goes into getting licensed in the state of MD. I am wondering now as well why the guy hasn't gotten his license. The process does not seem intricate or overly difficult. 

I am a licensed and insured electrical contractor here in NY. I spent 3 years moonlighting without licenses or insurance. My intentions were never to screw anyone. I was out looking to make money and to grow a customer base which I did. I could not be more greatful  to the customers that took the risk and gave me the opportunity. If your person does good quality work and is profesional why not give them the opportunity. If they show up drunk or high or show any signs of either of that send them down the road. I have been doing electrical for 10 years and my boss has hired some ruff characters that had no place in the field. So even hiring good companies you never know who or what your gonna get.

He is required to have a maryland contractor license to do the work. Not only are you taking a risk of being sued but who is certifying the work? Do you have a master electrician/plumber? I know an investor that hired an unlicensed contractor. The contractor made an electrical repair, burned down two townhouses. Who do you think was responsible and got sued?

It's state specific, but @Javier Marchena in Florida you have be an owner Occupant, not a rental property, to do work requiring a permit as an "owner builder".

@Rachel Gill The most important question is not whether he is licensed, at least for work not requiring permits, but whether he carries liability and workers comp insurance.  Many on GC licensed guys carry insurance.  You shouldn't have to worry about "employees vs independent contractor" status.

If you need a good contractor I know several that I licensed.

Originally posted by @Robert Gailie :

I am a licensed and insured electrical contractor here in NY. I spent 3 years moonlighting without licenses or insurance. My intentions were never to screw anyone. I was out looking to make money and to grow a customer base which I did. I could not be more greatful  to the customers that took the risk and gave me the opportunity. If your person does good quality work and is profesional why not give them the opportunity. If they show up drunk or high or show any signs of either of that send them down the road. I have been doing electrical for 10 years and my boss has hired some ruff characters that had no place in the field. So even hiring good companies you never know who or what your gonna get.

If you were electrocuted and had a serious injury, broke your two legs and an arm that would have disabled you to work for good, and your lawyer said the person you worked for is worth $4 Million, you and your lawyer could get $2M each, and since it's an open and shut case, he offers you a sweet deal to have the $3M and he gets the $1M. What would your family say for your sake? If a company is insured, screws up, has insurance, then, a customer could just take pictures, complain to your local contractors board, get another contractor, get his invoice, go to small claims court, sue the first contractor gross negligence for my money, any judge will award that.

On the other hand, what if I hire an unlicensed contractor for a $50,000 job, 95% of the job, I fire him for no reason at all, sue him, get my $47,000 back with 95% of the job done, spend $3,000 to get my job finished. Now, I get my $47,000 spend $3,000, that's a good day for me, $44,000 in my pocket, and I don't even have to work for it.

If I was the investor, why would I risk my asset, money, and things that I worked for years for one guy who might get injured, disabled, or perhaps die on my clock and everything goes away?

Originally posted by @Rachel Gill :  It depends.  There are different levels of rehab.  Some work can be done w/o permits & you can use a unlicensed handyman to complete. Work that requires permits usually requires a licensed contractor.

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Hello,

Yes, its danger of using non-licensed contractor, Nevertheless you can continue work with him If their work is pretty good otherwise you should defiantly break deal with him

If he is a person your welling to work with on a regular basis. Maybe sit with the person and ask why he isn't license and insured . Maybe there is a way you can make a deal and you get the person you want and he becomes legit. It's hard to find a contractor that your are comfortable handle your projects and your money.

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