For property owners, project owners, general contractors and anyone else facing a project with high costs, hiring an unlicensed contractor can seem like a tempting money-saving prospect. Rest assured, any potential penny-pinching you could gain from unlicensed contractors is back loaded with future costs and huge liability risks.
For anyone who is considering the idea of using unlicensed contract labor or even skimping on the process of vetting their contractor’s licenses, consider the following highly-likely outcomes:
What Happens When you Hire an Unlicensed Contractor?
You Get What You Paid For
Unlicensed contractors may not have the skills or knowledge needed to perform the work with the level of quality an average person would expect. Quality comes at a price, after all, so contractors that lack skills may need to compete in price rather than capabilities. Many property or project owners realize too late that the work they purchased is not really the work they had in mind.
The Work Could Be Dangerous and a Violation of Code
Licensed contractors are expected to understand building code and file for all the relevant permits. When they skip these steps, they put the property’s integrity at risk and could also place the hiring party in the crosshairs of local regulator departments like fire or inspections. Worse, work performed without proper knowledge could mean increased risk of hazards like structure fires or collapses.
Unlicensed Contractors Could Sue You if They Injure Themselves
An unlicensed contractor’s mistakes can quickly end up hurting your wallet. Consider the California case of Mendoza v. Brodeur, where someone hired their neighbor to perform roof work. The neighbor fell, became seriously injured and sued the hiring homeowner. Since the court deemed that the homeowner was technically an employer, the homeowner should have provided workers compensation insurance or risked being sued for on-the-job injuries.
You Could Get Sued for Their Mistakes
Perhaps the biggest financial risk is that an unlicensed contractor’s negligent actions could come back to haunt you. Hiring parties are considered responsible for their unlicensed contractors, which includes any liability costs.
Many unlicensed contractors do not carry their own insurance, and few insurers are willing to extend general liability insurance to an unlicensed, illegitimate third party. If the unlicensed contractor makes a huge blunder like puncturing a water main, any damages would have to come out of the pocket of the hiring party. These damages could skyrocket, especially with litigation costs. Even when insurers do cover the unlicensed party, they can come back on the hiring party by filing for subrogation.
Your Contractors Insurance Policy Could Get Cancelled
Behavior like hiring unlicensed or unqualified contract labor is seen as an unjustifiable risk by insurers. Such behaviors can lead to the cancellation of a policy, or it could provide complications any time the insured wishes to file a claim. Put simply, individuals walking down the straight-and-narrow never put their trust in contractors who are unlicensed.