December 18

The Hazards of Unlicensed Contractors

Unlicensed contractors represent a unique risk. This is due to the fact that an unlicensed contractor doesn’t necessarily mean that the contractor is unskilled; however, it does seem to be somewhat of a recurring theme that unlicensed tends to lead to bad situations. Licensing assumes a certain level of professionalism, and is for all intents and purposes, a better road to take.

Licensing can also prevent the contractor’s customers from a number of different problems that may be caused by the contractor. A lack of this protection can leave a customer in a significant financial hole for many different reasons:

Unlicensed usually means uninsured.
If you use a contractor who is uninsured, it means the contractor has no way of reimbursing you for any property damage he or she causes. This means you end up paying the price. Likewise, if contractor carelessness leads to injury or damage to third party’s property, the problem is likely to become yours.

No coverage under homeowner’s policy.
Some homeowners believe it is safe to use an uninsured contractor, assuming that any damages incurred would be covered under their own insurance policies. However, this isn’t the case. Most homeowner policies require that any work to the property be done by licensed contractors; coverage is often specifically excluded for damages caused by “bootleg” contractors.

Noncompliance with building codes.
Most building projects, even minor ones, usually require permits and inspections. Unlicensed contractors are often unfamiliar with the applicable building codes and are unable to obtain permits. If your project isn’t permitted or doesn’t comply with building and zoning codes, you may – and probably will – be ordered to remove or repair the job. Even if a building inspector doesn’t “catch” your code violation right away, you will almost certainly have to correct it if and when you try to sell your house.

Poor quality work.
Not all unlicensed contractors do poor quality work. And not all poor quality work is done by unlicensed contractors. However, as a rule, if there’s shoddy work to be done, it’s usually done by unlicensed contractors. Because unlicensed contractors aren’t subject to meeting specific standards, they are often untrained, less experienced, and unqualified to do certain types of work. Sloppy work by an unlicensed contractor could have serious ramifications.

Limited recourse for broken contracts.
If you have a dispute with a licensed contractor, you can call his or her licensing agency. Some licensing agencies offer mediation services or maintain a guaranty fund to help consumers recover their losses. At the very least, the licensing agency has the authority to suspend or revoke a dishonest contractor’s license. While this doesn’t necessarily ensure a contractor will play fair, it gives him or her considerably more incentive to do so.

Not all unlicensed contractors are unable to do their job well. However, history shows that unlicensed contractors are the major culprits of being uninsured, not complying with building codes, poor quality work, and for getting away with breaking contracts. Proceed with caution when taking a look at the risk involved with unlicensed contractors, and consider going through licensing agencies to find out background info about them if they are hesitant to provide it.

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