Fast Facts: Rebuilding after a natural disaster and finding the right contractor

This is a special advertising section. The material was prepared by the advertising department and did not involve the reporting or editing staff of The Press Democrat.

The Contractors State License Board, which operates under the umbrella of the California Department of Consumer Affairs, licenses and regulates California's 285,000 contractors and is regarded as one of the leading consumer protection agencies in the United States.

Avoid the Confusion

Rebuilding after any disaster can seem like an endless highway of contradicting road signs. That's why the California Contractors State License Board wants to make you aware of valuable steps to take, as well as warning signs that you may confront, during the process of rebuilding or restoring your home or other structure.

Structure Categories

Generally, reconstruction in a disaster area will be classified in one of two categories: home improvement or new construction. Understanding these categories will enable you to identify your particular damage when communicating with your city or county building department, your insurance company, and the other qualified professionals you select for your project.

Home Improvement – If, after the disaster, there is an existing foundation, chimney, or partial walls, your project likely will be classified as a home improvement project. This category may be less costly compared to a new construction project.

New Construction (Single-Family Dwelling) – If, after the disaster, there is nothing on your property other than earth and you will be constructing from the ground, up, your project will likely be classified as a new construction project. Be aware that the disaster declaration may possibly affect this determination.

Debris

Contact your local city or county building department to find out what the guidelines, requirements or permits are for demolition or debris removal and disposal. There may be fees associated with these steps, but many are waived in disaster situations. Debris removal and disposal is a section that you may want to include in the contract with your licensed contractor

Your Project

You will be faced with a number of steps during your reconstruction project. It is important to take your time and avoid any anxious tendency to “get this over with” or “just get back home.” Trying to speed the process can result in overlooking important details that may present structural or financial problems later on.

Insurance – Once you complete evaluation and work with your state-licensed insurance adjuster and you receive the loss coverage reimbursement money from your insurance policy, be sure to place those funds in a safe place. In this situation, a “safe” place refers to an account provided by a financial lending institution experienced with construction accounts. Your contractor is not a government-insured financial institution.

An account that would be less vulnerable to unscrupulous individuals would be a “construction escrow account.” This type of account enables you to protect your funds because the lender will require two signatures on a disbursement, as the agreed-upon project phases are funded. The construction escrow account lender may assist in verifying plans, suppliers, materials, and appropriate contractors before releasing funds.

Licensed Professionals – Whether your reconstruction project is classified as a remodel or new construction, you will need to check qualifications of the individuals you select to conduct your project. Look for experienced architects, inspectors, insurance agents, pest control companies, builders, and landscapers who are state-licensed, and verify their qualifications with the appropriate state agency and their business record with the Better Business Bureau (www.bbb.org).

Avoid door-to-door salespeople who offer low prices for “surplus materials” or high-pressure tactics that urge you to let them work for you on-the-spot. Never rely on slick business cards, flyers, or brochures as verification of a person's qualifications. Watch out for construction “consultants” who want to manage your project; they, too, must be CSLB-licensed if they bid or contract for a project or oversee the project and workers (BPC § 7026.1). (The construction consultant category does not apply to designers.)

Most licensing agencies or organizations have quick-access tools, such as the Contractors State License Board “Check the Status” link on its website. These valuable resources tell you whether the license is in good standing [current, active and not restricted (probation, suspension, or revoked)], and verifies an active surety bond and workers' compensation insurance, if necessary. CSLB enables consumers to research contractors by using a state license number, a business name, or the name of the qualifying individuals or employees. Home Improvement Salespeople also are required to be registered with CSLB.

Know What You're Buying – Do your homework when it comes to knowing the cost of projects and materials. This knowledge will help you weed out business people or contractors that may try to charge you more in a desperate situation. Be savvy: price-gouging is a crime and can result in severe fines and jail time in state- or federally-declared disaster areas. Typically, businesses cannot charge more than 10% above the normal prices they charged for their goods or services immediately prior to the emergency declaration (Penal Code §396).

Your Contractor – Find at least three (3) qualified contractors and obtain three (3) bids for the work you need. Ask the contractors for professional references and visit the project sites. Compare quality over price before making your decision on which company or individual to select. Your contractors must be licensed in the classification(s) for which they intend to do work. You can conveniently check this information on the CSLB website: www.cslb.ca.gov.

Your Contract – You've probably heard this before: make sure everything is identified and written into your contract. It's true! Your project's start and completion dates, the payment schedule, all materials and plan details of your construction project, all subcontractors-you name it; everything you plan to include in your project needs to be in writing and signed by both you and your contractor. This step is critical in assuring that your finished project is what you agreed to and expect upon completion. All change orders also need to be in writing and signed by both parties. If you have an escrow account, this information is shared with your lender.

Make sure your contractor pulls all required permits from the appropriate city or county building departments. Disaster recovery is not an ideal time for you to be listed as the “owner-builder” of your construction project. If anything goes wrong-from substandard work to subcontractor injury at the construction site-you, as the “owner-builder,” are responsible for damages. As an owner-builder, you also employ the contractors and workers and must follow state employment and tax laws.

Another precautionary step you can take is to have an independent source review your project's plans. There are several resources that can assist. For instance, local Builders Exchange offices may have “plan check” rooms where qualified professionals volunteer their time. The League of California Homeowners also provides helpful information at www.homeowners.org. Your escrow lender can help keep a watchful eye on the project details, as well.

Remember:

- Hire only licensed contractors (www.cslb.ca.gov).

- Get three references.

- Obtain three bids.

- Agree on the terms of your project in a written contract.

- Avoid paying in cash – even for a deposit.

- Keep a journal and take photos during all project phases that are kept in a project file.

- Make sure on-site materials and supplies are secure at the jobsite with a fence or other security.

- Obtain a lien release, signed by both the contractor and subcontractor, once work is completed and paid throughout the duration of your project. Free lien release and waiver forms are available on CSLB's website.

- Stay in constant touch with your contractor and maintain current telephone numbers and other contact information.

- Try to be present when building inspectors are on site to hear, first-hand, whether there are any problems or necessary corrections.

- Stick to the payment schedule; don't let payments get ahead of the work, and keep records of all payments. Document all change orders with addendums.

- For reconstruction classified as home improvement, the state law that prohibits a contractor from asking for a down payment of more than 10 percent of the contract price or $1,000 (whichever is less) applies when signing your initial contract. Only contractors who carry a blanket performance and payment bond that is on file with CSLB can ask for a higher down payment. Contractors can ask for more than that amount for jobs classified as “new construction.” However, it is recommended that you ask your contractor to honor the same principles as home improvement projects located in the disaster zone.

- Don't make the final payment until the project has written approval from the building department and you're satisfied with the job.

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How to find the right licensed contractor to rebuild your home

Make sure the contractor is licensed. All contractor advertisements-whether it be an ad in the phone book or newspaper, a flyer that shows up at your front door, or the company's name on the side of a truck-must have the contractor's state license number. You can check the license status online or call (800) 321-CSLB (2752). By the first of the year, CSLB expects to launch a new “Find My Licensed Contractor” website feature that will allow consumers to create a list of licensed contractors by classification in a specific geographic area.

Remember: Most licensed contractors are competent, honest, hardworking and financially responsible. However, most of the problems CSLB sees could be prevented if homeowners knew their home improvement rights and took responsibility for their project. A responsible and informed consumer can work more effectively with reputable contractors, and avoid being victimized by unscrupulous or unlicensed operators.

Shop around before hiring a contractor. Get at least three written bids on your project, and make sure you're comparing bids based on identical plans, specifications, and scope of work. Do not automatically accept the lowest bid. In fact, you should beware of any bid that is substantially lower than the others. It probably indicates that the contractor made a mistake or is not including all the work quoted by his or her competitors. You may be headed for a dispute with your contractor if you accept an abnormally low bid. It also is possible that a low-bidding contractor may cut corners or do substandard work to make a profit.

When the contractor comes to your house to give you a bid, ask to see his/her pocket license, along with a picture I.D. Make sure the person you're dealing with is the same person on the license.

Contractors also can hire salespeople to work for them. Those people must be registered with CSLB as a Home Improvement Salesperson. Ask to see the registration card, along with a picture I.D.

Remember: Contractors are required to have their license number on their business card and on all bids and contracts. Seeing a license number doesn't necessarily mean the license is valid. Check the license status. Although an unlicensed operator may give you a low bid, the risks of possible financial and legal consequences outweigh any benefits a lower bid may seem to offer.

Ask for personal recommendations. Friends and family recently may have had similar projects completed. If they are satisfied with the results, chances are you will be, too. Local customers, material suppliers, subcontractors, and financial institutions are good reference sources to check whether the contractor is financially responsible. If you are still unsure, you also may wish to check the contractor out with your local building department, trade association or union, consumer protection agency, consumer fraud unit, and the Better Business Bureau.

Verify the contractor's business location and telephone number. Make sure your contractor has a current business address and telephone number. A contractor who operates a business from the back of a pickup truck with a cellphone may be difficult to find if a job needs to be fixed after the last bill is paid. You can find a licensed contractor's “address of record” when you look up his/her license status.

Verify the contractor's workers' compensation and commercial general liability insurance coverage. Ask to see a copy of the Certificate of Insurance, or ask for the name of the contractor's insurance carrier and agency to verify that the contractor has insurance.

In California, if a contractor has employees, he/she is required to carry workers' compensation insurance. The importance of this cannot be overstated. If a worker is injured working on your property and the contractor doesn't have insurance, you could be financially liable to pay for injuries and rehabilitation. Your homeowner's insurance may or may not cover those costs. You should check with your insurance carrier to make sure the workers' compensation insurance coverage being provided by the contractor is adequate. Learn more from the California Department of Insurance.

Commercial general liability insurance is not required; however, it covers damage to your property. If the contractor does not carry general liability insurance, he/she should be able to explain how damage or losses will be; otherwise you or your insurance company could end up paying for damages.

A licensed contractor must provide you with information regarding both types of insurance in your written contract.

Alert: All C-39 roofing contractors (whether or not they have employees) must carry workers' compensation insurance or have a valid Certification of Self-Insurance on file with CSLB. This information is indicated when you review the status of a contractor's license.

Learn about contractor bonds. California licensed contractors are required to have a contractor license bond. It's important to know what bonds do and do not cover. Some bonds are designed to protect you against substandard work that does not meet with local building codes. Bonds do not assure the financial or professional integrity or competency of a contractor. Institutional lenders such as savings and loans, insurance companies or commercial banks generally require licensed contractors to secure bonds for large jobs.

Bonds may be classified as:

Contractor License Bonds – Licensed contractors are required to have a contractor license bond of $15,000. This bond cover any project the contractor agrees to perform. Be aware: this bond is often not enough to cover multiple complaints made against it or your project if it's worth more than the value of the bond.

Contract Bonds – Contract bonds guarantee both the completion of the job and payment for all labor and materials. In general, the bonding company will not have to pay more than the face amount of the bond. The cost of this bond is usually 1-2 percent of the contract price.

Blanket Performance and Payment Bonds – By law, a contractor cannot ask for a down payment of more than 10% of the contract price on a home improvement project or $1,000, whichever is less. There is one exception to this law: if the contractor has secured a “Blanket Performance and Payment Bond” and it is on file with CSLB. This is a bond in the amount sufficient to cover all outstanding contracts open at any one time. A contractor with this bond on file can require the entire cost up-front. This type of bond is generally used only by high-volume companies. There are only about two dozen licensees with a Blanket Performance and Payment Bond.

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What kind of contractor do you need to rebuild your home?

Here are some guidelines to use when you begin searching for state-licensed contractors. Using a licensed contractor could help your avoid financial risk and other problems associated with unlicensed operators.

In California, anyone who contracts to perform work on a project that is valued at $500 or more for combined labor and materials costs must hold a current, valid license from CSLB. You can verify the license or call (800) 321-CSLB (2752).

ALERT: Be advised that unlicensed individuals pose a risk to you and your family's financial security if a worker is injured while on your property, your property is damaged, or if the work is incomplete and/or faulty. Few, if any, unlicensed individuals have a bond or workers' compensation insurance. The quality of their work usually doesn't compare to that of a licensed contractor. Don't take the chance in order to save a few dollars. You'll probably end up paying more in the long run.

CSLB licenses contractors in 44 different classifications. This ranges from general contractors to swimming pool contractors, landscapers, painters, electricians, plumbers and many more. It will be easier to decide the right type of contractor if you carefully plan your project in advance and clearly define what you want done to your property.

Understanding the difference between a general and specialty contractor.

General engineering and building contractors usually oversee projects and coordinate the specific licensed subcontractors for a job. Specialty or subcontractors usually are hired to perform a single job. For example, if you need only roofing or plumbing work, you may want to hire a contractor licensed in that particular specialty.

A general building contractor also may contract for specialty work, but must hold a specialty license for that work or actually have a specialty contractor do the work. The only exception is if the job requires more than two types of work on a building. Then it is appropriate for a licensed general building contractor to contract for and oversee the entire project. For example, if your kitchen remodeling will involve plumbing, electrical and carpentry work under one contract, you should hire a licensed “B” General Building contractor. Under these circumstances, a “B” contractor may perform all of the work on a building, or subcontract parts of the job to contractors with specialty licenses.

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Report unlicensed activity as you rebuild after fires

Unlicensed contracting is part of California's estimated annual $60 to $140 billion dollar underground economy. These individuals do not pay taxes, have insurance or bonds. It is not unusual for them to be involved in other illegal activities as well.

ALERT:If you have a contract with an unlicensed individual and wish to file a complaint, please refer to the section on Filing a Construction Complaint. If you know of unlicensed activity and just want to report it, then you are in the proper section.

The following sections define illegal contracting and how to report unlicensed activity with the Statewide Investigative Fraud Team (SWIFT).

Who is considered an illegal contractor?

It is illegal for an unlicensed person to perform contracting work on any project valued at $500 or more in combined labor and material costs. Besides being illegal, unlicensed contractors lack accountability and have a high rate of involvement in construction scams. They also are unfair competition for licensed contractors who operate with bonds, insurance, and other responsible business practices.

What is CSLB doing to stop illegal activity?

CSLB's Statewide Investigative Fraud Team (SWIFT) to monitors and combats illegal activity. SWIFT has teams around the state that conduct stings on a regular basis and sweep construction sites.

SWIFT also conducts joint operations and sweeps with other state agencies dedicated to combating underground activity. Partnerships with other agencies help raise the penalties and fines for violators by increasing the scope of violations to include taxes, illegal payrolls, workers' compensation insurance, and worker safety.

Contact SWIFT

CSLB's Statewide Investigative Fraud Team (SWIFT) accepts complaints against unlicensed individuals actively working on a construction project where the combined cost for labor and materials is $500 or more and for any contractor who fails to pull a project building permit for construction activities.

Reporting Unlicensed Activity

The best way to let CSLB know about unlicensed activity on an active job site is by completing the SWIFT Lead Referral form (at www.cslb.ca.gov). After completing the form you may attach it to an email and send it to the appropriate SWIFT office. You may also fax and/or send the form by mail.

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Traveling Contractor Scams – Tip Sheet

There are groups of transient criminals that pose as door-to-door home repair contractors who rip off homeowners throughout California with painting, roofing, and paving scams. Not every door-to-door solicitor or family-owned business operates in this way; however, the Contractors State License Board urges consumers to be wary and to watch for any of these “red flags.”

The Suspects:

- Often related by family, and solicit door-to-door

- Come across as friendly, but can use high-pressure or scare tactics

- Are reluctant to give an up-front price or provide a written contract, and increase the price after the project is under way or completed

- Demand payments in cash

- Immediately cash checks (sometimes changing the amount before cashing)

- Drive customized newer vehicles with out-of-state license plates

- Use toll-free (800) telephone numbers instead of local numbers

- Have post office boxes or suite numbers instead of actual street addresses

- Target the vulnerable, like elderly or recent immigrants

- Offer complimentary inspections and then offer to fix “problems”

The Scams:

- Claim they have left over material from another job at a cheap price

- Claim they'll use a “sealant” but actually apply a useless, watery liquid that they spray on roofs, fences, or driveways

- Push a few new wood shakes under old roofing shakes and apply a useless oil

- Charge by the can for painting and then exaggerate the amount they say was used

Tips to Avoid Being Scammed:

- Watch out for door-to-door solicitations - especially when they want to start work immediately

- Be aware that your contractor must notify you of your right to cancel within three (3) days of signing a contract

- Be a good neighbor and report any suspicious home improvement activity if your neighbor is elderly or otherwise vulnerable

- Get free information from the CSLB, like “10 Tips for Making Sure Your Contractor Measures Up”

If you or a neighbor have hired or been solicited by someone fitting the description of these traveling criminals, please contact the Contractors State License Board in Northern California at (916) 255-2924.

Contact CSLB

The Contractors State License Board receives and processes applications for new contractor licenses; additional classifications and certifications, renewals, and changes to existing licenses; home improvement salesperson registration applications; and maintains the license and historical records of disciplinary actions taken against licenses.

Headquarters directs the activities of the field offices and initiates all disciplinary actions resulting from investigations. Field office staff investigates complaints against licensed and unlicensed contractors.

Location: CSLB Contractors State License Board

9821 Business Park Drive

Sacramento, CA 95827

Mailing Address: P.O. Box 26000

Sacramento, CA 95826

24-Hour Licensing and Consumer Information:

(800) 321-CSLB (2752)

Outside California: (916) 255-3900

Bond Unit Fax: (916) 255-4023

Hours of Operation: Monday through Friday

8:00 a.m. to 5:00 p.m. Pacific Time

(closed holidays)

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What You Should Know About Civil Judgments

Section 7071.17 of the Business and Professions Code requires contractors notify the Contractors State License Board (CSLB) of any unsatisfied “construction related” civil court judgment within 90 days of the judgment date.

The same law applies to arbitration awards unless the arbitration was provided by the CSLB. If the CSLB is notified of the judgment in a timely manner, the contractor is given another 90 days to resolve the judgment. If the judgment is not resolved within that 90 days, the license is suspended until the judgment is resolved. If the contractor fails to notify the CSLB of the judgment within the required 90 days then the contractor's license is suspended upon notification. Any party to the judgment can notify the CSLB of the judgment.

The unsatisfied civil court judgment or arbitration award must be final and “construction related”. What the law actually says is that the judgment must be “...substantially related to the construction activities of a licensee licensed under this chapter, or to the qualifications, functions or duties of the license...”. The CSLB interprets that to mean that if your judgment relates to the contractor's business in any way, it is “construction related”. If you hired a contractor to do work for you and the judgment is related to that work, the judgment would be “construction related”. It could also mean that the contractor did not pay the rent for the office, the utility bills for the office, or other bill incurred by the business, or did not pay a material supplier, subcontractor, or an employee. Very few judgments are not “construction related”. If you have a judgment or arbitration award and you do not believe the contractor has notified the CSLB, please send a legible copy along with a brief description of what makes this judgment “construction related”. If the contractor disputes that the judgment meets the legal criteria, we will ask you and the contractor for documentation. If the judgment is not “construction related”, we will remove it from the contractor's license record.

Alert Anyone can report a construction-related judgment against a contractor by sending a copy of the judgment to the CSLB Judgment Unit (see address below). In fact, most of the judgments received by CSLB are sent by the person to whom the contractor owes money.

Frequently Asked Questions:

How will I know what is going on with the judgment?

When we are notified of a judgment or arbitration award, we send a letter to the contractor with a copy to the judgment creditor. After that initial notification, every time one of the parties notifies us of some action on the judgment, we send a letter to the contractor with a copy to the judgment creditor. That way both parties are kept informed of the status of the judgment and its effect upon the contractor's license.

When is the contractor going to pay my judgment?

The CSLB is not a collection agency. What the law enables us to do is to suspend the contractor's license if the judgment is not satisfied. That suspension or threat of suspension often causes the contractor to pay the judgment rather than have the license suspended, but not always.

What if the contractor wants to make payments to me?

You are not obligated to accept payments, however you should keep in mind that it may be the only way you will get your money. If you and the contractor set up a payment agreement, make sure it is in writing with the dollar amount owed, the amount of the monthly payment, the date the payment is due each month, when the payment is considered late, and when the last payment is to be made. You both need to sign the agreement. If there is a judgment on file and you have made an agreement for payments, please send us a copy of that agreement and we will lift the suspension. If you notify us that the contractor has failed to make the payments, we will reimpose the suspension immediately. It is possible that with a small claims judgment, the judge will order that the judgment creditor accept a payment agreement.

What happens if the contractor files bankruptcy?

The federal bankruptcy laws require that all efforts to collect money from a bankrupt person/business stop once the bankruptcy is filed. We do require that the contractor notify us that he/she has filed bankruptcy and named you as a creditor. If you are named as a creditor in the bankruptcy, you will be notified of the creditors meeting by the bankruptcy court. That is your opportunity to be heard by the bankruptcy trustee regarding whether your case should be included in the bankruptcy or not. You may want to contact an attorney to discuss the conditions that must be met to have your case dismissed from the bankruptcy.

If the contractor pays the judgment, who has to file the “Acknowledgment of Satisfaction of Judgment”?

You are required to file the satisfaction if the judgment has been paid. If you have sent us the judgment and the contractor pays the judgment, please send us a copy of the satisfaction or a letter stating that the judgment has been satisfied.

Please send legible copies of the judgment and any correspondence to:

Contractors State License Board

Attn: Judgment Unit

P.O. Box 26000

Sacramento, CA 95826

Please include the contractor's license number on any documents you send and a short explanation of what the document represents.

What You Should Know About Small Claims Court

Investigation by CSLB does not guarantee restitution to complainants.

If your primary interest is to gain restitution, you should pursue the matter in small claims court or consult with an attorney. If you are considering legal action to recover damages of $10,000 or less, CSLB can provide you with A Consumer Guide to Filing a Small Claims Court Construction Claim brochure which will assist you with the process.

You can also contact the Small Claims Court clerk (at www.courts.ca.gov) for additional information and assistance or “self-help” information. If your damages are more than $10,000, you should consult with an attorney.

If you prevail in a civil or arbitration case against a licensed contractor, send CSLB documentation of the disposition of the case. CSLB will notify the contractor that the license will be suspended if the judgment or award is not satisfied pursuant to Section 7071.17 of the Business and Professions Code.