As more and more online home improvement marketplaces like Angie’s List come online, questions have arisen as to whether such online marketplaces must hold a contractor’s license. The California Contractor’s State License Board has put together a “Fast Facts” sheet to help online home improvement marketplaces navigate the ins and outs of contractor’s license requirements, salesperson requirements, and advertising requirements. The short answer is that these marketplaces do not need a contractor’s license as long as the customer is contracting directly with the listed contractors (not the marketplace). Here’s the slightly longer explanation:
July 20, 2018 CSLB #18-10
CSLB Hopes to Clear Up Confusion about License and Contracting Requirements for Online Home Improvement Marketplace Companies
SACRAMENTO – Over the past few months, the Contractors State License Board (CSLB) has been addressing emerging issues involving online marketplaces and contractor referral websites. In its most basic form, online marketplaces are e-commerce websites that link consumers to products and/or services that are provided by multiple third parties. In these situations the e-commerce operator processes the transactions. Many referral websites charge contractors for leads.
In either situation, there’s no argument that the contractor performing the home improvement work must hold a state license. But, does the online marketplace or contractor referral website need to have a California contractor’s license? CSLB hopes to help clear up any confusion by issuing a Fast Facts information sheet outlining requirements for these companies.
The following is a synopsis of information provided in the information sheet:
California Business and Professions Code (BPC) § 7026 defines a contractor as a “builder” which includes any person who undertakes, offers to undertake, or purports to have the capacity to undertake, or submits a bid for, construction or demolition of any building, home improvement, or project. The definition includes those who do construction or demolition work themselves or “by or through others.”
Therefore, persons engaged in the business of home improvement must be licensed in the appropriate trade before advertising and/or submitting bids for construction and construction-related services. The license requirement is for jobs that total $500 or more in labor and materials (BPC § 7028).
Contractor referral services are legal in California, but within limits. It’s important to remember that a referral service cannot solicit or negotiate contracts on behalf of a contractor, or offer to undertake to, or purport to have the capacity to undertake itself or through others a construction project (BPC § 7026).
A referral service may serve as a repository for licensed contractors and provide contractor contact information to prospective customers. However, to avoid allegations of unlicensed activity, the prospective customer should enter into a contract directly with the licensed contractor and make payments directly to that licensed contractor.
Also, it is a criminal misdemeanor (BPC § 7027.1) for any person to advertise for construction or work of improvement unless that person holds a valid license in the classification so advertised.
You can find the Fast Facts information sheet on the CSLB website (LINK).