Contracting without a license can have a variety of negative consequences for the person or persons who engage in it. As unlicensed contractors are a problem in almost all states, local governments have provisions in place to effectively counter and penalize individuals who provide services without the necessary business license.
From penalties and jail charges up to a court-ordered restitution, a variety of legal mechanisms have been put in place to counter the material and financial damages that unlicensed contractors cause. Here are some of the consequences that unlicensed contractors experience if caught and convicted.
The Legal Consequences of Contracting Without a License
Unlicensed contracting is typically subject to criminal and administrative sanctions or penalties. Additionally, individuals who have hired a contractor who is not licensed and bonded can also bring that contractor to court and require them to, at least, repay them.
Depending on the state you are in, criminal sanctions for contractors may differ though they are often similar in scope. For example, according to Chapter 489 of the Florida Statutes as well under 775.082 F.S., individuals who contract without a license are committing a first degree misdemeanor the first time around they are caught. Subsequent instances of unlicensed contracting are considered a third degree felony.
Misdemeanors are usually subject to a penalty of about $1,000 and a jail sentence of up to a year (or a probation of the same duration), while felonies can result in up to 5 years in prison or probation and a $5,000 penalty.
Similarly, unlicensed contractors in Arizona can expect a fine of at least $1,000 the first time around and at least $2,000 the second time around according to 32-1164 of the Arizona Revised Statutes as well as a possible sentence.
In some cases, felony charges can also be filed against anyone who illegally uses another person's contractor license or simply contracts without a license during a State of Emergency, as is the case in Florida and California for example.
Administrative sanctions are also imposed on those contracting without a license. For example, 489.13 of the Florida Statutes specifies an administrative fine of up to $10,000. In California administrative fines can be even up to $15,000, apart from the possible criminal fine of up to $5,000 for a first time offense.
Alternatively, in Arizona, anyone convicted of a misdemeanor can be convicted of a court to pay three different types of transaction privilege tax or use tax amounts, according to 32-1164 A.R.S.
Apart from the sanctions which can be imposed by the state government if one is found out to be contracting without a license, individuals who have been tricked by an unlicensed contractor can also claim a number of remedies.This includes court-ordered restitution, treble damages, disgorgement, claiming unfair and deceptive trade practices and others. Depending on the state they live in, individuals have recourse to these and other measures.
Get Licensed and Bonded
Getting licensed and bonded not only places contractors on the side of the law and legalizes their business, it also speaks of their legitimacy and that they have been approved by their local Contractors State License Board to work on projects. Being bonded, on the other hand, guarantees a contractor's financial stability and reliability.
What other downsides and dangers are there to being unlicensed? What do you think should be added to the list above? Let us know, leave us a comment!
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps contractors get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.