Hiring an unlicensed contractor in California is not itself illegal for you as the homeowner — the contractor commits the crime, not you. But the practical consequences land on your side of the fence: you can be treated as the worker’s employer if someone gets hurt, your homeowner’s insurance may refuse to pay for damage tied to the work, and any unpermitted construction becomes a defect you have to disclose and often fix when you sell the property.
When California Requires a Licensed Contractor
Since January 1, 2025, any construction project costing $1,000 or more in combined labor and materials requires a licensed contractor. Assembly Bill 2622 raised the threshold from the earlier $500 figure. The same rule applies below $1,000 if the work requires a building permit or if the person doing it uses employee labor.1Contractors State License Board. Industry Bulletin – License Requirement for Minor Work Increases from $500 to $1,000
An unlicensed person can legally do the job only when all three conditions are met: total cost under $1,000, no permit needed, and no employees on the crew. Splitting a larger project into smaller invoices to duck the threshold is illegal, and the Contractors State License Board (CSLB) specifically watches for it.2Contractors State License Board. Before Applying for a License When No Exam is Required
You can also work on your own property without a license under the owner-builder exemption. If the structure isn’t for sale, you can do the work yourself or use your own wage employees. If you plan to sell, the exemption still works for your principal residence, but only if you’ve lived there at least 12 months before the work is finished, and you can’t use it on more than two structures in any three-year period.3Contractors State License Board. Owner-Builders Pamphlet Owner-builder status does not exempt you from workers’ compensation obligations if you hire people to help.
What You Actually Risk as the Homeowner
You May Be the Legal Employer
This is where most homeowners get caught off guard. Under California Labor Code Section 2750.5, there is a rebuttable presumption that anyone performing work that requires a contractor’s license, without holding one, is an employee of the person who hired them.4California Legislative Information. California Labor Code 2750.5 An unlicensed worker cannot rebut it, because holding a license is part of the test.
If that worker or anyone on their crew is injured on your property, you can be responsible for medical bills, lost wages, and rehabilitation costs as their employer. A licensed contractor carries workers’ compensation insurance that absorbs those claims. Without a license, that obligation can fall on you or your homeowner’s policy.5Contractors State License Board. Owner-Builder Risks
Your Homeowner’s Insurance May Deny the Claim
Many homeowner’s policies include language allowing the insurer to deny claims tied to unlicensed work. Defective wiring that starts a fire, a deck that collapses, a plumbing failure that floods a floor — these are the exact scenarios you buy insurance for, and they are the ones an insurer is most likely to challenge when the work was done without a license.
No Enforceable Warranty
California Business and Professions Code Section 7031 bars an unlicensed contractor from suing to collect payment for work that required a license.6California Legislative Information. California Business and Professions Code 7031 That sounds like it favors you, and in some ways it does. It also means the contractor has little incentive to come back and fix problems. Your remedy for defective work is a lawsuit or paying someone else to redo it.
An unlicensed contractor cannot foreclose on a mechanic’s lien for work that required a license, so they can’t force a sale of your home to collect.7Contractors State License Board. What if a Mechanics Lien is Filed on Your Property? Anyone can still record a lien, though, and clearing it from your title can delay a sale.
Getting Your Money Back
If you have already paid an unlicensed contractor, Section 7031(b) lets you sue to recover every dollar you paid, not just the portion tied to bad work.6California Legislative Information. California Business and Professions Code 7031 Courts treat this as a statutory penalty rather than a damages claim, which is why the quality of the finished work doesn’t matter. You can recover even if you were happy with the job.
There is one hard deadline. You have one year from the date the contractor finishes or stops working to file for disgorgement. The clock runs from when the work ends, not from when you find out the contractor was unlicensed. Courts have held that the discovery rule does not apply and equitable tolling does not extend the year. Miss it and the full-disgorgement remedy is gone.
Permits, Disclosures, and Selling the Home
Unlicensed contractors generally cannot pull building permits in their own name. What often happens instead is that the homeowner pulls an owner-builder permit, which puts you personally on the hook for code compliance, worker safety, and construction quality.
If no permit is pulled at all, the problem follows the property. Code violations run with the land in California, so the current owner is responsible regardless of who did the work or when. California Civil Code Section 1102 requires you to disclose known material defects, including unpermitted work, on the Transfer Disclosure Statement when you sell. Concealing it can expose you to fraud or misrepresentation claims from the buyer. Disclosing it honestly can still cost you: unpermitted construction lowers value, and many lenders will not finance a home with known unpermitted work.
How to Verify a Contractor’s License Before You Hire
The CSLB runs a free license lookup where you can search by license number, business name, or the contractor’s personal name.8Contractors State License Board. Welcome to the Contractors State License Board The results show classification, current status, bond information, workers’ compensation coverage, and disciplinary history. Two minutes on that page before you sign anything prevents most of the problems above.
Confirm that the $25,000 contractor’s bond is active and that workers’ compensation coverage is current, or that a valid exemption is on file if the contractor has no employees.9Contractors State License Board. Issuing My License Ask for the license number early. Hesitation, or an explanation that a license is “in process,” is a warning sign.
One boundary worth naming: an unlicensed person is allowed to advertise for work up to $1,000 as long as the ad discloses they are not licensed. Seeing that disclosure does not mean the person can lawfully do a larger job for you.
Reporting an Unlicensed Contractor
If you have already hired one, or you have spotted unlicensed work in progress, the CSLB accepts complaints through several channels. For active job sites, a lead referral form lets investigators respond while the work is still going. Advertising violations have their own complaint form. General complaints can be filed online or by mail.10Contractors State License Board. Filing a Construction Complaint
The CSLB can investigate for up to four years from the date of the violation. Keep the contract, invoices, text messages, photos of the work, and payment records. Documentation is what turns a complaint into an enforcement action, and it is also what you will need if you file a disgorgement suit within your one-year window.