The California State Contractors Board requires a surety bond for companies engaged in work that requires a contractor’s license within California. This applies to any company or individual performing work within California regardless of where the company is based.
Two ways to satisfy bond requirement
There are two ways a contractor can satisfy the bond requirement.
They can obtain a bond through a surety company, or they can have a cashier’s check issued to be held in lieu of a surety bond.
The bond requirement must be fulfilled before a contractor’s license can be active, reactivated, or renewed per Business and Professions Code §7071.6.
Contractors required to comply with all laws
A contractor is required to comply with all laws related to their contractor’s license.
For a homeowner, this is often related to the contractor being in breach of contract, failing to pay subcontractors or suppliers who then make a claim against the homeowner, or the contractor abandoning the project.
If a homeowner is wronged by a licensed contractor, they can file a claim against the surety bond of that contractor. If one wants to make a claim, time is of the essence.
Written notice to be sent to surety company and contractor
Written notice must be sent to both the surety company and contractor within 15 days of the notice of completion, or 75 days after the end of construction if no notice of completion is given.
Notice must include a comprehensive description of the issue and include supporting documents such as a copy of the contract, photographs, copies of written communications, and inspection reports as applicable.
The California State License Board
A complaint should also be filed with the California State License Board. The surety company will investigate claims made against the bond and the board will investigate claims against the license, which often interconnect.
After a determination is made, the homeowner can accept the determination or, if unsatisfied with the determined, can take the contractor to court.
Commercial projects by their nature are often higher value than residential projects.
Additional bonding requirements
In both cases the maximum amount that can be claimed against a bond is the same, being the value of the bond itself. However, while all contractors must have a contractor’s license bond, commercial projects often have additional bonding requirements.
When bidding on projects valued at $100,000 or more, federal law requires a bid bond to be held by the contractor making the bid.
In California, any public project requires the contractor to have a bid bond unless a waiver is granted.
A performance bond may also be required to provide a surety the contractor will perform the contracted work or cover financial loss due to failure to do so.
This, in combination with the contractor’s license bond, increases the total amount that may be recovered on a commercial project.
Prior to July 1, 2023 California required contractors to have a surety bond of $15,000. After July 1, 2023 that amount has been raised to now require the contractor’s bond to be $25,000.
To learn more, contact Newport Beach Real Estate Attorneys today -- Go to NewportBeachRealEstateAttorney.com or call (800) 233-8521 for a free phone consultation.
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