Is it a problem if I have unlicensed contractors work on my rental properties?
There is probably nothing inherently wrong with using unlicensed vendors for many routine non-critical tasks that do not require a license by law as long as you are aware of the risks and take the necessary precautions to protect yourself.
You should understand the licensing requirements of your state to give you some idea of the value to put on the license and, of course, to know if you are required by law to use a licensed contractor for the particular work being considered.
Many states define which tasks must be performed by licensed contractors and set maximum dollar limits for which a license is not required no matter what the type of work.
A licensed contractor should usually be preferred over an unlicensed vendor.
In many states, the advantages of using a licensed contractor usually include some or most of the following:
- Provides procedures for filing complaints, with penalties of license suspension when the licensee is found in violation of laws and regulations,
- Provides assistance to consumers in resolving conflicts with the licensed contractor,
- Provides access to a state Recovery Fund in the event of poor work done by the licensed contractor,
- Allows litigation against the licensed contractor, while a consumer’s right to sue an unlicensed vendor is restricted in some jurisdictions,
- Licensees are often required by the state to be bonded,
- Licensees are required to carry liability insurance (proof of adequate insurance should be required),
- Licensees are required to carry workers’ compensation insurance for employees and sub-contractors (proof of adequate insurance per state law should be required),
- Licensees are required to obtain applicable permits (unlicensed venders will not be able to even pull a permit in many jurisdictions), and/or
- Licensees are required to do the work per building codes.