Proposed Legislation: Title Insurance to Cover Liens on New Home Purchases

Excerpted from a legislative analysis by construction law attorney William L. Porter

In light of recent residential developer bankruptcies, a change is proposed to ensure that title insurance policies will provide coverage against the risk that mechanics’ liens encumber newly purchased residential property. AB 2683 (Houston) is currently working its way through legislative committees. Contractors, subcontractors and suppliers should watch this bill closely and register their opinions with the bill's author.

Assembly Bill 2683 (Houston): Title Insurers to Cover Risk of Mechanics’ Lien Claims on New Residential Purchases

Recent residential developer bankruptcies have left new home purchasers with unexpected mechanics’ liens recorded by contractors and suppliers who contributed labor and materials to the construction of their homes, but were left unpaid when the developer closed its doors. New residential purchasers are thus being asked to pay twice. This legislation would shift the burden of satisfying these liens from new homeowners to builders and title insurers. Despite the apparent relief this bill seems to provide, there is little doubt that the true cost of shifting this burden would be spread out among all new homeowners in the form of higher title insurance premiums and corresponding increases in the price of purchasing a new home. Under this Bill Section 1094 would be added to the Civil Code to read as follows:

“1094. Every sales contract for the purchase of real property on which is located a newly constructed and previously unoccupied residential structure or structures shall provide for issuance of an owner’s policy of title insurance that includes coverage for mechanics’ liens for works of improvement commenced prior to transfer of the property to the purchaser."

The changes which have been proposed and are described above do not include all changes proposed and the descriptions given are only brief summaries. The full text of this Bill and all Assembly and Senate Bills can be viewed at http://www.leginfo.ca.gov/. Questions about these Bills can be directed to the sponsor of the Bill or to the California Law Review Commission whose membership and phone numbers are listed at http://www.clrc.ca.gov/.

Construction Commando utilizes the same forms and legal practice guides as many construction attorneys and law firms. Regardless of whether changes are implemented to California's mechanic's lien, preliminary notice and bond claim procedures, our clients can rest assured that their forms and documents are accurately prepared and comply with the latest laws affecting California contractors. We are a master in our trade, so you can be a master in yours. Learn more at www.constructioncommando.com, or email us.

About the author
William L. Porter is a partner in the Porter Law Group, Inc., Sacramento, California. The article was based on analysis of draft legislation as of mid-April, 2008 and on the California Law Revision Commission Summary of the legislation in question. Mr. Porter can be reached at (916)3817868 or at http://www.porterlawinc.com/.

Sweeping Changes Proposed to California Mechanics’ Lien, Stop Notice and Bond Claim Laws

Excerpted from a legislative analysis by construction law attorney William L. Porter

The 2008 California Legislature is proposing sweeping changes to the rules governing such familiar construction payment remedies as the mechanics’ lien, stop notice and payment bond claims. Senate Bill 1691 (Lowenthal) is currently working its way through legislative committees. Contractors, subcontractors and suppliers should watch this bill closely and register their opinions with the bill's author. Some of the most significant changes proposed are summarized below.

Changes to Private and Public Works Construction Claim Remedies

This voluminous Bill deals with changes to the rules governing construction claim remedies for both private works and public works projects, among other issues unrelated to construction. For the full 131 page Bill and its legislative status see www.leginfo.ca.gov . The analysis of the bill below is limited to construction‐related issues. Under the proposed legislation the current Civil Code sections dealing with preliminary 20 day notices, mechanics’ liens, stop notices and bond claims (Beginning with Civil Code section 3082) would be repealed and would be replaced by a new statutory scheme beginning with new Civil Code section 8000. This is not a mere renumbering. There are also significant substantive changes. Some of the major substantive changes proposed are as follows:

Important Legislative Changes Proposed as to Private Works Projects

§ 8150. Definition of Completion
Existing law defines the “completion” of a private work. The definition of completion is significant because completion triggers time limitations for a claimant to pursue statutory collection remedies, including the mechanics’ lien, stop notice and payment bond claims. Section 8150 would modify the definition of “completion” in two ways:
(1) First, the section changes an undefined reference to “actual completion” to “substantial completion.” It is the position of the Law Revision Commission that the change codifies case law and is consistent with industry practice. It is the Commission’s further understanding that practitioners presently understand “actual completion” to mean “substantial completion,” which in turn means completion of all essential work contemplated by the contract, excluding remedial, warranty, or “punch‐list” work.
(2) Second, the section deletes a vague reference to “acceptance by the owner” as a specified ground for completion. There is no existing provision governing precisely how an owner’s “acceptance” would be communicated. There is no notice or filing of a public record. Consequently, claimants might have no knowledge that an owner has “accepted” the work in question, thereby triggering the time periods in which potential claimants must act to pursue their remedies (including the constitutionally protected lien right). That lack of meaningful notice raises significant fairness concerns. Elimination of the existing provision remedies that situation.

§ 8418. Notice of Intent to Record Claim of Lien
This new provision would add an entirely new step to the familiar process of pursuing a mechanics’ lien. The new provision would require that a claimant, before recording a mechanics lien on a private work, take the additional step of providing written notification to the owner of the property in question that the claimant intends to record a lien in the near future. Some would argue that the new proposal is entirely unnecessary since the property owner has already received a notice that a mechanics’ lien may be recorded in the future. Such notice is in the form of the preliminary 20 day notice the owner receives from each subcontractor and supplier who could legally file a lien. Subcontractors and suppliers might view this new provision as an unnecessary additional step solely intended to cause the loss of lien rights for an inadvertent procedural misstep. Subcontractors and suppliers may well argue that the preliminary 20 day notices serves the same purpose and there is no need to provide an additional notice.

§ 8420. Notice Prerequisite to Recording Claim of Lien
This section is a companion to proposed Section 8418, above. It would require that a claimant attach a “proof of notice” that the above statute was met when recording a lien. Again, some would view this as yet another procedural pitfall intended to cause legitimate claimants to forfeit lien rights through inadvertent procedural error.

§ 8460. Time for Commencement of Enforcement Action (Return of Lis Pendens)
Generally, a recorded lien is invalid if an action to enforce the lien is not filed in court within 90 days after the lien is recorded. However, because the enforcement action is filed in court rather than in the County Recorder’s office, it is not possible to tell from the title records whether an apparently expired lien has actually expired or is being enforced through a court action. Consequently, title insurers are reluctant to insure title even if a lien appears to have expired.

Proposed Section 8460 would cure that problem by requiring the recording of a lis pendens (Latin for ‘a suit pending’) when bringing a legal action to enforce a lien. That places notice in the title record that the lien is being enforced. A title insurer could then easily determine that a lien has expired simply by noting the date the lien was recorded and searching for a timely lis pendens. It is interesting to note that the Civil Code some years ago required the recording of a lis pendens under such circumstances. The requirement was rescinded several years ago but now looks like it may be making a comeback. One wonders why it was rescinded in the first place. The lis pendens is a good and fair remedy to a lingering problem.

§ 8480. Expanded Grounds for Petition to Release Mechanics’ Lien
Existing law provides a summary judicial proceeding in which an owner can petition for release of an expired mechanics lien. Section 8480 expands the grounds for lien release and provides other procedural rules relating to the petition. Under existing law, this petition may be made only on the ground that the lien claimant has not commenced a lien enforcement action in the required time (generally, within 90 days after recordation of the lien). The proposed provision adds the following grounds:
(1) The demand stated in the claim of lien has been paid in full.
(2) None of the work stated in the claim of lien has been provided.
(3) The claimant was not licensed to provide the work stated in the claim of lien.
(4) There is a final judgment in another proceeding that the petitioner is not indebted to the claimant for the demand in the lien claim.

There are problems with this new proposal. While it would be wonderful to find a quick and easy method of releasing liens that will turn out to be invalid anyway, most of the above standards, which may seem straightforward at first glance, can often be quite complicated. Long trials have taken place to reach a decision on some of the above issues. These issues cannot be summarily dealt with in the same way as can the determination of whether 90 days have passed since a lien was recorded. Application of the new statute may be problematic. (The latest information is that this proposed change may be dropped entirely.)

§ 8488. Increased Fees Related to Hearing and Order to Release Lien
Under existing law, the prevailing party on a petition to release a lien may recover attorney’s fees up to $2,000. Section 8488 replaces the $2,000 limitation on such fee with a provision for “reasonable attorney fees.” It is not uncommon for the legal fees associated with such a hearing, even under the current unexpanded standards, to exceed this sum. The Commission saw no reason for the $2,000 cap on the fee award. (The latest information is that this proposal may also be dropped and fees would remain limited to $2,000.)

§ 8026. Shift in Burden of Proof from Material Supplier to Contractor
Under existing law, a material supplier who acts to enforce a mechanics lien for material delivered to a job site must prove the delivered material was actually used or consumed in the work of improvement. This legal requirement places the evidentiary burden on the person least able to bear the burden since it is the onsite contractors rather than the supplier who would best be able to determine what materials were actually used to complete the job. Section 8026 would create an “evidentiary presumption” that materials or supplies delivered to a construction site are actually used or consumed in the work of improvement. Contractors are then free to refute the presumption with contrary evidence.

§ 8058. Filing and Recordation of Lien Related Documents Without Notarization
Existing law allows the mechanics’ lien and some other documents to be recorded at the office of the County Recorder without notarization. However, documents to release a mechanics’ lien currently must bear the acknowledgment of a notary to be accepted for recording by a County Recorder. Section 8058 would allow releases of liens and other documents to be recorded without a notary acknowledgment. This proposal is problematic as it increases the ease with which a mechanics’ lien could be fraudulently released without assurance that the person who purportedly signed the lien release is the person they claim to be. Once the lien is released the property could be sold free and clear of the lien to a bona fide purchaser.

§ 8152. Time for Notice of Completion Expanded from 10 to 15 Days After Completion
Under this proposal, the time in which an owner may record a notice of completion would be extended from 10 days after completion to 15 days.

§ 8214. Discontinuing Practice of the County Recorder Providing Notice of Completion to Those who Record Preliminary 20 Day Notices
Under existing law, a person can record a preliminary notice with the expectation that the County Recorder will send them a Copy of the Notice of Completion as to the property when it is recorded. County Recorders sometimes fail to comply with this provision. Existing law provides no consequence for non‐compliance. Current law may do little more than serve as a potential trap for a claimant who relies on the Recorder’s office for critical notices. For example, a claimant who does not receive notice from the County Recorder when an owner has recorded a notice of completion will not know that the time limit for claimant remedies has been moved up. Section 8214 discontinues the practice of requiring County Recorders to provide those who record their preliminary 20 day notices with any notice of further filings in relation to the property, including the notice of completion.

§ 8490. 20 Day Delay in Enforcing Court Order or Judgment Releasing a Lien to Allow for Appeal
This section adds a 20 day hold period on the effectiveness of an order or judgment releasing a lien, to allow a losing claimant time to seek a stay of the order or judgment if the claimant petitions for appellate review of the order. Without the hold period, an owner could use the release order to immediately sell the property to a bona fide purchaser, without the claimant having a reasonable opportunity to contest the trial court’s order. However, for releases which are intended to be expedited, for example where a lien is released because no enforcement action was brought within 90 days, an additional 20 days would be added to the process.

Important Proposed Changes in the Area of Public Works Projects

§ 45010. Payment bond requirement
On a public works contract of more than $25,000, a general contractor is generally required to provide a payment bond for the project. This part of the proposed legislation addresses the situation where the original contract is later supplemented by a second contract, increasing the overall cost of the work of improvement. Section 45010 would provide that the original bond would cover all work, including work under the supplemental contract. Surety groups might object to this provision on the grounds that it could theoretically expand their liability on the original bond, without any offsetting increase in the bond premium.

§ 42210. Duration of Cessation of Labor Necessary to Constitute Completion Changed from 30 to 60
Days
Existing law defines the “completion” of a public work, an event which triggers time limitations for a claimant to pursue a statutory remedy. Section 42210 would modify one definition of “completion” to conform to a definition governing a private work: the period of continuous cessation of labor necessary to constitute completion would be changed from 30 to 60 days. This would provide uniformity and would be of sufficient length to insure that a cessation of labor would not prematurely trigger “completion” for public works projects.

§ 42230. Time for Notice of Completion Expanded from 10 to 15 Days After Completion
This section mirrors Civil Code Section 8152 in the proposed private work provisions and provides that the time in which an owner may record a notice of completion would be extended from 10 days after completion to 15 days.

§ 42240. Notice of Completion of Contract for Portion of Work of Improvement
In a private work, an owner may choose to treat a single large project as a number of smaller separate projects, provided that there is a separate direct contract for each smaller part of the whole. The owner is specifically authorized to give a notice of completion for each separate contract, to hasten the resolution of claims as to that part of the work. Section 42240 would extend the same option to public works of improvement. A public entity could choose to give a notice of completion for a separate part of a larger work of improvement, so long as that separate part is governed by a separate contract. This change was requested by California State University. It should increase procedural efficiency by allowing public entities to manage a large public work project as several smaller projects. However, it will confuse subcontractors and suppliers as to their deadlines for pursuing public works claims remedies, particularly if they are unaware that a project has been broken into multiple smaller projects, each with a separate notice of completion.

§ 44170. Notice to Claimant of Notice of Completion
Under existing law, a claimant can pay a small fee ($2) to be put on a list to receive certain notices from a public entity, including a copy of the Notice of Completion. Section 44170 would increase the fee to $10 to reflect increased administrative costs.

Preliminary 20 Day Notice Disciplinary Provisions Not Continued for Both Private and Public Works
Current Civil Code Sections 3097(h) and 3098(b), describing the requirements for the preliminary 20 day notices for private and public works provide that the failure of a subcontractor to give preliminary notice when providing more than $400 of work constitutes grounds for discipline by the Contractors’ State License Board. Those provisions are not continued in the proposed law. While the waiver of lien rights associated with the failure to serve a preliminary 20 day notice does seem a sufficient consequence for not serving the notice, the current law does serve a useful purpose that will be lost under the new proposal. When owners currently question why a subcontractor has found it necessary to serve a preliminary 20 day notice, subcontractors have been able to point to the existing law as justification. Thus, rather than responding to such an inquiry with an ominous statement that the prime contractor might not pay its bills, the subcontractor can instead simply note that the law requires the notice and if the subcontractor did not provide it then it would risk discipline by the licensing agency. To this extent existing law provides a practical means to describe an action and thereby avoid a problem. This benefit will be lost under the new proposal.

The changes which have been proposed and are described above do not include all changes proposed and the descriptions given are only brief summaries. The full text of this Bill and all Assembly and Senate Bills can be viewed at http://www.leginfo.ca.gov/. Questions about these Bills can be directed to the sponsor of the Bill or to the California Law Review Commission whose membership and phone numbers are listed at http://www.clrc.ca.gov/.

Construction Commando utilizes the same forms and legal practice guides as many construction attorneys and law firms. Regardless of whether changes are implemented to California's mechanic's lien, preliminary notice and bond claim procedures, our clients can rest assured that their forms and documents are accurately prepared and comply with the latest laws affecting California contractors. We are a master in our trade, so you can be a master in yours. Learn more at www.constructioncommando.com, or email us.

About the author
William L. Porter is a partner in the Porter Law Group, Inc., Sacramento, California. The article was based on analysis of draft legislation as of mid-April, 2008 and on the California Law Revision Commission Summary of the legislation in question. Mr. Porter can be reached at (916)3817868 or at http://www.porterlawinc.com/.

Using a Business Credit Card Makes Tax Time Easier

by Robert Alan

Nobody likes tax time. This is particularly true for the small business owner who has to deal with business taxes in addition to personal taxes. However, there are things that you can do throughout the year to reduce the stress that is felt at tax time. One of those things is to use a business credit card for all purchases that are made throughout the year. This keeps expenses easily organized and reduces the time that you’ll spend trying to sort your business expenses from your personal expenses.

The Importance of Business Credit Cards
Every good business uses business credit cards. If you’re a small business owner who doesn’t yet have a business credit card, it’s imperative that you get one. The business credit card makes it easier for you to make purchases and to keep those purchases organized. It also lends credibility to your business even if you’re just a one-man operation. Consider going to lunch with a client and using cash to pay the bill. You look a lot more professional if you take out a business credit card to cover the cost.

Using a Business Credit Card Wisely
Assuming that you understand the importance of business credit cards and already have one, you should learn to start using it wisely. Wise use of a business credit card means using it for every single purchase that you make for the business and only for those purchases made for the business. In other words, you don’t ever pay cash for business expenses and you don’t ever put personal purchases on your business credit card. This is a very easy way to keep all of your business credit card purchase information in one place. It also keeps your personal expenses separate so that you don’t have to think about them when it comes time to do your business taxes.

How Organization Makes Tax Time Easier
The main reason that people hate tax time is because it’s so time-consuming and frustrating. If all of your business expenses are made on your business credit cards, you’re not going to have this problem. You can get a copy of your annual statement and easily see what money was spent. This can be compared with information from your business bank account to see how your expenses compare with your income. Having this information on just a few documents makes doing your taxes a fairly straightforward process. It’s just a matter of plugging in the numbers and seeing what happens.

Paying your Taxes with a Business Credit Card
It is possible to actually use business credit cards to pay your taxes if it turns out that you owe money to the government this year. The benefit of this is that it’s done easily and it keeps yet another business expense organized on the card. The drawback is that there may be a fee associated with using a business credit card to pay your taxes. Weigh the fee against the benefits and decide whether you want to use your business card or your business bank account to pay what you owe.

About the author
Robert Alan is an editor for www.CreditCardAssist.com and frequently contributing writer on various credit card-related topics. Find more free information, tips and advice from Robert on the business credit card page at www.creditcardassist.com/business/creditcards.html

How to Avoid Piercing the Corporate Veil

by McDonald Law Group, LLC

Business owners often set up corporations as a means of asset protection. A corporate structure for your business can protect an individual from liability from a company’s debt. The piercing of the veil allows a plaintiff to attack the individual’s personal assets, as well as the assets of the business. This type of suit is prevalent when the corporation’s shareholders or limited liability company’s members have more assets than that of the company.

Some say that piercing of the corporate veil is the most litigated corporate law issue. The Courts use the following as a list to determine whether or not the corporation was an “alter ego” of the individual; unity of interest, wrongful conduct, and proximate cause. However this list fails to explain the real world approach the Courts have taken. The following is a list of factors that the Courts have taken in determining whether or not the corporate veil should be pierced:

Corporate Records
The companies financial records must be maintained and documented. Most states also require that stockholders and the board of directors meet annually, if not more frequently, to discuss the operation of the business. Not only must these meetings occur, but an accounting of them must be maintained within the company. This accounting can be minutes, resolution, etc. Failure to maintain these documents is evaluated by the Court.

Financial Transactions
The Court will look at whether the business had its own bank account with bank cards and checks, and whether or not the funds in the business account were used for only business purposes.

Capitalization
Businesses must be fully capitalized. While the amount varies in each industry, the failure to capitalize your company has been used by the Court as an indication the business was in fact the alter ego.

Treatment of Assets
The Court will look at how corporate assets were treated. If they were treated by the individual as his/her personal assets, the Court may determine that a piercing of the corporate veil is appropriate.

Failure to Pay Dividends
Failure to pay dividends is not determinative of whether the corporate veil has been pierced, but if the payment of dividends was appropriate and the person failed to pay them, this might indicate that he was in fact the alter ego of the company.

This is not an exhaustive list and not all factors must be met for a Court to pierce the corporate veil. Instead the Court weighs these and other factors to determine whether the business was used as the alter ego of the company.

So, is your corporate record book complete? Are you ready for a lawsuit or IRS audit? If not, we can help get you there. Construction Commando offers comprehensive, low-cost legal services to help keep your corporation in compliance and your corporate veil intact.

Whether you need just one resolution for a particular corporate decision, or you would like us to handle all of your corporate compliance documentation on an annual basis, we're here for you. We offer the same attorney-drafted legal documents that the law firms use, but at a fraction of the cost of a lawyer.

If you are considering incorporating your existing business, or would like to form a new corporation, contact us to learn how we can save you more than $1,000 off what an attorney would charge! For more information, please visit our website.

California Homeowner Subject to Suit by Unlicensed Contractor for Injuries Suffered on the Job

By Eric Casher
Thelen Reid Brown Raysman & Steiner LLP
©2008 ConstructionWebLinks.com. Reprinted with Permission. All Rights Reserved.

A homeowner hired his neighbor, an unlicensed roofing contractor, to replace the roof on his house. The parties agreed on a set price, and the roofer immediately began work. After only four hours of work, the roofer fell from the roof and was injured.

The roofer filed a personal injury suit against the homeowner for negligence in failing to provide proper safety protection and equipment for the job. The roofer claimed he was an employee of homeowner, and because homeowner did not have worker’s compensation insurance, the roofer was entitled to bring a civil action to recover for damages he sustained from the fall.

In response homeowner argued that: (1) The roofer’s exclusive remedy was worker’s compensation, not a civil action; and (2) The roofer was not eligible for worker’s compensation because he was not an “employee” as defined in the worker’s compensation law (Insurance Code §§3351 and 3352) since he had not worked enough hours to qualify for coverage before being injured.

The roofer countered he was an employee of homeowner based on California law (Insurance Code §2750.5 and cases interpreting it) providing that an unlicensed worker performing services for which a license is required will be considered an employee, not an independent contractor.

Homeowner acknowledged that roofer was an unlicensed contractor but argued that such status did not make the roofer an employee because the license provision does not supersede the definition of “employee” in worker’s compensation law.

Homeowner moved for summary judgment, and the trial court granted the motion.

The Court of Appeal reversed and reinstated the roofer’s negligence suit. Mendoza v. Brodeur, 142 Cal.App.4th 72 (2006). It held that although the roofer was not an employee for purpose of the worker’s compensation law, he was an employee for purposes of tort liability under California law providing that an unlicensed worker performing services for which a license is required is not an independent contractor but an employee. The court concluded that the two bodies of law must be construed together, and that one does not override the other.

In harmonizing the two legal principles, the Court of Appeal affirmed that simply because an unlicensed contractor is not eligible as an employee for worker’s compensation coverage does not preclude the unlicensed contractor from asserting an employment relationship for the purpose of pursuing litigation to recover for injuries sustained on the job. Thus, an unlicensed contractor can sue an employer in tort, and failure to meet the statutory definition of “employee” for purpose of worker’s compensation laws will not impair the unlicensed contractor’s ability to bring suit against his employer for injuries sustained on the job.


For more information about the issues covered in this report, please contact:
Attorney Eric S. Casher
ecasher@thelen.com
Thelen Reid Brown Raysman & Steiner LLP
101 Second Street, Suite 1800 San Francisco, CA 94105-3606
tel: 415.369.7764 fax: 415.369.8776

Unlicensed Contractors Rounded Up in CSLB Sting

SACRAMENTO —- A man suspected of ripping off day laborers, and a contractor with a suspended license, who was the target of financial abuse complaints, were among those nabbed by the Contractors State License Board (CSLB) in a sting operation on January 23 in Rancho Cordova. Members of CSLB’s Statewide Investigative Fraud Team (SWIFT) posed as homeowners during the daylong operation at a storm damaged condominium. They worked closely with the Rancho Cordova Building Department and the Rancho Cordova Police Department to go after blatant abusers.

The SWIFT team received bids from the suspects on projects at the sting house that included landscaping, painting, concrete and fencing. When the bids went over $500 on a job, the men were cited. California law requires a state contractor’s license for home improvement jobs that are valued at $500 or more in supplies and labor.

“The suspects who get caught in the Board’s sting operations usually have other legal problems.” said CSLB Registrar Steve Sands. “Homeowners are taking big risks when they use unlicensed people for work on their property. This latest operation emphasizes the fact that it pays to be cautious about who you hire.”

Investigators received tips that Michael Villa, a suspended contractor was financially abusing homeowners in Rancho Cordova. He bid on a storm damaged roof, in a declared State of Emergency zone, which made him eligible for felony charges under state law. He also got a $5,000 administrative citation. Another suspect, Elver Chili Martin, has been under investigation for months. He would allegedly pick up day laborers, and work them for as many as 12 to 14 hour days without pay. He was booked for not having proper identification, had his car towed, and could face additional legal problems along with civil penalties of $15,000.

The remaining suspects bid on regular home improvement projects and were charged with contracting without a license and illegal advertising. These are usually misdemeanor charges and carry a potential sentence of up to six months in jail and/or a $500 fine. The penalties go up with each conviction.

“We take a proactive approach to improve the safety and security of our residents in Rancho Cordova. That’s why we were so pleased to cooperate so closely with the CSLB to apprehend unsavory workers,” said Tom Trimberger, Chief Building Official for Rancho Cordova. “We will continue to work with the CSLB to ensure that these illegal business practices are actively discouraged in Rancho Cordova.”

Unlicensed operators are part of a multi-billion dollar underground economy that takes jobs away from legitimate contractors, and tax dollars from schools, roads and law enforcement. Illegal operators rarely have workers’ compensation or liability insurance. Homeowners have little recourse if something goes wrong with an unlicensed operator.

The people who were issued citations are scheduled to appear in Sacramento County Superior Court on March 26.

Legislative Update: New 2008 Construction Laws Clarify Contractor Responsibilities, Consumer Safety

As the New Year rolls in, contractors, once again, must heed the new and revised state laws that govern professions within the construction industry. Following are the highlights of legislative action taken in 2007. All California contractor laws are available in the Contractor State License Board’s (CSLB) 2008 Law and Reference Book, due for release in early January.

BUSINESS & PROFESSIONS CODE

§101.7 – Boards and other entities within the Department of Consumer Affairs (DCA) must meet three (3) times each calendar year, and at least once in northern California and once in southern California. The DCA Director is authorized to excuse a Board from meeting upon showing cause, and/or to call a special meeting.

§125.6 – In addition to facing disciplinary action if a licensed contractor refuses services based upon race, color, sex, religion, ancestry, disability, marital status, or national origin, licensees will face disciplinary action if they discriminate by refusing construction-related services based upon a prospective client’s medical condition or sexual orientation.

§7026.11 – The terms “mobile home” and “manufactured home” will now have separate and distinct definitions for reasons that are unrelated to Contractors License Law. The General Manufactured Housing (C-47) classification continues to be the appropriate specialty license for performing work relative to mobile homes and manufactured housing.

§7027.5 – Landscape Contractors (C-27) licensed by the Contractors State License Board are authorized to enter into prime contracts to construct and install outdoor cooking centers and fireplaces, as long as the projects are included in a residential landscape project, and the fireplace is not attached to the dwelling. Other properly licensed specialty or general contractors would still be required for tasks that are beyond the scope of the landscape contractor classification.

§7083.1 – Contractors whose licenses have expired, are canceled, or are otherwise inactive, must notify the CSLB Registrar of their current address(es), in writing, for five (5) years, instead of the previously designated three (3) years.

§7091 – If a licensee is convicted of a crime that is substantially related to the qualifications, functions or duties of a contractor, the CSLB will have two (2) years from the date the conviction is discovered in which to file disciplinary action against the licensee. Also, the CSLB will have 18 months after the date a warranty expires in which to file a disciplinary action against a licensee who fails to honor the terms of the warranty.

§7114 – As part of disciplinary action against a licensee, the Registrar of Contractors is authorized to order a licensee to pay a specific amount of money to an injured party if the licensee has aided an unlicensed person or allowed an unlicensed person to use his or her license.

§7159.5 – A statute of limitations has been established for filing criminal charges against contractors who furnish a bond, bond equivalent, or Joint Control that is approved by the Registrar and who are exempt from referencing the down payment, schedule of payments, the Mechanic’s Lien warning, or using the 10%/$1,000 down payment rule in a Home Improvement Contract where the cost of all labor and materials exceeds $500. The date the first payment is given to the contractor is the date used in establishing the statute of limitations for filing criminal charges.

§7159.14 – For the case where a Service and Repair Contract is not reduced to writing as required by the law, the date the first payment is given to the contractor is the date used in establishing the statute of limitations for filing criminal charges.

CIVIL CODE

§2782 – Residential construction contracts and amendments that indicate a general contractor or subcontractor is to be held harmless for construction defects, injury or negligence are legally unenforceable as of January 1, 2008.

INSURANCE CODE

§11760.1 – If an employer fails to provide access to an insurance company or its representative to perform a workers’ compensation audit, the employer will be liable to pay the insurance company three (3) times the total premium, plus associated costs.

Complete contents of each legislative change is available by looking up the California code and section number on the following state Website: www.leginfo.ca.gov.