Unlicensed Contractors Will Rip You Off

Did you know you could be arrested for using an unlicensed contractor? It's true. In states that require licensing, hiring an unlicensed contractor is illegal. And if that's not bad enough, did you know an unlicensed contractor who gets hurt on your property could sue you -- and win? Unlicensed contractors are unlikely to carry proper insurance, so it has happened.

These are the extremes. But even the average experience with an unlicensed contractor can be devastating. Most consumers who call me for help complain that the unlicensed contractor did shoddy work. Others report the contractor made off with their money and did no work at all.

Elease W. saved for two years to build a ground floor bathroom in her home, because she has arthritis and stairs are hard for her. She paid a contractor $10,000 to do the work. Two years later it still wasn't done right. For months, Elease and her daughters felt like prisoners in their home, because the contractor left gaping holes in the walls, so they didn't dare leave. The water pipes were built outside the structure, and they froze in the winter. The foundation was unstable, and the siding immediately started peeling off. Of course the family didn't check out the contractor until after everything went wrong. It turned out he was unlicensed and had a complaint record a mile long.

Paul H. needed a new roof. He got a couple of different estimates but felt he couldn't afford them. Then he spotted an ad in one of those free neighborhood newspapers -- promising the lowest roofing rates in town. Paul hired the man to reroof his home for $5,000.

The man demanded full payment in advance. The man climbed around on Paul's roof for a few minutes, then said he was going to get supplies. He never returned. When I investigated, I learned the phone number in the ad actually belonged to an answering service. The address the man gave Paul didn't even exist. And there were no licensed contractors by that name listed with the state.

Licenses are generally required for any work that affects the structural or electrical integrity of the building. I've done a couple different undercover investigations where we invited unlicensed contractors to give us estimates for roofing work. First of all, it was easy to find unlicensed contractors. We spotted their ads in local newspapers and found their business cards at home-improvement stores. Unlicensed contractors tend to use the cheapest possible means to market themselves.

When we confronted them, we heard every excuse. One man said he couldn't afford a contractor's license, even though the state where he worked only charges $300. Another man said he was working "under" somebody else's license. That's illegal. Only bonafide employees are allowed to work under the umbrella of a licensed contractor.

A third showed us a contractor's license for another state. That doesn't count. The contractor must be licensed in the state where the work is to be done. Several guys presented us with occupancy licenses, which are just business permits that anybody can buy. They don't make a contractor legal.

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