Key Takeaways
Increased License Exemption Limit – As of September 14, 2024, AB-2622 raises the person’s license exemption amount from $500 to $1,000 in California. This means unlicensed handymen can legally perform jobs under $1,000, as long as the work or operation does not require a building permit and they do not employ others to assist.
Strict Compliance Still Required – Property owners must ensure they follow the existing law when hiring unlicensed service providers. The $1,000 exemption is an aggregate amount, meaning jobs cannot be split into smaller bids to bypass the licensing requirement. The California Contractors State License Board (CSLB) enforces these regulations, and noncompliance could result in legal and financial consequences.
Imagine if you will, your tenant just moved out of a property you own and needs a few minor things fixed before you lease it out again. You contact a guy you know who does good work at a competitive price. He estimates the job to be $950 including the contract price for labor, material, and any other costs but you learn he does not have a contractor’s license.
You want to ensure you do things right since you will present the receipt to your former tenant. You remember something about a $500 threshold but aren’t sure about the existing law anymore. With inflation, is the cutoff still $500? Does this handyman need a contractor’s license to perform a $950 job?
As of September 14th, 2024, Assembly Bill 2622 amends the California State Business and Professions Code to increase the person’s license exemption amount from $500 to $1,000. The change to the California State Business and Professions Code allows unlicensed individuals to legally perform work under $1,000, including the contract price for labor, material, and other fees as long as it does not require a building permit and no additional workers are hired.
The increase reflects the rising contract price for labor, material and other expenses making it more feasible for small repair jobs to be completed without requiring a licensed contractor.
AB 2622 specifies that this $1,000 exemption applies as long as the work or operation does not require a building permit, and the unlicensed person does not employ another person to perform or help perform the job.
This is an aggregate amount, meaning it is for the total work or operation involved and not just a portion of a larger job or labor that needs to be done. It's also against the existing law for a service provider to advertise for construction work in a way that would mislead a person into believing they have a contractor’s license.
This increase is long overdue since there is not much that can be done for just $500. It could certainly be argued that $1,000 is still too low. This higher amount presumably makes enforcement more likely and breaking the existing law at this larger number sounds more egregious. Kind of like when they raised the speed limit on the freeway from 55 to 70 miles per hour.
Of course, any unlicensed handyman performing work that legally requires credentials should be concerned about potential fines and a criminal record.
Who Enforces the Contractors State License Law
The bill is enforced by the California Contractors State License Board (CSLB), which regulates and oversees contractor licensing and compliance in the state. The CSLB ensures that individuals performing labor above the exemption threshold are properly licensed, protecting consumers from unqualified or unregulated contractors.
Why Should a Property Owner Care if a Service Provider Is Properly Licensed?
We will go more in-depth in a separate blog as to why your vendors should be licensed and insured. For now, let’s just say in today’s tenant-friendly court system, you don’t want to be facing a judge explaining why you cut corners by hiring an unlicensed person to perform a repair. You also don’t want to be making the same explanation to an insurance adjuster if you ever have to make a claim.
With the price of maintenance and repairs being so high these days, you can’t get much done for $1,000.
Can a Job Be Broken Down Into Pieces With Multiple Bids Under $1,000?
Creative thinking should be admired and certainly can be a good thing. However, this exception limit is an aggregate amount. Therefore, if the total of work or operation and materials is over $1,000 then a person’s license is legally required. Breaking a job up into two or more pieces does not change anything. Breaking it up means you are essentially breaking the existing law.
If you decide to hire a person without the proper credentials you are taking a risk. Having a license is not a guarantee that everything will go smoothly but it does increase the odds. Simply put, you are more protected when a person has the proper license.
Yes, the new $1,000 limit is still low. At least the exemption amount has been increased from $500 to $1,000. This new higher amount is more reasonable and there are a lot of minor repairs that can take place for under $1,000.
This increase opens legal opportunities for unlicensed technicians to get work and places a more realistic requirement for property owners. This may not be a big change, but it is nice to at least see something loosen up to become a little more reasonable for us all.
Bottom Line
The license exemption amount for unlicensed handymen in the State of California increased from $500 to $1,000 starting September 14, 2024. This was done with an amendment to the California State Business and Professions Code by AB 2622. Now you can legally have an unlicensed technician perform a job that is less than $1,000 including labor and materials if it is the total for the entire job, the work does not require a building permit, and the unlicensed person does not employ another person to perform or help with the job.
Remember, we are not attorneys or CPAs so we don’t give legal or tax advice. For legal advice please consult an attorney who is in the area of law in which you have a question.
For Real Estate Advice
If you are looking for a reliable property management company to help you handle a rental property or a real estate broker to guide you through the sales process in Long Beach, Los Angeles, or Orange County, California; or you are just considering it and have a few questions about real estate contact the Mike Dunfee Group today! If you would like an introduction to Long Beach Property Maintenance, Inc. Lic # 1116721 we can set that up too.
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