Governor Newsom signed Senate Bill 342, which amends Business and Professions Code section 7031 and significantly limits the draconian consequences traditionally associated with temporary contractor licensing lapses on many larger construction projects.
Imagine completing a multimillion-dollar project, performing quality work, paying your subcontractors, and satisfying the owner, only to discover that a temporary contractor license lapse could prevent you from recovering payment for that work or pursuing claims for extra work. For decades, that was the reality under California Business and Professions Code section 7031.
A contractor that allowed its license to lapse, even briefly, could face catastrophic consequences completely disconnected from the quality of its work. In some cases, a contractor that performed otherwise flawless work could be barred from recovering payment and even be ordered to disgorge compensation already received – even if the owner knew the contractor had a lapse in its licensing and allowed it to continue construction.
That reality is about to change.
Ms. Frisch may be contacted at hfrisch@seyfarth.com