Do Remodeling Contractor Licenses Matter?

Building Contractors
Contractors: Are They Licensed?. CC-Licensed; Flickr user U.S. Army Corps of Engineers

Inevitably the issue of licensing comes up when discussing a home renovation project with a home remodeling contractor.

At the front of his or her portfolio, the contractor may have a copy of a state license, along with a print-out showing a clean record of consumer complaints, penalties, or fines.

A few may even make a big issue of licensing, saying that this is proof positive of a good local reputation and that superior work on his part is guaranteed.

Not so.

Do Licenses Matter?

It's good if your state has a licensing system. It's a fast way to check if the contractor is indeed licensed. In some cases, you can check on-line regarding on consumer complaints and penalties or fines.

Remodeling licenses matter in that they separate the small number of bad actors from a large number of rule-abiding ones.  The worst of the worst are identified, and in some cases are fined or barred from conducting further business.

Licensing can also keep the contractor in check by requiring him to:

  • Hold a surety bond or declare an Assignment of Account (a bond alternative which allows him to put up cash without the bond broker middleman).
  • Have liability insurance coverage.
  • Be aware of contractor rules and policies.

But There Is a Limit

It should give you some degree of confidence that the contractor is licensed and that there are no complaints or fines. But don't feel that a license is a stamp of approval.

 

Roughly only about 35 states license remodeling contractors. In 15 or so states, there is no licensing.

In some states, licensing doesn't mean much. A contractor may only need to post a bond. Or he may only have to register with the Secretary of State or hold a business license--hardly difficult requirements to meet.

The mandate of licensing agencies is to help both individual citizens and industry. So while they do provide useful information for consumers, they also wear the industry hat (though the industry may beg to differ).

Even though licensing is meant to keep out the worst of the worst, a few bad apples may get in and manage to stay licensed.

No Guarantee of Good Work

A license does not mean great work. 

Your contractor might perform a kitchen remodel that results in weird, wavy ceilings; crooked cabinets; gapped wood flooring; and blotchy wall paint.

Bad work?  Yes.  Is this cause for finding a licensee or pulling his license?  No.

Make sure the remodeling contractor is licensed and has a good record. A contractor's job quality can vary widely--from great to barely passable--without the contractor losing his license or getting black marks on his record.

What About Those Complaints?

We live in a complaining age, where complainers have multiple avenues (usually on the Internet) for airing their woes.

  Therefore, you sometimes need to take a record of complaints with a grain of salt.

Don't automatically discount a contractor with a complaint or two on record with a state agency. There may be other factors at play of which you may not be aware. It's more the aggregate number of complaints and their severity of punishment should worry you.

Summary

  • Not every state will license remodeling contractors.

  • The bar to licensing is extremely low in some states--just register and post a bond.

  • State licensing agencies are not consumer advocates.

  • Licenses do not mean superior work.

A contractor's record with your community is much more important than his record with a state agency.