Renting Your Contractors License – Yes or No?

Is Renting your contractors license Illegal… Not if you are following the law!

renting your contractors licenseFor years, I have been asked if it’s okay for someone to become a qualifier on a license for a company who couldn’t otherwise obtain a license on their own.

I’ve always answered by quoting the Business and Professions Code that covers this issue. I also stress that they must have first hand knowledge of the work being done under the license they are qualifying. This direct supervision could be in the form of on-site visits, progress reports, photo’s, etc. You, as the qualifier, are responsible to ensure that the work being done meets plans, specs, and is to code. By not doing this, you are putting yourself at great risk of losing your personal assets, and being removed from any other license you may be qualifying. My recommendation is to do on-site visits. If the CSLB were to receive a complaint about a project that you are required to oversee, you better have your i’s dotted and t’s crossed. The only way to effectively do that is to make site visits.

Although the article below is stating that it is illegal to “rent” your license, it also states that you can qualify up to three licenses per year if you show that you own at least 20% ownership in that company. The CSLB shouldn’t ask a question, answer it with a No, then tell you the law says yes. Mixed signals only confuses the issue.

What the CSLB doesn’t do, is require that you prove you actually own 20%. You’re only required to list 20% on the license application. When I complete a clients application, I notify them of the 20% rule, but there is nothing to keep the company and qualifier from having a side letter stating that the qualifier doesn’t own any voting shares. That agreement will also state what the compensation will be to the qualifier. The qualifier is obviously not going to work for free, so compensation will be part of that agreement. I’m not sure why the CSLB has chosen to use the word “rent” other than to attempt to keep qualifiers from doing what the law allows.

In the case cited in the article, the qualifiers who accepted payment but didn’t maintain direct knowledge of the work being done did deserve to be punished. But I feel the CSLB needs to either have more control (lol me suggesting the government should have more control is funny) over qualifiers who qualify more than one license, or they should change the law. Doing nothing but catching the bad guy after the fact is not following their mandate to protect the consumer…

Perils of  Renting Your Contractors License

Are you a retired, expired or “inactive” contractor? Have you been asked to serve as the qualifier for someone else’s license for a monthly fee without having to be involved in day-to-day business operations?

If you receive such a solicitation, your first question should be “Is that legal?” The answer: No.

Companies throughout the state have been offering to “rent” contractor licenses so their business can qualify to conduct a construction operation. Licensees have been offered several hundred dollars per month to do this. But, amendments to Business and Professions (B&P) Code section 7068.1 clearly state that an individual has to have direct control and supervision of his or his employer’s or principal’s construction operations or face disciplinary and misdemeanor criminal charges (punishable by up to six months in jail, by a fine of $3,00 to $5,000, or both).

Licensees also can be held liable in a civil court for damages that may arise from defective work done by the business entity they qualify. Violations of Contractors State License Law result in the qualifier being held responsible, regardless of his or her knowledge or participation in the prohibited act or omission.

Construction performed by unqualified individuals who illegally obtain a license by using an absentee qualifier is a threat to the public. Consumers are put at risk when substandard work is performed by unskilled individuals; the cost to correct deficient work can be exorbitant, often exceeding the original contract amount.

The ongoing case against revoked licensee Avi Gozlan (see story on preceding page ) provides a sobering example of what can happen when qualifiers are not actively involved with the licenses they qualify. Gozlan was one of 13 people indicted by the Ventura County Grand Jury in August for a telemarketing scheme that used licenses that were obtained from nonparticipating qualifiers as a front to sell phony or inferior home improvement services.

Three qualifiers already have pleaded guilty to felony conspiracy charges in the Southern California case in which thousands of consumers are believed to have been defrauded.

Remember that when you’re the qualifier for a license, you need to have direct supervision and control of business activities. California contractors cannot act as a qualifier for an additional individual or firm unless there is a common ownership of at least 20 percent. An additional firm may be a subsidiary or joint venture of the initial company where at least 20 percent of the equity is owned by the initial firm. Also, a qualifying individual can be the qualifier for not more than three firms in any one-year period.

CSLB’s website includes more information that describes the duties and responsibilities of a qualifier: http://www.cslb.ca.gov/applicants/ContractorsLicense/ExamApplication/BeforeApplyingForLicense.asp

via CLC Newsletter Fall 2013.

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Comments

  1. This is some great stuff as I was looking into how the license works very interesting to know if such work can be done legally

  2. My dad sold me his roofing business and moved to Costa Rica using me as his RMO. I do not have a contractor’s license, my dad has nothing to do with the day-to-day operations. Am I doing anything illegal by running the business and using his license? He’s been there since 2014 and only shows up once or twice a year so my mom can look at the books. He’s got nothing to do with his(my) business, am I doing anything illegal? He’s applied for the Costa Rica Retiree program that demands he prove’ he’s making over $2000 USD a month in income. This is not the first time my dad has pushed the ethical boundaries or been slack with the law. Am I at risk telling everyone “I own the business, my dad retired” when they ask “Who is the contractor”? His last lawsuit cost him over $40,000, should I start saving to defend myself?

    • Hello Jim,

      Are you listed on the contractors license? Legally he should be kept in the loop for all work being performed, since he’s not you are both walking on the edge.

      I would suggest replacing him on the license as the qualifier.

      • Jim Carrigan says:

        Dad is the “Sole Owner” “RMO/CEO/PRES” according to the CSLB website. I tried to get him to do everything legal but he really love’s to push that envelop far. One of our former employees was a great faithful and knowledgeable businessman. My dad tried to rent out his license to him, he refused saying “its not ethical or moral”. My dad thought he being a bit too “hyper-vigilant with his morality because people in our church push things to the extreme. My fear is that same worker ended up venturing on his own and my father might have reported him to the Contractor’s Board for not having a contractor’s license. What if that same worker decided to use the same tactics as my dad did? He’s not the most moral man, obeying the building code, tax laws are not his strongest suit. I got no real options because I failed the contractor’s license, dad own’s all the equipment. What could go wrong?

        • Jim Carrigan says:

          Is is wrong for me to tell everyone “I own the business” if my dad is the owner on paper and all the CSLB documentation? I am upset because he was so lazy when he was here, I was doing everything. Could I make more money running a bigger company without having my dad ruin everything? I love the business, am very good at it, just afraid my dad’s lack of morals will catch up to me. Thank you for your insights and help!

          • You mentioned in the prior post that your dad is the Sole Owner / RMO CEO PRES. He can’t be both. If you are not listed on the license you shouldn’t be stating that you own the business.

            When did you apply for a license? Would you be able to provide documentation to support your experience if the cslb asked for it?

        • What could go wrong? Everything. If that former foreman notified the cslb of the situation (dad out of the country), the cslb would/could investigate and it could end in a revocation of the license.

          • Jim Carrigan says:

            He has me listed as “CEO/President” on the CSLB, this is what the CSLB has my dad as. My dad had all friends write great reviews on Yelp and Google Reviews like “Jim Jr is one of the best local contractors and small business owners you can trust”. I told him I wanted to correct the Yelp and Google Reviews about my status “being licensed” and “sole owner” and he screamed at me. I feel dirty, if I tell my father he has done something wrong he will not talk to me. My dad and mom slammed my sister because she said he was putting me in a dangerous position. They kicked her off the contractor’s license and have not spoke to her since 2014.
            My sister worked as our auditor and paralegal, she told me to call the CSLB under alias.

            I called the CSLB and their fraud guy said “If your paying Workers Compensation and you are Insured, we are not going to chase you down”. Not chasing me down does not really answer a question if I am doing the right thing. How could he call the CSLB on his former employee when he has me doing almost the same thing. Can my dad run the business from Costa Rica according to the licensed information below? He say’s he is over “10 percent owner”. What would you do to convince your dad if he put you in my shoes? I apologize for asking you, if I asked my dad he will scream at me.

            Jimmy Carr Senior (Name adjusted to protect myself).

            Title RMO / CEO / PRES
            Association Date 05/20/1998
            Classification C39
            Title SOLE OWNER
            Classification C39 ROOFING
            Association Date 05/20/1996
            Disassociation Date 03/17/2001
            Title SOLE OWNER
            Classification HIC HOME IMPROVEMENT CERTIFICATION
            Association Date 10/12/1996
            Disassociation Date 01/01/2001
            Title RMO/CEO/PRES
            Classification C39 ROOFING
            Association Date 03/17/2001
            Disassociation Date 05/19/2010
            Title RMO
            Classification C39 ROOFING
            Association Date 05/19/2010
            Title RMO/CEO/PRES
            Classification D24 METAL
            Association Date 05/19/2006

          • Can you email your license number to me so that I can get a better idea of what your options are? contractorslicenseguru @ gmail.com

          • Jim Carrigan says:

            Yes, I will! Thank you!

  3. Can be RMO for two different companies?

    • Yes, a qualifier can be an RMO for up two three corporate or LLC licenses in any one year period. The qualifier must show at least 20% ownership on the license application.

  4. chris manning says:

    What is a good price to ask for being an rmo a company?

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