Are California Community Managers Required to have a Contractor's License?

By Tyler Berding and Julia Hunting

Legislative Update!

The Governor of California has signed SB 822 which clarifies AB 2237, discussed below, and confirms the legislative intent that Community Managers are not required to have a contractor's license in the course of their regular duties. SB 822 amends California B&P Code Section 7026.1 to add the following section: 

(b) The term “contractor” or “consultant” does not include a common interest development manager, as defined in Section 11501, and a common interest development manager is not required to have a contractor's license when performing management services, as defined in subdivision (d) of Section 11500.

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                 The blogosphere has been burning up lately over a new California law that some commentators say might require community association managers to have a General Contractor’s license to perform their jobs.  Since property managers can be said to “oversee” bids for construction projects it has been suggested that they might fall within the expanded definition of “consultant” which was added to the basic contractor’s licensing statute by Assembly Bill 2237.[1]                           

               

                California Business and Professions Code Section 7026.1(b)(1) defines who must have a General Contractor’s “B” license as follows: 

                                                                         

                “Any person, consultant to an owner-builder, firm, association, organization, partnership, business trust, corporation, or company, who or which undertakes, offers to undertake, purports to undertake, purports to have the capacity to undertake, or submits a bid to construct any building or home improvement project, or part thereof.” 

          

                AB 2237 added subsection (2) which states that a “consultant” is someone who: (A) Provides or oversees a bid for a construction project; or (B) Arranges for and sets up work schedules for contractors and subcontractors and maintains oversight of a construction project.” 

                Question: “These sound like tasks that a community manager might perform for their client associations during construction projects so why don’t they need to be licensed under the new law?”

                Answer: The new subsection modifies 7026.1(b)(1) by adding a further definition of “consultant,”[2] but it does not remove or change the other qualifying language in that same section which defines a “contractor” as someone offering to construct a building or part of a building.

                The Legislature did not create a new category of person who must be licensed—i.e. a “consultant” who does not actually perform the work. To require a license, a “consultant” (like the other categories of persons or entities who must be licensed) must still be someone “…who or which undertakes, offers to undertake, purports to undertake, purports to have the capacity to undertake, or submits a bid to construct any building or home improvement project, or part thereof.” A licensee cannot be either a “consultant” or someone who performs or proposes to perform work. Under this statute a “contractor” must still be both. AB2237 did not change that.

                This conclusion is supported by the legislative history of AB 2237.  The text of the amendment was originally located in its own subdivision under Section 7026.1 and it applied to all “persons.”  The legislature then relocated the amendment under subdivision (b) as 7026.1(b) (2).  It also eliminated the amendment’s application to all “persons” and made it instead a modifier of the term “consultant” within subdivision (b).  This change is noteworthy – before a “consultant” is deemed a “contractor” under subsections 7026.1(b) (1) and (2), it must first be either undertaking, offering to undertake, or submitting a bid to do the work.  Consultants who merely provide or oversee a bid, or schedule or oversee a construction project without also building it or contracting directly with others to build it, aren’t “contractors” under 7026.1(b) and do not need to be licensed.  

                The California Contractors State License Board was the sponsor of the bill and describes its purpose as follows: “‘AB 2237 is a valuable consumer protection measure and will place project responsibility where it belongs,’ said CSLB Registrar Steve Sands. ‘All too often, people who don’t have a state contractor license call themselves construction consultants and encourage property owners to take on a home improvement project as the owner-builder. The so-called consultant collects a fee and many times leaves the homeowners with all of the project responsibility and liability.

                Owner-builders that employ workers must be registered as an employer with the EDD Employment Development Department and must have protective measures in place for workers, including workers’ compensation insurance in the event of an onsite injury. The homeowner becomes responsible for all phases of a project and its integrity, including pulling project permits, requesting inspections, and making sure local and state building codes are met. The new law will clearly define when someone is a contractor and discourage unscrupulous individuals from working under a fraudulently obtained owner-builder permit.’”[3]

                The scenario that CSLB addresses with AB 2237 is the case where a person tries to circumvent the license requirements by calling himself a consultant to an owner-builder, when in fact he or she is behaving like a contractor.  I.e., he still submits a bid to perform certain work, and then provides the labor and materials in return for a “fee.”  The purpose of the statute is to make sure that the persons furnishing labor (i.e., employing workers or otherwise doing the actual work) have “protective measures” like proper insurance and performance bonds in place.  AB 2237 intends to regulate those submitting bids and performing the actual work, rather than those who merely oversee or manage it.

                If the Legislature intended to create a new category of  licensed contractor—one who “oversees” construction, but does not perform or propose to perform a work of construction—something  like the original version of the bill would have been adopted instead of the very narrow amendment that we have. So, unless the community manager or his or her company was performing, or offering to perform a work of construction, they do not need a contractor’s license[4]. This same analysis applies to construction managers hired by community associations. They do not need to have a General Contractor’s license unless they propose to or undertake to do the actual work or some part of it.[5]

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[1] AB 2237 is codified as California Business and Professions Code Section 7026.1 (b)(2)

[2] The word “consultant” as used in the statute refers to and modifies the phrase, “consultant to an owner-builder” found in Section 7026.1(b)(1)

[3] Contractors State License Board, Press Release 12/31/2012.

[4] The California Contractors State License Board (CSLB) has stated that community associations are considered exempt from the contractor’s license statute pursuant to California Business and Professions Code Section 7044 which exempts “owners” and their employees from all licensing requirements. The CSLB recognizes that a community association acts on behalf of the owners as to certain components of the project, is delegated certain maintenance and repair obligations that would normally fall to individual owners, and therefore is exempt. This exemption would include managers or executive directors who are true “employees,” working for wages or salary. As to them, the licensing statute does not apply even if they were performing in the role of a “contractor.”  

[5] It may have been the original intent of the legislature to require that construction managers be licensed. Language to this effect was found in the original version of the bill. But those provisions were expressly deleted when the last version was passed.