When do I need a licensed contractor?
In this article, we will use Virginia as the basis for discussing licensure as it has some of the most stringent regulations in the country.
The licensure for the state of Virginia is governed by Virginia Code Section 54.1, Subtitle II, Chapter 11 (click here for the online version of the code).
The licensure of contractors is managed by the Department of Professional and Occupational Regulation (DPOR).
In the State of Virginia, you must hire a licensed contractor if the value of the work is valued over $1,000. To show how varied this requirement is, in the state of North Carolina, this floor is $30,000.
There are a few exemptions, which primarily allows work on federal and state projects, if you are working on your own property or if you are building out a leased space for your own use. (click here for the full list of exemptions).
There are two parts to licensing in Virginia: the dollar value of the work and the type of work.
The License Value as Defined by Class
The dollar value of the work a contractor can take is defined as a Class A, Class B and a Class C contractor. A Class A contractor has no limit on the value of the contract that they can take on. A Class B contractor is limited to a one-time contract value of $70,000 and they cannot perform more than $500,000 in a single year. A Class C contractor is limited to a one-time contract value of $7,500 and they cannot perform more than $150,000 in a single year.
Before a contractor can even apply for the type of work they want to perform (i.e., general contractor, plumber, electrician), they apply to DPOR for the Class of contracts they can perform. DPOR strictly audits contractors and ensures they have the financial capacity and experience necessary to handle these size of projects. Once they receive their Class, they then apply for Type.
The License Type - General and Specific
There are essentially two variations of Type: General and Specialized.
A General license allows a contractor to perform most work that does not require a specialized trade such as plumbing, gas fitting or air conditioning. The work that can be performed with the General type would be basic remodeling, concrete installation or roof installation. If a general contractor is putting in a new bathroom in an existing building, he will have to hire a licensed plumber to install the plumbing and that licensed plumber will have to pull a separate permit just for their scope of work.
Under the general license, you will need to ensure that they are licensed as either a residential contractor (which has the acronym of RBC – Residential Building Contractor) or a commercial contractor (which has the acronym of CBC – Commercial Building Contractor). A contractor can have both a CBC and an RBC license. Not only can an RBC contractor not pull a permit for a commercial project, there are benefits to homeowners to using an RBC contractor.
If an RBC contractor receives payment for a project and never performs, there is an insurance claim the homeowner can make with the state of Virginia for compensation through the Contractor Transaction Recovery Fund (click here for details on making a claim). If a homeowner gives money to a contractor who does not have a license with the RBC designation, they lose this protection. There is no such protection for commercial owners.
Specialized licenses are for works that require specialize training such as plumbing, electrical, air conditioning (HVAC), asbestos removal and gas fitting. Some of this work can be performed without a license, for instance, if plumbing lines are being replaced or moved within five feet of their previous location, they can be performed without a license.
It’s always a good idea to use a licensed contractor if you want to pay someone to do the work even if you technically do not need to. A licensed contractor has been vetted by the State and face civil and criminal penalties which an unlicensed contractor will not if there are issues with your build.
Always verify the license information which can almost always be done online. In Virginia, it is very easy to look up a license by going here.