What Contractors Need to Know About California CSLB Bond Requirements

iStock-1470161618 (1)

You may not know this, but the Contractors State License Board requires contractors to secure a bond prior to being awarded a license. In the event that any claims are filed against this bond, both the surety company and CSLB investigate independently of each other.

Bonds must accurately represent what’s on file with CSLB, with matching business name and license number as required for licensing purposes. The disciplinary bond amount will be decided by the Registrar, but that’s just the tip of the iceberg on what you’ll need to know about these important documents.

Qualifications

Whoever operates or plans to become a licensed contractor in California must secure and maintain a contractor license bond. A bond serves as a legal contract guaranteeing compliance with state laws and regulations as set out in California Business & Professions Code or face financial losses due to payout of their bond. Consumer damages caused by licensed contractors will also be protected through this bonding mechanism.

Bonds are required by CSLB as part of its licensing process, with applicants for licensure having to submit an application, license fee and bond as part of their application. To meet CSLB regulations, a surety bond must be written on an approved form by the Attorney General’s office and signed off by an attorney-in-fact of a surety company that matches what’s on file with them. Plus, they must arrive at its headquarters within 90 days from its effective date.

Failing to post the necessary bonds before applying for a license can result in penalties and license suspension by CSLB, who also uses these amounts as an indicator that specific contractors may need more oversight or monitoring.

Apart from bond requirements, licensed contractors must fulfill specific experience and education criteria in order to be eligible for licensure in their chosen trade. For instance, those aspiring to become home improvement contractors must possess experience within that trade and pass an exam; those interested in becoming specialty trade contractors must have similar experiences within five years as they apply and pass an exam as well.

Additionally, all contractors must provide their current employer for verification purposes. The person must hold either RME or RMO status within the last five years and be an individual who can vouch for their reliability as an RME or RMO.

Fees

The California State Licensing Board levies several fees associated with license applications, examinations and other services provided by them. Most notable among them is an original application fee for each trade type which must be paid in order to have your application considered for review by them. Additional classification fees will also be assessed depending on your trade selections on your application form.

Once your application has been posted by the CSLB (https://www.cslb.ca.gov/), they will send instructions on how to submit fingerprints within their specified deadlines. Missing your submission deadline could delay your license application by several weeks or months and even cause it to become null and void so that reapplying may become necessary.

As part of their application to be licensed by the CSLB, applicants are also required to secure a $25,000 contractor license bond as financial guarantees of compliance with state laws and consumer protection from contracting misconduct. The cost of this bond depends on a contractor applicant’s individual credit score and record as an independent contractor, with those with stronger scores paying lower rates than those with limited or challenged credit records.

iStock-1463759443 (1)

Forms

Contractor bonds provide contractors with an effective means to fulfill contractual agreements with their clients while remaining compliant with licensing regulations. Contractors seeking CSLB license should remain knowledgeable regarding all of the forms related to obtaining, maintaining and filing these bonds.

Step one in securing a California contractor bond involves paying the premium, which typically depends on how much is requested. After making this payment, a bonding company will issue a certificate which should then be filed with CSLB.

Contractors must file an annual report with CSLB that details their business activities for which they have been licensed, within 30 days after each calendar year ends. The report requires certain information, such as their company name and CSLB license number as well as officers, directors, employees and agents who work within their organization.

Maintaining a contractor license requires proof of workers’ compensation insurance for each employee, using this form an insurer can submit this data directly into the CSLB system and meet requirements without incurring penalty fees for late submission of this document.

Requirements

Contractor license surety bonds provide clients with protection against damages caused by unlicensed work or violations of California State Contractors’ Law, with – as you can read here – costs typically ranging between $102 and $450 annually, depending on factors like credit score and other considerations. Unlike an insurance policy which will pay out claims on your behalf, with surety companies holding you liable if money is dispersed through claims.

Unused or expired bonds are considered delinquent and could lead to the California Solicitor General Board taking disciplinary action. Therefore, renewing them before your license and bond expire is key in order to avoid such action from being taken against you by CSLB. They should send a renewal application approximately 60 days before both expire; if this doesn’t arrive then reach out to either your Surety Company or CSLB directly for more help obtaining one.

Applicants seeking to obtain a bond must provide the CSLB with their license number or application fee number, their approved trade, and job code associated with their specific job application. Depending on their license classification they may also need to submit financial and business data.

LEAVE A REPLY

Please enter your comment!
Please enter your name here