The construction industry represents one of the largest employers in the United States. Nationally, approximately 7.1 million people work in the various trades. ^{1 Most states regulate the industry through contractor licensing laws designed to promote public confidence and trust in the competency and integrity of licensees and to protect the health, safety, and welfare of the public. Although most contractors comply with the applicable laws and perform valuable services, a small minority work as unlicensed contractors, performing substandard work, providing no warranties, subjecting homeowners to civil liability, and ignoring state and municipal licensing requirements. Many unlicensed contractors cannot meet the various licensing specifications, which entail passing a trade test, providing dependable references, and establishing sufficient financial responsibility to engage in the construction business. Other such unlicensed contractors may be employees of licensed contractors working side jobs and unable to guarantee their work when problems develop. In these circumstances, the contracts often are verbal with little or no paper trail, and payments are made in cash. The unlicensed contractor’s paperwork usually displays a cell phone number and a mail drop for an address. Further, homeowners may not know the individual’s last name.}

^{The Problem}

^{Contracting without a license is an administrative or criminal violation in states that license contractors. Aside from the various state licensing requirements, many municipalities also require some form of business registration and impose administrative or criminal penalties for noncompliance.}

 

^{People who use the services of unlicensed contractors expose themselves to civil liability under their homeowners’ policies if contractors or their employees are injured on the job. Moreover, homeowners have little recourse if the work is not performed properly except to sue the unlicensed contractor civilly and hope that they can locate some assets. Several states have enacted legislation that voids a contract if the contractor is not properly licensed, thereby releasing the homeowner from the obligation to pay for faulty services. However, this does not stop the unlicensed contractor from placing an illegal lien on the customer’s property. Many elderly homeowners are not aware that the lien is illegal. In these cases, the unlicensed contractor may pressure them to pay for the unlawful services, thereby continuing the fraud.Â} 

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• 1516801537-paper3.doc