This year, the North Carolina Licensing Board for General Contractors adopted a new regulation known as 21 NCAC 12.0501, which requires all general contractors to include their license numbers on all contracts, advertisements, and websites.
At this point, the board feels that the common-knowledge definitions of “contract” and “website” are sufficient, but admits that further criteria need to be added when discussing advertisements. To address the “gray area” surrounding what is and is not considered advertising, the board has announced that a complete definition will be included in the next round of amendments.
Enforcement Is Soft…for Now
The board has made it clear to contractors that this new requirement will be “softly” enforced at the current time, but enforcement will become stricter in the future. In part, this relaxed enforcement is due to the lack of a complete definition for advertisements, but also due to the costs that will be incurred by general contractors to reach a level of compliance with all printed materials.
The recommended approach for compliance is to hand-write license numbers on pre-printed documents, including contracts, letterheads, business cards, banners, project signs, and other literature. In addition, placing stickers on vehicles that display a company name is recommended.
One critical aspect of this new regulation is that the Board for General Contractors is going to hold all employees of a general contractor to the same requirement of having license numbers on all documentation. This means that the employees can be held accountable if any documents, including their business cards, contracts, or advertising, do not include complete general contractor license numbers. In the past, only the general contractor was held responsible for compliance with the contracting guidelines, but now employees will also be held accountable.
How Contractor Licensing Helps Consumers
The North Carolina Licensing Board for General Contractors aims to provide protection to the general public when they are engaging the services of a general contractor. The licensing process was designed for the purpose of safeguarding life, health, and property, as well as public welfare. The guidelines must be followed by persons, firms, or corporations that enter into construction contracts in the State of North Carolina for projects costing in excess of $30,000 (per NC’s General Statutes § 87-1). Consumers now have the added peace of mind of knowing that all general contractors must meet minimum educational and experience backgrounds to be providing construction services in the state.
The licensure requirement for anyone performing construction for projects costing in excess of $30,000 is meant to protect consumers. The North Carolina Supreme Court has held that the statute requiring licensure is a protective statute and therefore anyone who contracts to erect a building costing more than the minimum sum specified in that statute may not recover against the owner for any breach of that contract. The net result of this finding by the North Carolina Supreme Court is that an unlicensed contractor who exceeds the statutorily defined maximum amount cannot enforce its contract with an owner and cannot force the owner to pay for the work performed, even if there are no construction defects.
In addition, these regulations protect consumers from working with less-than-qualified contractors who in the past would prey on unsuspecting clients. Prior to the licensing process, contractors were able to work under a variety of company names, assumed names, or as representatives of other companies. This allowed less-than-savory contractors to provide low-quality work, overcharge clients, and even take deposits and not return to complete the work. When word spread about their questionable business practices, the contractor would simply change the name of the so-called business or work under a different name. The requirement of a license has all but eliminated this practice.
Another benefit of contractor licensing is that consumers have an entity to consult in the event of poor-quality workmanship, uncompleted projects, or a warranty issue. Contractors cannot disappear as they could in the past. The board maintains current contact records for contractors and is willing to assist consumers when there is an issue contacting a contractor who previously completed work or who has not completed a project.
How the New Regulation Helps Consumers
Having general contractor license numbers on all documents is an added effort to protect the general public from fraud or other contractor scams. There is no punishment for a consumer who fails to look for a contractor’s license, other than working with a non-licensed contractor. However, it does preclude the consumer from being able to use the beneficial services offered by the Board for Contractors, such as inspections, claims against the contractor, and the Homeowners Recovery Fund.
Responsibility for compliance rests with each general contractor and all of its employees. Though enforcement is in the early stages, the penalties will become greater as the board issues a full definition of advertising material and allows a reasonable amount of time for contractors to comply. This amendment is worthwhile and will benefit every consumer who is working with a general contractor in North Carolina.
Have questions about construction defects? Please call our North Carolina construction litigation attorneys at Rhine Law Firm, P.C., at (910) 501-2474. We advocate for consumers and homeowners’ associations who need assistance with construction-related issues.