Kalb's Q & A For California Contractors

by David Kalb | September 28, 2010

The balance between a contractor's worksite and the surrounding community can sometimes become strained. Often it's because of noise created by the work. Can a contractor be fined by the CSLB when the decibels rise and tempers flare? Why should a responsible managing officer (RMO) always file to disassociate from the company when he leaves? One contractor offers us an example, and another, some basics on financial responsibility for RMO and RME qualifiers …

Q: Question – What are the legal hours of operation for a contractor to start banging around at the construction project next door to my house? Our local ordinance says 7:00, but I wondered if the CSLB lets them start earlier?

A: Local governments regulate noise ordinances, including those affecting a contractor's start time. To my knowledge, the CSLB has no rules or regulations addressing this issue.

Q: Can a Delaware corporation hold a California contractor's license?

A: Yes, corporations from any state can become licensed in California so long as the company registers as a “foreign corporation” with the secretary of state (SOS).

Q: If we wanted to change the name of our corporation, what would that entail concerning the CSLB? Could we just show the change with the SOS or would more paperwork be involved?

A: Once you amend a corporate name with the SOS, you must also officially change it with the CSLB. This involves filing an Application to Change Business Name.

Q: My company is closed and was dissolved in 2008. However, there are several outstanding disputes and small claims that have come up over the years. The RMO disassociated in October 2007. If we choose not to defend all these small claims, what are the chances that the RMO will have a black mark on his record with the CSLB? I'm assuming someone will file a complaint and possibly make a claim on the company's bond. We're not concerned with the company, but how does this affect the RMO's record?

A: If there were judgments prior to the date your RMO disassociated, this would have an impact on his license record. On the other hand, any judgments or bond claims after October 2007 will NOT likely cause any repercussions with the Contractors Board.

Q: I have a question regarding RME/RMO. I have a “C-10” license and somebody asked me to become a RME or RMO for his corporation. Please tell me if I'll have any financial liability in case something goes wrong with the business in the future. Also, is it my responsibility to apply for a bond or is the owner supposed to handle this? Thank you for your help, any advice is welcome,

A: I am often asked about potential “liability” for a RME or RMO. There is no way to give you a definitive response because a court, arbitrator or the CSLB would ultimately determine financial liability. What I can tell you is that a responsible managing officer (RMO) would potentially be more “financially liable.” If “something goes wrong with the business in the future,” a company officer would likely have some fiduciary responsibility. The responsible managing employee (RME), on the other hand, should have no control over financial matters and therefore is less likely to be held responsible.

It is usually up to the company to secure a bond for the RME or RMO. This $12,500 Bond of Qualifying Individual is only required if the RMO owns less than 10 percent of the company and is in addition to the contractor's bond.

As a highly mobile society, keeping in touch with everyone is often difficult. However, you should always remember to update your address with the CSLB or expect to pay a price. Another contractor discovers that while you may be forgiven, government computers never forget. I hear from a lot of people about getting their contractor's license, but you might be surprised at how many want to get off a license. How do you do that?

Q: The responsible managing officer (RMO) on our contractor's license is the company VP. He's leaving and our president would like to take everyone but himself off the license. How do we go about doing this? Please note the President is also a licensed contractor under his own name.

A: If removing the RMO, you'll need to file an Application to Replace The Qualifying Individual. To remove all other officers, the president should file an Application to Report Current Officers. Both forms are available from the CSLB.

Q: Our company moved our office location two months ago. We know the CSLB needs to be notified, but have we waited too long? What are the rules regarding this, and if we waited too long what will the Board do?

A: Because some official correspondence – like your renewal – is often NOT FORWARDED by the post office, it is advisable to inform the CSLB of any address change as soon as possible. However, since you're allowed to notify the CSLB within 90 days of any change in business address, you have not waited too long. This 90-day time period also applies to changes in business name and personnel (including the qualifying individual). Changes of this nature MUST be made in writing on a form prescribed by the registrar.

According to B&P Section 7083, a failure to notify the registrar of these changes within 90 days is grounds for disciplinary action. While the Board could issue a citation to someone who waits more than 90 days, it is unusual for them to do so.

Q: I filed my license application with the Contractors Board months ago. Yesterday I received a letter telling me I had lied on my application and have the option of withdrawing it. This has something to do with my fingerprints and a legal problem over 20 years ago. What do you think we should do?

A: As we discussed, even though you did not knowingly falsify the license application, the CSLB could take formal action against you. It does not matter that you forgot about the legal problem you had as a teenager. This letter isgiving you the option of withdrawing the application without any real penalty and re-applying with a truthful response to question No. 11 (criminal background). I suggest you accept the Board's offer. When reapplying, give the Board as much information as you can about your “youthful indiscretion 23 years ago.”

While the Board's disclosure requirements sound harsh, the fact remains that every applicant must divulge ANY and ALL criminal activities in their past. This includes that DUI 30 years ago, a fight in college or something more major. You must disclose this information even if – as in your case – all court records have been expunged.

Knowledge is power. Knowing where to go for the answers is half the battle.

Get expert assistance immediately when you e-mail, call, 916-443-0657 or email info@cutredtape.com , fax (916) 443-1908, or write me at Capitol Services, Inc., 1225 8th St. Ste. 580, Sacramento, CA 95814.