Legal Considerations Before Hiring Contractors

Hiring a general contractor involves establishing a formal business relationship. Homeowners often treat the screening process like a job interview, checking only references and viewing portfolios. While these checks are helpful, you must conduct legal due diligence before signing a contract.

In California, structural disputes and mechanic's lien claims can be prevented entirely by performing critical entity checks.

1. Audit corporate standing

If the contracting business operates as an LLC or Corporation, navigate to the California Secretary of State (SOS) Bizfile search. Search the business entity name. The entity status must show "Active" or "Good Standing." If the business status is listed as "Suspended" or "Forfeited," they are legally prohibited from conducting business transactions or signing contracts in California.

2. Verify General Liability Coverage Limits

Although the CSLB tracks bonding requirements, they do not require general contractors to carry General Liability Insurance (unless they are registered as an LLC). Insist on receiving a **Certificate of Insurance (COI)** naming you as an additional insured. Contact the insurance agency listed on the certificate directly to confirm the policy is active and the coverage limit matches (typically $1,000,000 per occurrence).

"Never accept a photocopied certificate of liability insurance. Request that the contractor's insurance broker emails the document directly to you."

3. Check for Outstanding CSLB Judgments

Run the CSLB license search. In the detail section, look for any outstanding CSLB disciplinary actions, arbitration citations, or civil judgments. A history of unresolved disputes is a significant indicator of potential project risk.