AB 2237: Contractor Licensing Law & Its Impact on HOA Managers

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hoa_construction_manager.jpg*New Legislation

AB 2237 was passed in 2012 by the California Legislature to expand the legal requirements for the “contractors” who are required to have a General Contractor’s “B” license from the State of California.

The “contractors” who must be licensed are defined in Cal. Business and Professions Code Section 7026.1(b)(1). They include “[a]ny person, consultant to an owner-builder, firm, association, organization, partnership, business trust, corporation, or company, who or which undertakes, offers to undertake, purports to undertake, purports to have the capacity to undertake, or submits a bid to construct any building or home improvement project, or part thereof.” (Emphasis added.)

AB 2237 expands upon this definition by adding subsection (2) to Section 7026.1(b). Subsection (2) states that a “consultant” includes a person who either: (A) “Provides or oversees a bid for a construction project,” or (B) “Arranges for and sets up work schedules for contractors and subcontractors and maintains oversight of a construction project.” This language has spawned questions from community association/HOA managers who are concerned that, as a result of AB 2237, they may now be required to hold a license in order to perform common tasks such as obtaining bids and overseeing the progress of ongoing construction work.

A careful reading of Section 7026.1 and the legislative intent behind AB 2237 reveals that the answer to that question is generally “no.” …

The new subsection (2) further defines what constitutes a “consultant.” It does not, however, alter or eliminate the initial requirement that the consultant also be a “contractor” within the meaning of that Section. A contractor is someone “who or which undertakes, offers to undertake, purports to undertake, purports to have the capacity to undertake, or submits a bid to construct any building or home improvement project, or part thereof.” AB 2237 therefore did not create a new class of persons (e.g., “consultants” who do not actually perform or offer to perform the work) who must now be licensed.

This is supported by the legislative intent behind AB 2237. The Contractors State License Board (CSLB) sponsored the bill. The CSLB stated that the purpose of the bill is to serve as a “valuable consumer protection measure” meant to address situations where “people who don’t have a state contractor license call themselves construction consultants and encourage property owners to take on home improvement projects as the owner-builder. The so-called consultant collects a fee and many times leaves the homeowners with all of the project responsibility and liability. …[AB2237] will clearly define when someone is a contractor and discourage unscrupulous individuals from working under a fraudulently obtained owner-builder permit.” CSLB Press Release – 12/31/12.

AB 2237 is thus intended to address situations where a person acts in the function of a contractor (i.e., performing part of the work or providing labor/materials) and seeks to evade California’s licensing requirements by classifying himself as a “consultant to an owner-builder” that is merely collecting a “consulting fee.” It is not intended to regulate persons (i.e. community managers) who merely obtain bids or oversee the progress of construction work.

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Community managers and HOA Boards should be careful to avoid situations where the manager or Board proposes to or undertakes a portion of the work or all of it. In those situations, compliance with California’s contractor licensing requirements would be necessary.