If January is any indication, 2017 should be a banner year for homebuilding in Minnesota! If you are one of homeowners looking to hire a contractor this year for a new construction project, make sure to take steps to protect yourself by doing your due diligence, including hiring a licensed contractor.
The Minnesota Department of Labor and Industry (DLI) is the state agency responsible for licensing Residential Building Contractors, Residential Remodeling Contractors, roofers, electrical contractors, and plumbers. In addition to issuing licenses, DLI also fields complaints regarding licensees, can initiate disciplinary proceedings, and can impose civil penalties. When selecting a contractor, a homeowner should check the contractor’s license status with DLI. Homeowners should strongly consider only retaining a licensed contractor in good standing. By choosing a licensed contractor, the homeowner will get the benefit of the DLI licensee requirements – for instance, that the qualifying person for the licensed contractor passed an examination and will take continuing education courses, and that the contractor carries liability and property insurance.
Perhaps the most important reason to hire a licensed contractor, however, is so the homeowner has opportunity to have access to the Contractor Recovery Fund should the occasion arise for it. The Contractor Recovery Fund is a fund administered by the State of Minnesota, and was established to, among other things, compensate homeowners who have obtained final judgments on the “grounds of fraudulent, deceptive, or dishonest practices, conversion of funds, or failure of performance that arose directly out of a contract” with a licensee, and for who no other source of recovery is available. Minn. Stat. § 326B.89.Only homeowners who have claims against a licensed contractor have the right to make a claim with the Contractor Recovery Fund. While there are limitations to pursuing a claim with the Contractor Recovery Fund, sometimes it is the only source of recovery available for a homeowner.
While there are certain limited conditions under which a contractor does not have to be licensed to lawfully perform work, the benefits of the licensing statutes and the important protections they provide for homeowners are significant. By performing due diligence at the start of the project to ensure that the selected contractor is licensed and in good standing, a homeowner will help lock those protections into place.