I am evaluating bids for our new, custom home. Company 1’s bid is from a general crontrator that is listed by name as the Qualifier on the Contractor License (this is in Utah). Company 2’s bid (less expensive) is from a GC who’s company is doing business under a relatives Contractor License. The Qualifier listed on Company 2 Contractor License is a W2 employee of Company 2, and really isn’t involved in the work.
Assuming Company 2 can provide evidence of liability and worker’s compensation insurance, what risks do we run when Company 2 is essentially “borrowing” his relative’s contractor license? The cost difference is significant between the bids, so I just want to understand if there is any difference or additional risk in this situation. Appreciate any advice!
Tom
Replies
no such thing
There is no legal basis for "borrowing" a contractors license. The license holder is responsible for any contracts and/or permits established under their name. I'd say that makes the license holder "involved" even if you wish to believe otherwise. If you don't think so, then just wait an see who your attorney contacts when (and if) your building contract goes south. However, if the license holder is well aware of the responsiblity they are taking on and is willing to assure you, contractually, that they legally stand behind it, then I don't see a problem. They are free to delegate the responsiblity of executing their contractual responsiblities to whomever the parties consent to (for example: a subcontractor).
As you are evaluating your bids and associated risks, remember that you generally get what you pay for. You've identified a solid reason for a cost discrepency. Don't delude yourself into thinking this automatically represents value.
You might look into what it takes for one to "qualify" as a contractor in your state. Then simply ask the #2 guy why he can't qualify on his own. Or not... you may then choose to dis-qualify him all on your own.
The legalities involved are probably very complicated. You ought to seek advise on them elsewhere.
we dont know what contractor #2's situation is, why he doesnt carry a license, or why he needs a relative to pull the permit but this does or should bring up the question why?
It could be a legit reason why he doesnt have a license but the impression it puts out is that he is trying to short cut the system or that he can not meet the states requirements to be a home builder. why would you want someone like that to build your house? regardless of the price difference.
Beazer Homes
Lennar Homes
Rutneberg Homes
Hovnanian
D.R Horton
Pulte
Toll Brothers
Habitat for Humanity
All of these national builders have something in common, they all use Qualifying Contractors to meet local licensing requirements where ever they build. For many business people who aren't contractors hiring a Qualifier is the only way they can get into the construction business. There are probably as many home builders who use qualifiers as there are who qualify themselves. Nothing wrong with that at all and no reason to be suspicious without cause. Apply the same due dilligence to every builder you're considering and you'll be fine.