Contracting Without a License in California: Penalties and Enforcement

Contracting without a license in California is a misdemeanor punishable by up to $5,000 in fines and six months in county jail on a first offense, and the penalties climb sharply on later convictions. On top of the criminal side, an unlicensed contractor cannot sue to collect payment and can be forced to refund every dollar the customer already paid, even for work that was finished and satisfactory.

First-Offense Criminal Penalties

Business and Professions Code 7028 makes it a misdemeanor to act as a contractor without a valid license. A first conviction carries up to $5,000 in fines, up to six months in county jail, or both.¹ Prosecutors push harder when there is evidence of consumer harm or false advertising. Telling a homeowner you’re licensed when you aren’t turns a straightforward charge into something much more serious.

Using another person’s contractor license number is a separate offense under Business and Professions Code 7027.3 and can be filed as a felony, with potential prison time of up to three years.

Penalties for a Second or Third Conviction

The second and third tiers are meaningfully different from the first, and from each other.

On a second conviction, the court must impose a fine equal to 20 percent of the contract price or $5,000, whichever is greater. The default jail sentence is at least 90 days, and a judge can go below that only in unusual circumstances and must state the reasons on the record.¹

A third or subsequent conviction carries a fine between $5,000 and either $10,000 or 20 percent of the contract price, whichever is greater, plus a mandatory jail sentence of 90 days to one year. These penalties are cumulative with penalties under other California laws.¹

Anyone whose contractor license was previously revoked, and who was responsible for the acts that caused the revocation, faces the third-offense tier automatically on any charge after revocation.¹

Additional Charges Prosecutors Often Add

Unlicensed contracting rarely ends with a single charge when there is a dispute or a loss. If you took substantial payments for work you weren’t licensed to perform, prosecutors can add grand theft under Penal Code 487 when the amount exceeds $950.² Grand theft is a wobbler, which means it can be filed as either a misdemeanor or a felony depending on the facts.

Working in homes of people 65 or older adds another layer. Penal Code 368 covers financial crimes against elders. If the value taken exceeds $950, the offense becomes a wobbler with potential felony punishment of two, three, or four years in state prison and fines up to $10,000.³

Contracting without a license inside a declared state or federal disaster area can be charged as a felony, exposing the defendant to state prison time rather than county jail.⁴ Post-wildfire, post-earthquake, and post-flood work is where this comes up most often.

You Cannot Collect, and You May Have to Refund Everything

The financial consequences under Business and Professions Code 7031 are what tend to shock people the most. An unlicensed contractor cannot file a lawsuit to collect payment for work performed, no matter how well the job turned out. If the homeowner is satisfied with the finished project and simply refuses to pay the final installment, the contractor has no legal remedy.⁵

The property owner can also sue to recover every dollar already paid, even for completed work. A contractor who finished a $60,000 kitchen remodel can be ordered to return the full $60,000. California courts apply this rule consistently.⁵

Any security interest taken to guarantee payment is unenforceable if the contractor lacked a valid license during the project. A mechanic’s lien filed by an unlicensed contractor is worthless.⁵

There is one narrow exception. A court can find “substantial compliance” with the licensing requirement, but only if the contractor was previously licensed in California, acted in good faith to maintain that license, and moved quickly to fix the lapse once discovered. Someone who never held a California contractor license cannot use this defense at all.⁵ In practice, it protects a licensed contractor whose renewal was delayed, not someone who avoided getting licensed.

Unlicensed operators also face personal liability for defective or unsafe work. Most insurance carriers refuse to cover unlicensed contractors, so any judgment for property damage or injury comes out of personal assets. A single injury claim from a job site can easily exceed what the contractor earned on the project.

How the CSLB Catches Unlicensed Work

The Contractors State License Board investigates unlicensed activity through consumer complaints, undercover sting operations, and job-site inspections.⁶ The board coordinates with local law enforcement and district attorneys, and it has authority to issue stop-work orders on the spot.

When the CSLB issues a citation, the violation goes into a public database anyone can search. For someone who later wants to get licensed, a history of unlicensed work becomes a serious obstacle. Repeat or serious violations get referred to county prosecutors for criminal charges. Sting operations ramp up after natural disasters, when unlicensed operators tend to flood affected areas.

Work That Does Not Require a License

Not all construction work in California needs a license, but the exemptions are narrower than most people think.

Minor Work Under $1,000

As of January 1, 2025, Assembly Bill 2622 raised the minor work exemption from $500 to $1,000. A person can perform work without a contractor’s license if the total cost of labor, materials, and all other expenses is under $1,000. The work cannot require a building permit of any kind, and the person cannot hire anyone to help.⁷ If the job needs a permit or involves hired labor, a license is required no matter the price. Splitting a larger project into smaller pieces to stay under $1,000 is explicitly prohibited.⁸

Owner-Builder Work

Property owners can build or improve structures on their own land without a license under Business and Professions Code 7044. If the owner does all the work personally (or uses their own employees), the improvements are not intended for sale, and no subcontractors are involved, no license is required.⁹

An owner can also hire licensed subcontractors directly. For single-family homes, this allows the sale of up to four structures per calendar year. A homeowner improving their primary residence qualifies if they have lived there for at least 12 months before the work is completed and the work is done before any sale.⁹

Selling or offering a structure for sale within one year of completion creates a legal presumption that the project was built for sale, which defeats the exemption. Selling five or more structures within a year makes that presumption conclusive.⁹

Licensed architects and engineers working within the scope of their own professional license, government employees on public projects, and certain agricultural workers are also exempt.

Homeowners Take on Risk Too

People sometimes assume only the contractor is exposed. That is not how California works. Under Labor Code 2750.5, a worker performing services that require a contractor’s license is presumed to be an employee rather than an independent contractor if they don’t hold a valid license.¹⁰

If the unlicensed contractor or any of their workers is injured on the job, the homeowner can be treated as the employer for workers’ compensation purposes. California requires workers’ compensation coverage for anyone with even one employee.¹¹ A homeowner who never planned to be an employer can end up liable for medical bills, lost wages, and disability payments. Standard commercial general liability policies often exclude work done without proper licensing, and homeowner’s property insurance may deny claims tied to unpermitted or unlicensed construction.

1
California Legislative Information. California Business and Professions Code 7028
2
California Legislative Information. California Penal Code 487
3
California Legislative Information. California Penal Code 368
4
Contractors State License Board. Consequences of Contracting Without a License
5
California Legislative Information. California Business and Professions Code 7031
6
Contractors State License Board. Consumer Home Page
7
Contractors State License Board. License Requirement for Minor Work Increases from $500 to $1,000
8
Contractors State License Board. Before Applying for a License When No Exam is Required
9
California Legislative Information. California Business and Professions Code 7044
10
California Legislative Information. California Labor Code 2750.5
11
Contractors State License Board. Workers’ Compensation Requirements