The California Court of Appeal has once again demonstrated that an unlicensed contractor is taking a significant financial risk, even if the contractor’s customer is fully aware of the lack of license. In Alatriste v. Cesar’s Exterior Designs, Inc., the California Court of Appeal rejected an attempt to assert defenses against the application of California Business and Professions Code section 7031(b). That statute provides that anyone using the services of an unlicensed contractor is entitled to recover all compensation paid to the contractor. That Alatriste court held that the statute applied even if the customer entered the transaction with full knowledge of the contractor’s lack of license. Further, the Alatriste court held that the unlicensed contractor’s obligation to provide a refund was not limited to payments for services, but also applied to payments materials.
In Alatriste, a homeowner hired a landscape contractor whom the owner knew to be unlicensed. The contractor was in the process of obtaining a license. When a dispute arose regarding the quality of the work, the homeowner sued to recover all amounts previously paid to the contractor. The contractor attempted to raise several defenses, all of which were rejected by the court. For example, the court held that the homeowner’s knowledge was irrelevant. Additionally, the court held that it did not matter whether some of the payments were for materials that were incorporated into the homeowner’s property. As a result, the contractor was obligated to repay all amounts received from the homeowner.