Contractors: unlicensed work.

Senator Umberg's contractor licensing reform measure creates distinct enforcement frameworks for residential and commercial construction projects, modifying how California courts handle payment disputes involving unlicensed contractors. The legislation separates private residential projects of 25 units or fewer from larger residential, commercial and public works construction.

For residential projects with 25 or fewer units, the bill maintains existing prohibitions on unlicensed contractors recovering payment and allows property owners to recoup all compensation paid to unlicensed contractors. In larger residential, commercial and public construction, courts must block compensation only for periods when a contractor lacked proper licensing. When a license lapses solely due to administrative issues like late renewal fees, the contractor's payment forfeiture is capped at either actual damages or $10,000 per day.

The measure also modifies rules around security interests taken to guarantee contractor payment. For small residential projects, these remain entirely unenforceable if the contractor was unlicensed at any point. For other construction types, security interests become unenforceable only during specific periods of unlicensed status. The bill preserves existing provisions allowing courts to find "substantial compliance" with licensing requirements when contractors previously held valid licenses, acted in good faith to maintain them, and promptly addressed any lapses.