📋 Overview: Contractor Fraud in California

Contractor fraud is a pervasive problem in California, costing homeowners billions of dollars annually. Whether you've been victimized by an unlicensed contractor, abandoned mid-project, or stuck with shoddy workmanship, California law provides multiple avenues to recover your losses.

Common Types of Contractor Fraud

Unlicensed Contracting

Performing work requiring a license without holding a valid CSLB contractor's license

Abandonment

Taking payment then disappearing without completing the agreed work

Excessive Down Payments

Demanding more than 10% down or $1,000 (whichever is less) in violation of the Home Improvement Act

Substandard Work

Work that doesn't meet building codes, industry standards, or contract specifications

Contract Violations

Missing required contract elements, failure to provide 3-day right to cancel, improper change orders

Bait and Switch

Quoting low price then demanding much more once work begins or homeowner is invested

California's Contractor Licensing System

California requires contractors to be licensed by the Contractors State License Board (CSLB) for any project over $500. This system protects consumers through:

  • Licensing requirements - Contractors must pass exams, demonstrate experience, and maintain insurance
  • Contractor bonds - Licensed contractors must maintain a $25,000 bond that consumers can claim against
  • Disciplinary authority - CSLB can suspend or revoke licenses for violations
  • Consumer recovery fund - If bond is insufficient, consumers may recover from the state fund

Unlicensed Contractors Cannot Sue You

Under Business & Professions Code Section 7031, an unlicensed contractor cannot sue to collect payment for their work. If you paid an unlicensed contractor, you may be entitled to recover all money paid - not just damages for defective work, but the entire contract amount.

Check License Status First

Before sending your demand, check the contractor's license status at the CSLB website (cslb.ca.gov) or call (800) 321-CSLB. An unlicensed or improperly licensed contractor dramatically strengthens your claim and available remedies.

✅ Elements to Prove

Different claims require different elements. Here are the key elements for common contractor fraud claims:

Claim Against Unlicensed Contractor (B&P 7031)

1. Work Required a License

The work performed required a contractor's license (projects over $500 for most trades)

2. Contractor Was Unlicensed

Contractor did not hold a valid, active California contractor's license at all times during the project

3. You Paid Compensation

You paid money to the contractor for the work performed

Remedy: Return of ALL compensation paid, regardless of whether work was satisfactory.

Breach of Contract

1. Valid Contract

A contract existed between you and the contractor (written or oral)

2. Your Performance

You performed your obligations (typically making agreed payments)

3. Contractor's Breach

Contractor failed to perform as promised (abandonment, delays, defective work)

4. Resulting Damages

You suffered monetary harm as a result of the breach

Fraud/Intentional Misrepresentation

1. False Representation

Contractor made false statements (about qualifications, scope, timeline, price, licensing)

2. Knowledge of Falsity

Contractor knew the statements were false when made

3. Intent to Induce

Statements were made to induce you to hire the contractor

4. Justifiable Reliance

You reasonably relied on the false statements

5. Resulting Damages

You suffered harm because of your reliance

Home Improvement Act Violations (B&P 7159)

The contractor violated the Act if they:

  • Failed to provide a written contract for work over $500
  • Contract missing required provisions (contractor info, scope, price, timeline, etc.)
  • Collected down payment exceeding 10% of contract price or $1,000
  • Failed to provide 3-day cancellation notice for home solicitation sales
  • Used false or misleading advertising
  • Made material deviations from contract without proper change orders

Document Everything

Take photos/videos before, during, and after work. Save all contracts, invoices, receipts, texts, and emails. Get written estimates from other contractors to document repair costs. This evidence is crucial for proving your claim.

💰 Damages & Penalties

Contractor fraud claims can result in significant recoveries, especially when the contractor was unlicensed.

Damage Type Description
Return of All Payments (Unlicensed) Under B&P 7031, recover ALL money paid to unlicensed contractor - regardless of work quality
Cost of Completion Cost to hire another contractor to complete abandoned or unfinished work
Cost of Repair Cost to fix defective or substandard workmanship
Overpayment Difference between what you paid and value of work received
Consequential Damages Additional losses caused by breach (water damage, temporary housing, lost rent)
Punitive Damages For fraud or malicious conduct - potentially multiple times actual damages
Attorney Fees Recoverable under CLRA and often under contract provisions
Bond Claim Up to $25,000 from contractor's surety bond

Sample Damages Calculation

Example: Abandoned Kitchen Remodel by Unlicensed Contractor

Homeowner paid $35,000 for kitchen remodel. Contractor completed demolition and some framing, then disappeared. Investigation revealed contractor's license was expired (unlicensed).

Total paid to contractor $35,000
Recovery under B&P 7031 (all payments to unlicensed contractor) $35,000
Cost to complete project (new licensed contractor) $42,000
Value of work completed by original contractor -$8,000
Net completion cost above original contract $34,000
Temporary kitchen rental $2,400
POTENTIAL TOTAL RECOVERY $71,400+

*Note: Under B&P 7031, homeowner recovers $35,000 (all payments) PLUS may also recover costs to complete. Punitive damages possible if fraud proven.

Contractor Bond as Fast Recovery

Filing a claim against the contractor's surety bond can provide faster recovery than litigation. Licensed contractors must maintain a $25,000 bond. The bond company often pays valid claims within weeks. Get bond information from CSLB license lookup.

📂 Evidence Checklist

Gather the following documentation to support your contractor fraud claim:

License Verification

CSLB license lookup printout showing contractor's license status, history, and any disciplinary actions

Contract Documents

Written contract, proposals, estimates, change orders, invoices, payment receipts

Payment Records

Canceled checks, credit card statements, bank transfers, cash receipts - all payments made

Communications

Emails, texts, voicemails, letters with contractor documenting promises, problems, and disputes

Photos/Videos

Before, during, and after photos showing work progress, defects, damage, abandonment

Inspection Reports

City/county building inspection reports, failed inspections, code violation notices

Repair Estimates

Written estimates from other licensed contractors to repair or complete the work

Expert Opinions

Building inspector, engineer, or trade expert reports documenting defective work

Get CSLB Records

Request the contractor's complete CSLB file. It may contain prior complaints, disciplinary actions, and bond information. This can support your claim and reveal a pattern of misconduct. File a Public Records Act request if needed.

📝 Sample Demand Language

Use these paragraphs as building blocks for your contractor fraud demand letter.

Opening - Contractor Fraud Claim
I am writing to demand full reimbursement of all amounts paid to you for the [DESCRIBE PROJECT - e.g., "kitchen remodel," "roof replacement," "room addition"] at my property located at [ADDRESS]. Your failure to [complete the project / perform work meeting industry standards / maintain proper licensing] constitutes breach of contract, fraud, and violations of California's Contractors State License Law. This letter also serves as the 30-day notice required under California Civil Code Section 1782 (CLRA) before initiating legal action.
Unlicensed Contractor Claim
Investigation with the Contractors State License Board reveals that you [were not licensed / held an expired license / were not properly licensed for this type of work] during the performance of work at my property. Under California Business & Professions Code Section 7031(b), a person who utilizes the services of an unlicensed contractor may recover all compensation paid to the contractor for the performance of any act or contract. Accordingly, I am entitled to recover the full $[TOTAL AMOUNT PAID] paid to you, regardless of any value you may claim to have provided.
Abandonment
On [DATE], you ceased work on the project without notice and have failed to return despite my repeated attempts to contact you on [DATES OF CONTACT ATTEMPTS]. The project remains approximately [PERCENTAGE] complete. I have paid you $[AMOUNT PAID] of the $[CONTRACT PRICE] contract price. Your abandonment constitutes breach of our contract and, if intentional, may constitute theft by false pretenses under California Penal Code Section 484. I have obtained estimates from [NUMBER] licensed contractors to complete the work, averaging $[AMOUNT].
Substandard/Defective Work
The work you performed fails to meet the standards required by our contract, applicable building codes, and accepted industry practices. Specifically, the following defects exist: [LIST SPECIFIC DEFECTS - e.g., "roof leaks at multiple points," "electrical work fails inspection," "plumbing not to code," "cabinet installation is uneven and improperly secured"]. These defects were confirmed by [city building inspector / licensed contractor / structural engineer] in a report dated [DATE]. The estimated cost to repair these defects is $[AMOUNT] based on estimates from licensed contractors.
Home Improvement Act Violations
Your conduct violates California's Home Improvement Act (Business & Professions Code Sections 7150-7168) in the following ways: [SELECT APPLICABLE: (1) You demanded a down payment of $X, exceeding the statutory limit of 10% of contract price or $1,000; (2) The contract failed to include required provisions under B&P 7159; (3) You failed to provide the required 3-day right to cancel notice; (4) You made material deviations from the contract without proper written change orders.] These violations support my claims and may result in disciplinary action against your contractor's license.
Demand and Consequences
I demand that you pay the sum of $[TOTAL DEMAND AMOUNT] within 30 days of receipt of this letter. This amount represents [ITEMIZE: return of payments / cost to complete / cost to repair / consequential damages]. If you fail to pay within 30 days, I will: (1) file a complaint with the Contractors State License Board seeking disciplinary action; (2) file a claim against your contractor's bond with [BONDING COMPANY NAME]; (3) pursue all legal remedies including actual damages, punitive damages, and attorney fees in California Superior Court; and (4) report this matter to local law enforcement for potential criminal prosecution.
Full Sample Demand Letter
[YOUR NAME]
[Your Address]
[City, CA ZIP]
[Your Email]
[Your Phone]

[DATE]

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED

[CONTRACTOR NAME]
[CONTRACTOR DBA if applicable]
[Address]
[City, State ZIP]

Re: Demand for Refund - Contractor Fraud
Project Address: [PROPERTY ADDRESS]
Contract Date: [DATE]
Contract Amount: $[AMOUNT]
Amount Paid: $[AMOUNT]
CSLB License #: [NUMBER or "UNLICENSED"]

Dear [CONTRACTOR NAME]:

This letter constitutes formal demand for reimbursement and serves as the 30-day notice required under California Civil Code Section 1782 (CLRA).

BACKGROUND

On [CONTRACT DATE], I entered into a contract with you to perform [DESCRIBE WORK] at my property located at [PROPERTY ADDRESS]. The contract price was $[AMOUNT]. I have paid you $[AMOUNT PAID] to date.

YOUR VIOLATIONS

[CHOOSE APPLICABLE PARAGRAPHS FROM ABOVE AND INSERT HERE - e.g., unlicensed status, abandonment, defective work, Home Improvement Act violations]

LEGAL BASIS

Your conduct violates:
- Business & Professions Code Section 7031 (unlicensed contracting)
- Business & Professions Code Section 7159 (Home Improvement Act)
- Business & Professions Code Section 17200 (Unfair Competition Law)
- Civil Code Section 1770 (CLRA - Consumer Legal Remedies Act)
- Civil Code Sections 1709-1710 (Fraud and Deceit)

DAMAGES

- Payments made to you: $[AMOUNT]
- Cost to complete/repair: $[AMOUNT]
- Consequential damages: $[AMOUNT]
- TOTAL: $[AMOUNT]

DEMAND

I demand payment of $[TOTAL] within 30 days.

If you fail to comply, I will:
1. File a complaint with CSLB
2. File a claim against your contractor's bond
3. Pursue civil litigation seeking all damages plus attorney fees
4. Report to local law enforcement

Contact me at [EMAIL/PHONE] to arrange payment or discuss resolution.

Sincerely,

_________________________
[YOUR NAME]

Enclosures:
- Copy of contract
- Payment records
- CSLB license lookup
- Photos of defective/incomplete work
- Repair estimates

cc: Contractors State License Board
cc: [BONDING COMPANY NAME]

📥 For Recipients: Responding to a Contractor Fraud Claim

If you're a contractor who has received a fraud demand letter, here's what you need to know.

Take This Seriously

Contractor fraud claims can result in: loss of your contractor's license, claims against your bond, civil judgments, criminal prosecution for unlicensed contracting or theft. Do not ignore this demand.

Immediate Steps

  1. Verify your license status - Check CSLB to confirm your license was active and properly classified for the entire project
  2. Review the contract - Confirm you have a written contract with all required Home Improvement Act provisions
  3. Gather documentation - Collect all contracts, change orders, invoices, photos, and communications
  4. Assess the claims - Evaluate whether the homeowner's complaints have merit
  5. Notify your insurance - Contact your general liability insurer about the claim
  6. Consult an attorney - Especially if unlicensed status is alleged or criminal charges are threatened

Response Options

Complete the Work

If project is incomplete, offer to finish with specific timeline. This may resolve the dispute and preserve your reputation.

Repair Defects

If work is defective, offer to make corrections at no additional cost. Document all repairs thoroughly.

Negotiate Settlement

If you can't complete or repair, negotiate a fair refund. A partial refund is better than litigation costs.

Dispute with Evidence

If claims are false, respond with documentation: photos of completed work, inspection approvals, signed change orders.

Common Defenses

  • Substantial compliance - Work was completed substantially as agreed, with only minor variations
  • Homeowner interference - Homeowner's actions prevented completion (denial of access, failure to pay, constant changes)
  • Approved changes - Changes were authorized by written change orders signed by homeowner
  • Payment dispute - Homeowner failed to make required progress payments, justifying work stoppage
  • Proper licensing - License was valid and properly classified at all times (provide CSLB records)

If You Were Unlicensed

Under B&P 7031, you cannot sue the homeowner to collect payment if you were unlicensed, AND the homeowner can recover all payments made to you. The "substantial compliance" doctrine does NOT apply to licensing - you must have been properly licensed at all times. Your best option is likely to negotiate a settlement, as litigation will likely go badly.

🚀 Next Steps

After sending your contractor fraud demand, here's what to expect and how to proceed.

Expected Timeline

Days 1-14

Contractor receives letter, reviews, potentially consults attorney or insurance

Days 14-30

Contractor should respond with payment, offer to repair/complete, or dispute

Days 30-60

If negotiating, continue discussions; if no response, proceed with enforcement

Day 31+

CLRA notice period expired - can file suit; file CSLB complaint; file bond claim

If They Agree to Resolution

  1. Get it in writing - Written settlement agreement with specific terms
  2. Verify repairs - If agreeing to repairs, inspect work and get inspection approval
  3. Retain records - Keep all documentation in case issues resurface
  4. Consider release scope - Only release claims once you're satisfied; reserve unknown defects

If They Refuse or Don't Respond

  1. File CSLB Complaint - Report to Contractors State License Board for investigation and potential license action
  2. File Bond Claim - Submit claim to contractor's bonding company (up to $25,000)
  3. Small Claims Court - For claims up to $12,500 (no attorney needed)
  4. Superior Court - For larger claims or to recover attorney fees
  5. Report to DA - If fraud or unlicensed contracting, report to District Attorney for criminal prosecution

Need Legal Assistance?

Contractor fraud cases can be complex. Get a 30-minute strategy session to evaluate your claim and discuss your options with an attorney.

Book Consultation - $240/hr

California Resources

  • Contractors State License Board (CSLB): cslb.ca.gov | (800) 321-CSLB
  • CSLB License Lookup: cslb.ca.gov/OnlineServices/CheckLicenseII/
  • File CSLB Complaint: cslb.ca.gov/Consumers/FilingAComplaint/
  • CA Attorney General: oag.ca.gov/consumers
  • CA Courts Self-Help: courts.ca.gov/selfhelp

Contact Information

For legal assistance with your California contractor fraud claim, contact:
Email: owner@terms.law
Consultation Rate: $240/hour
Flat Fee Demand Letter: $450
Book Online: calendly.com/sergei-tokmakov/30-minute-zoom-meeting