Contractors: unlicensed work.

The list of exempt project types in both subdivision (a)(2)(B) and (b)(2) was expanded from a single category (public work of improvement) to five categories: public works of improvement, commercial construction projects, institutional construction projects, common interest developments (as defined in Civil Code Section 4100), and multifamily residential projects of four or more units where no tenant or resident is a party to the contract.

Subdivision (b)(2) was restructured. The old version allowed a person to 'maintain an action for compensation' if they were licensed at execution and during the relevant performance period. The new version (b)(2)(B) instead authorizes a person to 'bring an action to recover the portion of compensation paid to the unlicensed contractor for work performed during the time in which the contractor was unlicensed,' limiting recovery to only the unlicensed period rather than potentially the full contract value.

The exemption for common interest development projects (defined in Section 4100 of the Civil Code) now includes a new condition: it only applies if a tenant or resident is not a party to the contract. If a tenant or resident IS a party, the full prohibition on recovering compensation from an unlicensed contractor applies, meaning the client can recover all compensation paid rather than being limited to the portion paid during the unlicensed period.

The provision stating it is the intent of the Legislature to enact subsequent legislation relating to secondary education was removed entirely. The bill title was also shortened to remove the 'relating to secondary education' language, making this a purely contractor licensing bill.

The bill's structure was reorganized. The old version had subdivision (a) covering private residential construction of 25 units or less and subdivision (b) covering all other work within a single section. The new version splits these into what appears to be two separate sections (both labeled SECTION 1, likely a drafting error), with the first establishing general rules and the second creating the two-track system.

The standard for when a contractor can recover compensation changed from requiring licensure 'at all times during the performance of that act or contract' to requiring licensure 'at all times during the time the contract was executed and during the portion of the times of the performance of that act or contract for which they are seeking to recover compensation.' This narrows the requirement to the specific period for which payment is sought rather than the entire project duration.

A person who used an unlicensed contractor's services can now only recover 'the portion of compensation paid for work performed during the time in which the contractor was unlicensed' rather than 'all compensation paid to the unlicensed contractor for performance of any act or contract.' This limits recovery to the unlicensed period only.

The fiscal committee vote changed from 'no' to 'yes,' indicating the amended bill now carries fiscal implications requiring fiscal committee review and approval.

Section 7031(a)(1) now requires a contractor to have been duly licensed 'at all times during the performance' of the act or contract to bring a compensation action. The prior version allowed recovery if the contractor was licensed at the time the contract was executed and during the portion of performance for which compensation was sought, effectively permitting partial recovery even if the license lapsed partway through a project.

Section 7031(b)(1) now allows a person who used an unlicensed contractor to recover ALL compensation paid to that contractor, rather than only the portion of compensation paid during the time the contractor was unlicensed. This gives clients a broader remedy when they discover their contractor lacked a valid license.

Assembly Member Wicks added as principal coauthor, and the amendment date updated from July 1 to August 13, 2026.

The Senate version split the law into two tiers: subdivision (a) applied strict rules to private residential construction of 25 units or less, while subdivision (b) applied more lenient rules to all other construction including public works and commercial projects. The Assembly version removes this distinction and applies a single uniform standard to all construction work.

A new exemption is created for 'public works of improvement.' Under this exemption, a contractor may maintain an action for compensation if they were duly licensed at the time the contract was executed and during the portion of performance for which compensation is sought, without regard to the underlying merits of the cause of action.

The standard for a contractor to recover compensation is now uniformly: the person must have been a duly licensed contractor at the time the contract was executed AND during the portion of the performance for which they are seeking recovery. This replaces the Senate version's stricter 'at all times' requirement for residential work and its more lenient period-based approach for other work.

The $10,000 per day cap on ineligibility for contractors whose licenses were suspended only for administrative purposes (such as failing to renew on time) is removed. This cap existed only in the Senate version's subdivision (b) for non-residential work.

A client's right to recover from an unlicensed contractor is limited to 'the portion of compensation paid...for work performed during the time in which the contractor was unlicensed' rather than 'all compensation paid.' The public works exemption also applies to this client recovery provision.

The bill now amends Section 7031 of the Business and Professions Code (Contractors State License Law) rather than merely stating intent about secondary education. The original secondary education intent language is retained but moved to a separate section.

Creates a two-tier system based on project type. Subdivision (a) applies the existing strict no-recovery rule only to private construction work for residential real property of 25 units or less. Subdivision (b) applies a new, more lenient rule to all other construction work including public works, commercial projects, and private residential projects exceeding 25 units.

The right of a person who used an unlicensed contractor to recover all compensation paid is now limited to private construction work for residential real property of 25 units or less. For larger projects, this full-recovery remedy no longer applies.

For non-small-residential work, an unlicensed contractor can now recover compensation for the period they were properly licensed; only the unlicensed period is barred. If the license lapse was purely administrative (failed to renew on time, failed to pay renewal fee), the recovery cap is actual damages or $10,000 per day, whichever is greater.

The security interest unenforceability provision is now limited to only the period when the contractor was unlicensed for non-small-residential work, rather than rendering the entire security interest unenforceable.

Renumbering of subdivisions throughout Section 7031 to accommodate the new structure. The substantial compliance doctrine provisions are renumbered from (e) and (f) to (c) and (d).

Fiscal committee designation changed from 'no' to 'yes', indicating the amendment now has fiscal implications requiring review.