The following are some general principles of law that govern homeowner/contractor disputes:
Generally, home improvement contractors must be licensed by the State of California. To obtain a license, the Contractor must post a bond of at least $7,500 with the Contractor's State License Board. A homeowner who sues a licensed contractor for defective work can also sue the company issuing the bond by naming the bonding company as a Defendant. This may be helpful in cases where the Contractor is insolvent or has gone out of business. The name of the bonding company can be obtained from the Contractor's License Board (415) 469-6200). However, as a guarantor, the bonding company can only be sued for a maximum of $2,500 in Small Claims Court.*
The work itself must be defective. A homeowner cannot sue to recover monies paid to an unlicensed Contractor solely on the basis that he did not have the required license.
A penalty of up to three times the damages, in addition to the actual damages that the owner incurred, may be awarded to a homeowner who successfully sues an unlicensed Contractor for damage arising out of work for which a license is required (Code of Civil Procedure Sec. 1029.8). The total amount of the damages and penalty cannot exceed the Small Claims Court limit.
A Contractor cannot sue and recover payment for home improvement work that requires a Contractor's license, if he has not substantially complied with the licensing laws. To recover, the Contractor must prove that he had the necessary license(s) at the time the work was done. Contact the Contractor's License Board to determine if the Contractor is licensed at their local number (415) 469-6200 or (800) 321-2752. Or write to them at:
Contractors State License Board
PO Box 26000
Sacramento, CA 95826
An unlicensed Contractor can also sue for payment for work in a home improvement contract for which a license is not required (e.g.: the installation of finished products that do not become a fixed part of the structure.
The State Contractor's License Board can assist the homeowner to get the contractor to return to the job to complete work or to repair defective work. However, to recover money from the Contractor, the homeowner must file a claim in Small Claims Court.
You may find useful on this topic from Contractors State License Board
*The $5000 limit does not apply, and a $4,000 limit applies, if a "defendent guarantor . . . is required to respond based upon the default, actions, or omissions of another ($2,500 if the defendent guarantor does not charge a fee for the service).