The Unlicensed Disaster
August 1, 2005
You are responsible for every screw that is screwed, every nail that is pounded, every board that is cut, every wire that is strung in your rental property. It doesn’t matter if you did it, you, a tenant, an unlicensed contractor, or a fully licensed contractor, you have the ultimate responsibility.
Witness the 1996 case of Randall Nathan, San Francisco landlord. He hired a carpenter to make repairs on a deck for one of his properties in Pacific Heights. The repair was done improperly by the carpenter. The carpenter said Nathan knew about it, Nathan said he didn’t. It doesn’t matter if the landlord knew or not, a guest of one of his tenants died because the balcony collapsed as a result of the improper repair. District Attorney Terrence Hallinan, who was up for reelection, charged Nathan with manslaughter.
Fortunately the jury did not completely agree with the district attorney and deadlocked in Dec. 1996. Nathan was not so lucky with the civil suit: he was ordered to pay $12 million. He was responsible because the work was done wrong.
Here is the most important point to remember. Randall Nathan was a licensed contractor in addition to being a landlord. The carpenter was a licensed carpenter. He was still held responsible for the injuries the shoddy workmanship resulted in.
I can’t begin to count the number of questions I get from landlords asking about having tenants work on their property, either in exchange for rent or to be paid separately. Whenever you are tempted to allow a tenant or an unlicensed contractor to work on your property, think about Randall Nathan.
It’s easy to get sucked in. The price is too good to be true, both from the tenant or the unlicensed contractor. “Those licenses just run up the price for everybody,” goes the mantra I have heard too many times from unlicensed contractors wanting to work on a property I own. Just remember, lawyers are all licensed.
In the event of an accident on your property where someone is injured that can be traced back to work done on your property by an unlicensed individual, you will get a letter from an officially licensed attorney. You will get a letter no matter who did the work, but imagine explaining to the judge how you were trying to save money by using someone who was “not qualified” to do work on any property. The state and the courts assume that anyone who is not licensed is not qualified.
In most states if the work was done improperly and someone is injured you will be at least a co-defendant with the repairperson. Chances are the repairperson, especially one who is unlicensed and hiding from the licensing authorities, has no assets. He probably doesn’t even own his own home. In fact he could be your tenant. That leaves the landlord, real estate barons that we all are, with vaults full of money and file cabinets full of assets, stuck for the entire judgment.
Yes it is cheaper to have a tenant or an unlicensed contractor work on your rental property. In most cases it will never be an issue who did the work because there are no health and safety issues involved. But in situations that involve porches, steps, railings, doors, or anything that could fall off, fall over, or crash through, never even consider using anyone but a fully qualified workman.
About the Author: Bob Cain
Some 30 years ago Bob Cain went to a no-money-down seminar and got the notion that owning rental property would be just the best idea there is for making money. He bought some. Trouble was, what he learned at the seminar didn’t tell him how to make money on his rental property. He went looking for help in the form of a magazine or newsletter about the business. He couldn't find any.
Always ready to jump at a great idea, he decided he could put his speaking and writing skills to work and perform a valuable service for other investors who needed more information about property management. So Bob ferreted out the secrets, tricks and techniques of property management wherever he found them; then he passed them along to other landlords.
For over 25 years now, Bob has been publishing information, giving speeches, putting on seminars and workshops, and consulting for landlords on how to buy, rent and manage property more effectively.