Unlicensed Contractors: A Threat to Their Sureties

Practical InsightsThe lapse of a contractor’s construction license can be a big problem for its surety.

A surety must heavily rely upon its principal to comply with applicable business requirements, including the qualification to do business in the jurisdiction of the project and a valid contractor’s license. However, a contractor’s license can be quickly suspended or revoked for failure to pay fees, update names of officers, maintain worker’s compensation insurance, or renew the license bond. A failure to obtain a proper license may occur when contractors form joint ventures or enter a new state to obtain new work. These are generally matters of record that can be verified on the licensing board’s website.