Hired an Unlicensed Contractor in Oregon? Why You Can End Up Paying Twice

When you hire an unlicensed contractor in Oregon and the job goes wrong, you usually pay twice: once to the person who did it badly, and again to someone licensed who tears it out and does it right. The state protections that help homeowners get money back only cover licensed contractors. The cheaper bid can end up being the most expensive way to get the work done.

Why the low bid looks so good

An unlicensed contractor skips costs a licensed one has to carry: the bond, liability insurance, workers' compensation, permit fees, and the license itself. That's how the bid comes in low. The savings come from dropping the protections those costs pay for, and the risk they covered moves to you.

Problem one: no bond and no CCB help

When a licensed contractor walks off a job or does work that's provably wrong, you can file a complaint with the Construction Contractors Board. The CCB can mediate, and the contractor's surety bond is a pool of money you may be able to recover from.

None of that applies to unlicensed work. The CCB's consumer tools page says that if you use an unlicensed contractor, you lose the ability to recover damages through a bond and to get CCB help mediating a dispute. The CCB's own hiring guide lists mediation as unavailable in a dispute with an unlicensed contractor.

So if the deposit is gone and the work is half done, your choices are court, where you'll be chasing someone who may have no assets to collect from, or paying a licensed contractor to finish. Most people end up doing the second.

Problem two: liens from people you never hired

This is the one that surprises people most. In Oregon, the subcontractors and suppliers who provided labor or materials for your job can claim payment from your property if they weren't paid. That's true even if you paid your contractor every dollar.

The state's Notice of Right to a Lien opens with a warning to protect yourself from paying any contractor or supplier twice for the same service. If your contractor takes your money and doesn't pay the lumber yard, the lumber yard can come after your house.

This can happen with a licensed contractor too. The difference is what you can do about it. With a licensed contractor you have the bond and the CCB. With an unlicensed one you're on your own.

The CCB's construction liens brochure explains the protections:

• When a supplier or sub sends you a Notice of Right to a Lien, keep it. It tells you who might have a claim.
• Pay with checks made out jointly to your contractor and the supplier named in the notice.
• Before final payment, get a signed lien release from everyone who sent you a notice.

Problem three: an injury on your property

Construction is dangerous work. A licensed contractor with employees has to carry workers' compensation.

The CCB's Risky Home Improvement Shortcuts warns that unlicensed contractors can become your employees for tax purposes, and that you must cover employees with workers' compensation. If you don't, and an unlicensed worker is hurt, you may have to pay penalties and claim costs. A fall off a ladder at your house can cost far more than the whole job.

Problem four: work without a permit

According to the CCB's Risky Home Improvement Shortcuts, unlicensed contractors can't pull the permits a job needs, so the work often gets done without one. The permit and the inspections are how someone other than the builder checks that a deck can hold weight or that a wall was framed right.

Unpermitted work becomes your problem, not the contractor's. Often it surfaces years later, when a buyer's inspector asks about it. Fixing it can mean opening up finished work so it can be inspected, or tearing it out and starting over. That's paying twice again.

If you've already hired someone unlicensed

Don't panic, and don't keep paying ahead of the work.

• Stop paying for work that isn't done. Pay only for what's finished and checked.
• Keep every text, email, receipt, photo, and payment record.
• Save any Notice of Right to a Lien you received. Use joint checks or get lien releases from those suppliers before you pay anything more.
• Have a licensed contractor look at what's been built before anyone covers it up or builds on top of it.
• Ask your city or county whether the work needs a permit, and get it inspected.

If the contractor has disappeared, see our guide on what to do when a contractor stops responding. Some of those steps only work with a licensed contractor, but the record-keeping applies either way.

Two minutes that save you from paying twice

All of this is avoidable. Before you sign anything or hand over a deposit, look the contractor up at search.ccb.state.or.us. It's free and takes about two minutes. Our guide on how to check a contractor's CCB license walks through what the record shows and what to look for.