California §7031: when a customer can take back every dollar

If a California job needed a contractor's license and you did not hold the right one for the whole job, two things happen. You cannot sue to collect what you are owed, and the customer can sue you to recover every dollar they already paid, even if the work is perfect. That is Business and Professions Code §7031, and it is the harshest unlicensed-work rule in the country. The part almost nobody covers is the clock: the customer's claim to take your money back is a one-year claim, not a four-year one, and it starts running when the work ends rather than when anyone discovers the licensing problem. That cuts both ways, and if you are the contractor it is the most important sentence on this page.‍‌‌​‌‌‌​‌​‌‌‌​‌‌​​‌‌​‌‌​‌‌​​​​‌​‍

This guide is California only. It is general guidance, not legal advice, and §7031 is a statute people lose seven-figure sums to. If it is live for you, get a California construction attorney.

What §7031 actually says

Most summaries paraphrase it. Here is the structure of the real thing, subdivision by subdivision, from the current text of the statute.

Four things in that table catch people out.

"Regardless of the merits" means the quality of your work is irrelevant. Not a mitigating factor, not something the judge weighs. Irrelevant. A defect-free job and a disastrous one are treated identically.

"All compensation paid" is not the unpaid balance. It is everything that has already changed hands. Your costs do not come off it. Materials you bought and installed do not come off it. The customer keeps the improvement and gets the money back. California's Supreme Court has described this as a stiff, all-or-nothing penalty, and the courts apply it that way on purpose: the harshness is the deterrent (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988; MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co. (2005) 36 Cal.4th 412).

§7031(c) is the one that gets missed. A security interest taken to secure payment is unenforceable. So the fallback of "I will secure the debt instead" does not rescue the position either.

"At all times during the performance" means a lapse mid-job is not a technicality. The statute conditions the right to sue on being duly licensed at all times during the performance of the act or contract. A renewal that slips, a qualifier who leaves, a suspension for an unrelated reason: each is a gap in "at all times."

The classification trap

§7031(d) requires licensure "in the proper classification." Holding a valid CSLB license is not the end of the question if it is the wrong class for the work you actually did.

That subdivision also does something procedurally brutal: when licensure or proper licensure is disputed, the burden of proof sits on the licensee, and proof is made by producing a verified certificate of licensure from the CSLB. You prove you were licensed. The customer does not have to prove you were not, and §7031(d) expressly says the party disputing it is not required to produce a certificate.

A general contractor who self-performs a specialty trade outside their classification, or a specialty contractor who takes on a job broader than their class, is exposed here even though they hold a real, current license. Judicial Council v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882 is the case usually cited on a license that did not hold good across the life of the contract.

The one-year clock, and why it is the most useful thing on this page

The three SiteKiln guides that already mention §7031 are accurate, and like most coverage of this statute they stop before the limitation period. It is the part that decides real cases.

A §7031(b) disgorgement claim is a claim for a penalty or forfeiture created by statute. Code of Civil Procedure §340(a) gives one year for "an action upon a statute for a penalty or forfeiture, if the action is given to an individual." So the customer does not get the four years they would have on a written contract. They get one.

Two Court of Appeal decisions carry the point:

• Eisenberg Village of the Los Angeles Jewish Home for the Aging v. Suffolk Construction Co. (Court of Appeal, 26 August 2020, docket B297247) is the decision that put §7031(b) inside CCP §340(a) and addressed delayed discovery, which is the doctrine that would otherwise postpone the start of the clock until the customer found out about the licensing problem.
• San Francisco CDC LLC v. Webcor Construction L.P. (Court of Appeal, 19 March 2021, docket A156669) applied it to a large completed project where the disgorgement claim was brought too late. The opinion deals in completion or cessation of the work as the accrual point, and with work that was free of defects. The sums at stake were very large and the claim still failed on timing.

So the practical shape of it: the clock runs from when the work is completed or ceases, not from the day someone spots the license problem. If you are the contractor, the date the job ended is the date that matters, and it may already have run. If you are the customer, waiting to see whether the building performs before raising a licensing point is how a nine-figure claim gets lost.

⚠️ Limitation periods turn on facts, accrual arguments and the precise procedural history, and the two decisions above are Court of Appeal decisions rather than Supreme Court ones. Do not read a date off this page and act on it. This is the point to take to an attorney, and the point most worth taking early.

Substantial compliance: narrower than it sounds

§7031(e) is the only relief in the section, and it is not a general fairness valve.

It is completely unavailable to anyone who "has never been a duly licensed contractor in this state." If you never held a California license, there is no argument to make. Where it is available, the court may find substantial compliance only after an evidentiary hearing and only if all three of these are shown:

1. You had been duly licensed in California before the work.
2. You acted reasonably and in good faith to maintain proper licensure.
3. You acted promptly and in good faith to remedy the failure once you learned of it.

All three, not any one. The doctrine is for the contractor whose license lapsed and who fixed it, not for the contractor who never had one, and not for the contractor who found out and carried on.

Does the exemption for small jobs save me?

Only for genuinely small work, and it fails on more conditions than most people realize. Under B&P §7048 the licensing chapter does not apply to a job where the aggregate price for labor, materials and everything else is less than $1,000, treated as casual, minor or inconsequential.

Read the conditions carefully, because each one independently destroys the exemption:

• It must be under $1,000. Less than, not up to. A job at exactly $1,000 is not exempt.
• It is the aggregate price for the whole undertaking, across one or more contracts. Not per visit, not per invoice.
• The work must not require a building permit.
• You must not advertise or hold yourself out as a contractor (§7048(c)(1)).
• You must not employ anyone to perform or assist in the work (§7048(c)(2)).
• You cannot split a bigger job into sub-$1,000 contracts. §7048(b) shuts that down expressly, and it shuts it down whether or not evasion was the purpose.

The $1,000 figure is current. It was raised from $500 by AB 2622, effective 1 January 2025, and §7048 has since been amended again by AB 1170, effective 1 January 2026. It is worth saying plainly that this threshold went up, because it is widely reported the wrong way round.

What this means if you are the contractor

• Check your classification against the work, not against the license. A current license in the wrong class is, for §7031 purposes, no license.
• Treat renewal dates as job-critical. "At all times during the performance" has no de minimis exception.
• If a lapse has already happened, what §7031(e) measures is your conduct. Acting "promptly and in good faith to remedy" is one of the three conditions, so the day you discover a problem is the day the record starts being written.
• Know your completion date. Since accrual runs from completion or cessation, it is the single most important date in your file.
• Do not rely on securing the debt. §7031(c) makes the security unenforceable too.

What this means if you are the customer

• You may be able to recover everything you paid, even on good work. That is the statute working as designed, not a loophole.
• You have one year, and it probably runs from when the work ended. Not from when you found out.
• Check the classification, not just the license number. The CSLB license lookup shows the class.

Common questions

Can a California contractor sue for payment without a license?

No. Business and Professions Code §7031(a) bars an unlicensed contractor from bringing any action to collect payment for work that required a license, "regardless of the merits of the cause of action." The quality of the work makes no difference, and §7031(c) also voids any security taken for it.

Can a customer get their money back from an unlicensed contractor in California?

Yes. Under §7031(b) someone who used an unlicensed contractor may sue to recover all compensation paid, not just the unpaid balance and not net of the contractor's costs. California courts treat it as a deliberate all-or-nothing penalty, available even where the work was done properly.

How long does a customer have to bring a §7031 disgorgement claim in California?

About one year, not the four available on a written contract. Disgorgement under §7031(b) is treated as an action on a statute for a penalty, which Code of Civil Procedure §340(a) limits to one year, generally running from completion or cessation of the work. Confirm dates with an attorney.

Does a lapsed license count as unlicensed under §7031?

It can. §7031(a) requires that you were licensed at all times during performance, so a mid-job gap engages the section. §7031(e) offers a substantial-compliance route, but only to someone previously licensed in California who acted in good faith to maintain it and to fix it promptly.

Does having a CSLB license protect me if it is the wrong classification?

Not necessarily. §7031(d) requires licensure in the proper classification for the work performed. If licensure or proper licensure is disputed, the burden of proof falls on the licensee, proved by a verified certificate from the CSLB. The challenger need not produce a certificate.

Is work under $1,000 exempt from California licensing?

Only if it clears every condition in §7048. The aggregate price must be less than $1,000, so a job at exactly $1,000 is not exempt. The work must not need a building permit, you must not advertise as a contractor, and you must not employ anyone. Splitting a job does not work (§7048(b)).

Where these figures come from

Every statutory quotation on this page was taken from the current text at leginfo.legislature.ca.gov on 2 August 2026, not from a summary or a mirror.

Cases are cited by court, date and docket number. Where SiteKiln could not open the full opinion text, the case is described rather than quoted, and no damages figure is stated for San Francisco CDC v. Webcor because that figure could not be confirmed against the opinion.

The honest bit

§7031 is settled law and its effect is brutal, but how it lands on a specific job depends on the contract, the classification, the dates and the procedural history. Statutes get amended and appellate decisions get distinguished. Treat this as a map of where the risk sits, not as an answer for your job, and check anything you rely on at the source or with a California construction attorney. If a §7031 point is live and money has already changed hands, the limitation date is the first thing to establish, not the last.

Related: What happens if you work without a contractor's license · Working under someone else's license · Working as a Contractor in California · Do I need a contractor license · Contractor License Checker · Mechanic's Lien Deadline

How this site is funded →

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

In crisis? 988 Suicide & Crisis Lifeline 988 · Mental health support

How this site is funded →