Is Your Contractor Licensed? A Guide to NC General Contractor Requirements
You've explored your options and you have a bid for your project. Things are going well! That is, until you remember the contractor ad on a bench bragging about being "fully licensed." You start to wonder, is my contractor licensed…and what does it mean if they AREN’T licensed?
North Carolina is one of many states that require building professionals to obtain a License under certain circumstances to perform work. Understanding these requirements and how they protect you should be the first step taken when looking for someone to remodel or build a home!
When is a General Contractor (GC) License Required?
The basis of the rule is straightforward. Your contractor must have a general contractor license in North Carolina to manage any construction project where the total cost of the project is $40,000 or more, and there must be a permit if the project is $40k+ and/or involves structural, plumbing, electrical, or HVAC changes.
Structural changes include projects like removing walls, making additions that change the footprint of your home, or adding a deck. Some of these are linked, such as where changing or removing a wall also means having to reroute electrical wiring. Adding a new bathroom obviously requires new plumbing, but also likely involves electrical and HVAC changes as well.
What does "cost of the project" include?
It's the total project value, including all labor, materials, equipment, and profit on a given property. While these issues can arise with any company you hire, you should always vet the Contractor you are working with to ensure you don’t get surprised with additional fees later on. You can ask questions like, “Can this quote change? If that is the case, how so?” or “Are there any other costs associated with this project that we haven’t discussed?”
There is still the possibility that the Contractor may run into unforeseen expenses that you may be liable for, but at least you have protected yourself the best you can by asking these questions up front. The last thing you want is someone coming back after beginning the work, asking for more money than you were prepared to spend.
Types of Licenses and Financial Tiers
The North Carolina Licensing Board for General Contractors (NCLBGC) issues licenses for builders/remodelers as either a Building Contractor or Residential Contractor.
Building Contractor: This is the broadest classification, permitting work on commercial, industrial, institutional, and all types of residential buildings.
Residential Contractor: This license is restricted to work on residential structures as defined by the NC Residential Code.
Within these classifications, your license is subject to a specific financial limitation, which dictates the maximum value of a single project you can undertake.
Limited License: Allows for projects up to $750,000.
Intermediate License: Allows for projects up to $1,500,000.
Unlimited License: Places no limit on project value.
Why work with a Licensed General Contractor?
It protects you by mitigating the risk of being burned by a contractor who is scamming people as a fake business. A Licensed GC will often be more reputable and trustworthy than someone who is not.
Have you experienced loss due to a dishonest or incompetent contractor? The NCLBGC has a recovery fund designed as a last resort for you to potentially recover some funds.
The board also provides these tips to help protect you from financial losses when doing work on your home.
It ensures that the project meets industry standards.
Just because something works for the moment doesn’t mean it always will, and it certainly doesn’t mean it is best for the homeowner. In some cases, homeowners would rather take a shortcut to save on costs, but future homeowners may have to correct the issue, or worse, live in the home unaware that they & their home are vulnerable to issues.
Provides accountability and ensures the contractor is qualified for the project they are undertaking.
Accountability - If you feel that your Licensed GC isn’t performing their job properly, there is a formal complaint process and the NCLBGC will investigate the issue on your behalf. You can review that process on their website here.
Qualification - By giving contractors different classifications, you can be confident that the contractor isn’t “batting out of their league” because they have been approved by the NCLBGC for the license and classification for that meets or exceeds your project size.
It increases the odds of having a good customer experience. While not every licensed GC runs a great business, the likelihood is higher than if not. To keep your license, you have to take 8 Continuing Education courses a year, 6 of which are geared towards teaching the contractor how to run a better business that ultimately makes the experience better for the homeowner.
How can you know if your Contractor is Licensed?
When you’re ready to start your contractor search, whether from a referral or simply looking up “local contractors near me,” the first step is to confirm whether they have a license or not. You can do this very easily by searching their name or company name on the NCLBGC website.
What can happen with Unlicensed General Contractors?
Chris, Keith Smith Construction’s GC, was talking with a homeowner who had an unfortunate experience and this is a great example of what can happen with unlicensed contractors:
While searching for a contractor to remodel a basement into a long term rental suite, the homeowner quickly discovered how important transparency, licensing, and competence are in construction work. Within 30 minutes we were able to provide a clear ballpark estimate based on photos and the general scope of work. In contrast, another contractor offered 3D renders and made multiple site visits but avoided giving any pricing. Without even a range, it was impossible for the homeowner to make informed design decisions. The situation worsened when the contractor’s plans were based on an incorrect assumption about building codes, leading to a recommendation to move the entire HVAC system—a change that would have added over $10,000 unnecessarily.
A 30 second search of the NCLBGC website revealed no record of a general contractor license for the company. When asked about it directly, the contractor brushed off the question without providing a license number and never answered the phone again. Between the lack of pricing, the code mistake, and the evasive answers about licensing, it was obvious that hiring the unlicensed contractor for their project.
While hiring a Licensed General Contractor doesn’t solve all of the problems you may experience, it increases the likelihood of working with a reputable company for your project. Your home is most likely your greatest asset and trusting someone with it is a major leap of faith, especially on larger projects. We often are interacting with your family throughout the duration of the project as well, and you, the homeowner, want to do everything in your power to pick a trustworthy contractor. A decent barrier to prepare and protect for that is the GC License.
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Want to talk to a Licensed GC about your project, schedule a ballpark estimate meeting today!
We’ll talk through your vision and timeline to figure out if we are the right contractor for you and give an accurate ballpark estimate based on projects similar to yours.