The Washington State Legislature decided it was time to increase the bond required for licensing as a general and specialty contractor registration in Washington State. 2SHB 1534 raises the required bond amounts from $12,000 to $30,000 for general contractor registration and from $6,000 to $15,000 for specialty contractor registration. It also requires the Department of Labor and Industries to deny an application for contractor registration when the applicant is a successor to a business entity with an unsatisfied final judgment against it. This will continue to make it difficult for serial contractors to dissolve one entity and reopen as a new contractor registration in order to avoid financial responsibility.
The new legislation also increases fines and penalties for violations of the Contractor Registration Act and requires revenues from those fines and penalties to be deposited into a new program known as the Homeowner Recovery Account. This funding will establish the Homeowner Recovery Program for eligible homeowners to receive recovery payments of up to $25,000 from the Homeowner Recovery Account based on unsatisfied final judgments brought against registered contractors (subject to certain requirements and limitations). The goal is to help homeowners recover some damage from unscrupulous contractors that disappear with payment but leave no financial assets to pay a judgment, except to the extent of the statutory bond.
Given the economic realities of many construction projects, the updated amounts appear to better reflect claims that typically arise on behalf of consumers and that current bonding levels are inadequate to approximate those claims. Time will tell how much relief this new legislation will actually provide.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
