The South Bay Association of REALTORS® recently provided several valuable insights into the recent legal updates that will impact real estate transactions. One of the most significant changes is the new contractor exemption. Undoubtedly, this raised questions and opportunities for both real estate professionals and homeowners. Let’s break down the key aspects of the contractor exemption and what it means for you.
What is the Contractor Exemption?
The contractor exemption is a legal provision that allows individuals to perform certain types of work without needing a contractor’s license. As of 2025, the threshold for this exemption has increased from $500 to $1,000. This means that homeowners and small businesses can now undertake projects involving labor and materials valued up to $1,000. Besides, they don’t need a licensed contractor for this purpose.
Key Features of the Contractor Exemption
Here are the key features of Contractor Exemption for 2025 and how they’re going to impact the real estate landscape:
- Increased Project Limit: The most notable change is the increase in the project limit from $500 to $1,000. This adjustment allows homeowners to take on more substantial projects without the added complexity of hiring a licensed contractor.
- Per Project Basis: The exemption applies on a per-project basis. This means that each individual project can be valued up to $1,000, allowing for multiple projects to be completed under this exemption, provided they are distinct and separate.
- Labor and Materials: The exemption covers both labor and materials, making it easier for homeowners to manage small renovations, repairs, or improvements without the overhead of contractor fees.
- Legal Compliance: While the exemption provides flexibility, it is crucial to note that all work must still comply with local laws and regulations. This includes obtaining necessary permits and adhering to safety standards.
- Avoiding Evasion of the Law: The law explicitly states that homeowners cannot evade the contractor licensing requirement by dividing a single project into multiple smaller projects. Each project must stand on its own merit to qualify for the exemption.
Implications for Realtors
As realtors, understanding these new contractor exemptions is essential for guiding clients effectively. Here are a few implications to consider:
1. Advising Clients on Home Improvements
With the increased project limit, homeowners may feel empowered to tackle more significant repairs or renovations. Realtors can advise clients on how to leverage this exemption for home improvements that could enhance property value before a sale.
2. Navigating Legal Requirements
It is vital to remind clients that while they can undertake projects without a contractor’s license, they must still comply with all legal requirements. Realtors should encourage clients to research local regulations and obtain necessary permits to avoid potential legal issues.
3. Utilizing C.A.R. Form RPA
The California Association of REALTORS® (C.A.R.) form RPA (Residential Purchase Agreement) addresses repairs and improvements. Real estate professionals should familiarize themselves with this form to ensure that any work done by sellers or others complies with legal requirements and is properly documented.
4. Educating Buyers and Sellers
As the real estate market evolves, educating both buyers and sellers about these changes is important. Buyers may appreciate knowing that they can negotiate repairs or improvements without the need for licensed contractors, while sellers can highlight the potential for DIY projects that could enhance their property’s appeal.
Conclusion
The new contractor exemption is a significant development for homeowners and REALTORS® alike. With the increased project limit, there are new opportunities for homeowners to manage small projects independently, but it is essential to navigate these changes carefully. By staying informed and advising clients on legal compliance, realtors can provide valuable guidance in this evolving landscape. As we move through 2025, let’s continue to support our clients in making informed decisions about their properties.