Contractor’s License Bond Increase:
California Senate Bill 607 will increase the required amount for all contractor’s license bonds to $25,000 on January 1st, 2023. This increase includes the standard contractor’s license bond, the bond for qualifying individual, and the disciplinary bond.
SB 607 also adds new licensing fees, as well as increases some existing fees, effective January 1, 2022. The bill also differentiates between entity type, charging higher initial license and renewal fees for partnerships, LLC’s, corporations, or joint ventures. You can find a Contractors State License Board bulletin with the new fee schedule here. Also, effective July 1, 2022, application and license fees for military family members will be waived.
What Are the Implications for Contractors?
One of the implications of this bill is that contractors are now on the hook for a larger penal sum amount for any potential claims filed against them. This risk can be largely mitigated by following legal and ethical business practices.
The contractor’s license bond increase will also lead to mid-term premium adjustments and supplemental billings for any bonds currently in force. This means that contractors will most likely pay more for license bonds after January 1, 2023. However, some surety markets are responding to the bond amount increase by lowering premium rates, which would offset some of the additional cost to the contractor. The exact change in premium will vary on an individual contractor level.
If you have any questions about how this might impact you, or you would like assistance with any type of bond, please reach out to us today! We’re here to help!