In 2005, after many years of considering whether to regulate contractors, the Idaho Legislature passed the "Idaho Contractor Registration Act," codified as Idaho Code, Title 54, Chapter 52. The Act has broad scope and significant penalties for noncompliance that will become effective on 1/01/06.

While the Act is titled the Idaho Contractor "Registration" Act, it appears to provide for licensing rather than registration under the supervision of a public board consisting of four contractors and one "public" representative. It is anticipated that, at least in early years, registration requirements will be relatively simple and straightforward and the focus of the board will primarily be upon disciplining gross incompetence, fraud or dishonest practices.

The Act, in Idaho Code ¤ 54-5210, requires:

• SSN or Tax ID Number
• The name and address of the business and of each owner, partner, shareholder or other person holding an ownership interest.
• A certificate showing workers' compensation coverage and liability insurance (including "continued operations coverage") of not less than $300,000.
• A description of the type of construction to be undertaken.
• A affirmation that no owner or principal has ever been denied a contractor's license or had a license revoked in any state.
• A fee not exceeding $150 per year.

The requirement of listing all owners, including shareholders, may impose hardships on publicly traded companies. The listing requirement will also frustrate persons who wish to conceal their ownership interest in a business for competitive reasons, a practice common in the construction business. The act governing public works contractors, for example, does not by its terms require disclosure of the names of all shareholders.

The Act requires all contractors to register and the term "contractor" is very broadly defined. In its simplest sense, a contractor under the statute consists of anyone who engages in construction or hires those who do. The Act specifically exempts persons holding licenses from the state while engaging in the profession or practice for which they are licensed. The list of licensees specifically includes, but is not limited to, architects, engineers and surveyors, public works contractors, public works construction managers, electrical contractors, plumbers, and licensed installation of HVAC systems. Because of the severity of the penalties for noncompliance, persons involved in construction shouldn't rely on other licensing and should register under the new Act. The cost is relatively modest, and for reasons discussed later, it is likely that other persons involved in construction are going to want to see a license before accepting subcontracted work or supplying materials.

The law also includes exemptions for:

• An employee working for wages or salary
• A pure supplier, A public utility
• A person participating in construction where the total contract price is less than $2,000 and the entire project costs less than $2,000.
• Agricultural construction.
• An owner who contracts for work to be performed by a registered contractor on his own property, unless the owner intends to evade the requirements of the Act by selling the improved property during construction or within one year after completion.
• An owner performing construction on his "personal residential property" whether or not it's occupied by the owner, but the exemption does not apply if the owner intends to sell the property within 12 months.
• A person working on his residence even if owned by another person. Owners or lessees of commercial property performing construction work on the property they own or occupy.

The Act requires that the contractor's license number be used on almost all public communications including the place of business, the construction site, advertising, contracts, permits, letterhead, and subcontracts. Violation of the Act is a misdemeanor punishable by a maximum fine of $1,000 and/or six months in jail. In addition, the contractor board can impose a fine of up to $1,000 for violation of the law. The most significant penalty is license revocation which would deny the contractor the right to participate in the construction industry.

Under Idaho Code ¤ 54-5208, an unlicensed contractor is not entitled to file a lien. A subcontractor or supplier loses its lien rights if it works for an unlicensed contractor unless it does not have actual knowledge that the contractor was not licensed or it reasonably believes the contractor was licensed. (Failure to display the contractor's permit number on appropriate documents and other required places might impute knowledge.) Unfortunately, there appears to be no "good faith" exemption for a subcontractor or supplier who works for a contractor (including an owner who qualifies as a contractor) who improperly contends it is exempt from registration. Consequently, the subcontractor may be protected if it wrongly believes the contractor is licensed but not if it wrongly believes the contractor is exempt.

In addition, a person engaged in construction without a required license is not entitled to bring an action under a contract. Registration after the fact will not helpÑany action seeking compensation for construction must allege and prove that the person performing the construction work held a registration under the Act at all times the work was performed or that such person is exempt. California has a similar law and is notoriously tough on unlicensed contractors who routinely are held to be not entitled to payment. This would also seem to be the law in Idaho after January 1, 2006. There is no grace period and thus licensing must be in place by December 31, 2005, for contracts started in 2005 or earlier. Hopefully, this time schedule will be accommodated by a contractor's licensing board, which promptly implements procedures for licensing contractors, before the end of the year.

Mike Baldner is a partner with the law firm Meuleman Mollerup LLP, practicing in the area of real estate law. Mr. Baldner can be reached at 208.342.6066 or by email at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it more information at www.lawidaho.com.