The $10,000 or 25% Rule for Specialty Contractors.
A Specialty Contractor may perform the work which is considered to be a part of their specialty as defined by Board policy. In addition, a specialty contractor may perform work which would otherwise require a license so long as it complies with the $10,000 or 25% rule. There are three components to the rule that are critical to Specialty Contractors:
(1) the total scope of work to be performed is PREDOMINATELY of the type for which the specialty contractor is recognized as exempt by the Board; and
(2) the work would generally require a license is incidental to and an integral part of the exempt work performed by the specialty contractor and does not exceed the greater of $10,000 or 25% of the total value of the contract at the time of contracting the work to be performed.
As you read through the FAQ below, remember that because of the "
Heavy Hammer" of a nonenforceable contract given by law to the consumer, in any contract dispute, the consumer has an incentive to challenge whether the contract work which would otherwise require a license (that is, the work which is not identified as part of the categories of work of a specialty contractor) does not meet the requirements of this rule.
If you have questions or are unsure in any way, you should consult your legal advisor. Of course, you may also contact me for legal advice. This is going to be a fluid area of change and interpretation and the advice of knowledgable legal counsel who understands what the most recent court and board rulings are may be critical to not only having an enforceable contract but also whether you will face a complaint before the Board.
Frequently Asked Questions about this Rule:
A: The term is not defined by the statute and there are no judicial interpretations. However a reasonableness test may be anticipated. For example, again with the Outdoor Environment specialty example, if the contract is for a basic pool and landscaping, retaining wall and an above ground deck, the total scope of the work is predominately of the type of work for which the specialty is recognized. If the contract is for a pool with simple landscaping (say a cost of $8,000) and converting an upstairs bedroom facing away from the pool into a media room (including moving structural walls) (say a cost of $9,000), the total scope of work is not likely to be predominately related to the specialty.
The determination of a scope of work that is "predominately related" is factually driven by the specialty, each contract and the particular circumstances. If you have questions or are unsure in any way, you should consult your legal advisor. Of course, you may also contact me for legal advice. There may also be some provisions or language to consider for your contract which may help support your position in the event of a challenge. A: Again, the term is not defined by the statute and there are no judicial interpretations. However a reasonableness test may be anticipated. For example, again with the Outdoor Environment specialty example, if the contract is for a pool with a bathhouse for the pool, landscaping, outdoor kitchen and a building to house the pool equipment, the bathroom and the storage building would be likely be "incidental to and an integral part". If the contract is for a pool, landscaping, outdoor kitchen, bathhouse and an upstairs bedroom/bathroom facing away from the pool, there is a much greater likelihood that the work for the bedroom would not be incidental to and an integral part of the exempt work.
Now we get to play the law school games. What IF the upstairs bathroom/bedroom is overlooking the pool and the work includes new French doors giving access to a new deck overlooking the pool and a staircase down to the pool (assuming does not exceed 25%). This may be more likely to be considered incidental to and an integral part of the exempt work.
The determination of a scope of work that is "incidental to and an integral part of' the exempt work is factually driven by the specialty, each contract and the particular circumstances. If you have questions or are unsure in any way, you should consult your legal advisor. Of course, you may also contact me for legal advice. A: There may be some reasonable flexibility in a contract but the key term is reasonableness. If you assign a value of $1 to the work that falls under the $10,000 or 25% rule, the Board (which has a number of contractors as part of its make up) will find that the assigned value is unrealistic and will determine its own value. You may want to consult with me or your legal advisor if you have questions or to consider potential changes to your contract form.
Q: Can I enter into a contract for an amount which would comply with the rule and then immediately execute a change order for additional work?A: The rule provides that the test is determined "at the time of contracting." However the Board (and an attorney for a consumer in a dispute situation) will recognize an attempt to evade the rule through a change order executed immediately after. You may want to consult with me or your legal advisor if you have questions or to consider how to handle change orders which would increase the scope of the work falling under the rule or reduce the scope of the exempt work.
Q: Are there other tips and changes to my contract you would recommend?
A: Most definitely! Your contract is never a document to be engraved in stone and brought down by Moses from the mount. It is a living changing document. It should be updated and reviewed by a qualified professional on a regular basis. There are changes in licensing law that may impact your contract and there are other changes in Georgia law that has an impact.
You may want to consult with me or your legal advisor if you have questions or to consider potential changes to your contract form.
Q: Is there a way to do construction work that is not within a specialty and yet not have a license?
A: This is unlikely to work for most contractors. By virtue of the definition of Residential Contractor under the statute, contracts for residential or light commercial work must exceed threshold limit of $2,500 before they are covered by the licensing requirements. Again, you may want to contact me or your legal advisor to consider limiting your work to be sure you are under this limit and to understand the full restrictive nature of this choice.
Q: Is there a way to do construction work that is within my specialty and exceed the $10,000 or 25% rule?
A: The Board also provides that anyone:
(a) who is on the Limited Service Specialty Contractors or the Traditional Specialty Contractors list, and
(b) who is working for a licensed residential or general contractor under a valid permit
is exempted from having to hold a hold a license of their own. But you must comply with any requirements for the specialty trade, citing as an example, Chapter 14 of Title 43 (which applies to trades such as electricial contracting, plumbing, conditioned air contracting, low voltage contracting or utility contracting.
This Board position may be subject to judicial challenge.
Again, you may want to contact me or your legal advisor to consider relying on this exception to be sure there are not other considerations or changes that may impact this legal information. Have I said that enough? This is going to be a fluid area of change and interpretation and the advice of knowledgable legal counsel who understands what the most recent court and board rulings are may be critical to not only having an enforceable contract but also whether you will face a complaint before the Board.