We are currently building a multifamily building in Southern California that is 2 stories of wood frame over concrete foundation and podium. We have engaged with a General Contractor to subcontract the frame and concrete work at the project. For the sake of clarity lets call this GC as GC 1. GC 1 has engaged with another company to perform the concrete and frame work, later on we found out that the company that GC 1 has engaged with also holds a General B license, which makes the company a general contractor. So lets call this company GC 2. So GC 1 has contracted GC 2 to perform the work and GC 2 has used its employees in its payroll to perform the work. GC 2 does not hold a C5 or C8 license. Does this mean that the company GC1 hired as a subcontractor (which is GC 2), does not have the proper licensing since they executed the job as a subcontract? The crew that GC 2 would pour concrete and then the same crew would switch their tools and work as framers. The quality of the work has caused problems such as problems with drywall not being level, windows not being level, water leak through concrete, additional stucco work to cover the concrete that was not properly formed are just a couple that comes to my mind. What is the best way to recoup some of the damages that were caused by GC 2 due to performing a trade without C5 or C8 license? And what kind of action can we take against the GC1 which has subcontracted this work to GC 2 knowing that the only license they have was a General B License?
A “B” General Building Contractor Can Enter a prime or sub-contract for a framing or carpentry project and selfperform the work.
But A “B” General Building Contractor Cannot Enter a sub-contract involving trades other than framing or carpentry unless: The sub-contract requires at least two other, unrelated trades or crafts; or the “B” General Building contractor holds the appropriate license classification.
In the below scenario it appears that GC 2 is not properly licensed to perform the concrete work under the subcontract.
In that case, you likely have a claim against GC 1 for breach of contract for hiring GC 2 to perform work for which it was not properly licensed.
You likely also have a claim against GC 2 to recoup the money paid for the concrete work.
If the project is not yet completed, you need to determine whether you have the immediate right to withhold payments to GC1 in order to offset the damages you have incurred. If so, follow the procedure exactly as laid out in the contract documents and as your attorney advises you. It is generally preferred to withhold money as an offset, as opposed to filing an affirmative claim for payment or disgorgement and chase the general contractor.
Imporantly, you also want to determine whether the contractor provided a performance bond, guaranteeing the completion of the project. Most standard AIA contracts provide the owner with an option of requiring a performance bond from the general contractor. If you have that right, and a breach covered by the performance bond has occurred, you may be able to make a claim on the bond and have the surety who issued the bond tender a completion contractor or otherwise fund the project's completion.
On the other hand, if the project is completed, then you need to consider demanding the repairs to the project under the contractual warranty, if any. Most construction contracts generally have at least a 1 year warranty. Depending on the nature of the parties' insurance policies, some of the investigation and repair costs could be covered. Defects which cause resulting property damage, i.e., a plumber's pipe that leaks adn damages the structure, are the types of damages a contractor's general liability insurance policy will cover. If the defects do not have the resulting damage component, there may be no insurance coverege for your claim, despite there being liability for a breach of contract, negligence, etc.
Based on the limited information supplied, GC2 was likely not properly licensed, and depending on how their contract was written, the entire amount of their contract might be disgorged under Business and Professions Code section 7031. This is highly fact specific, and you attorney can only properly advise you after reviewing all of the proejct records.
Lastly, you need to determine whether there are any other contractual or statutory pre-litigation procedures which apply before filing a lawsuit or formally demanding arbitration. Given the nature of your project, I expect your contract requires some form of pre-litigation notices.