FAQs

Alternative dispute resolution (or ADR) is a way disagreeing parties can resolve a dispute without litigation. The most common forms of ADR are arbitration and mediation.

Arbitration is a form of alternative dispute resolution where a neutral third party hears the evidence and makes a determination as to the prevailing party. Arbitration provisions preclude homeowners from filing suit in court against a contractor for money damages.

Mediation is a form of alternative dispute resolution where a neutral third party assists the parties with a compromise of their dispute. The mediator does not make a determination as to the prevailing party.

Contractors can divest the Contractors' Registration Board of jurisdiction by including an arbitration provision in their contract.

Yes, the Board can award attorneys' fees to the homeowner.

In order to recover attorneys' fees from a homeowner, a contractor must include a provision in your contract for the recovery of reasonable attorneys' fees against the homeowner. Under Rhode Island law, homeowners may recover attorneys' fees if the homeowner prevails in a lawsuit against the contractor, but Rhode Island law does not provide for the recovery of attorneys' fees by contractors who prevail. To even the playing field, contractors must include an attorneys' fee provision in their contract.

A limited liability entity is an entity created and organized under Rhode Island law and filed with the Rhode Island Secretary of State. The owner’s are generally personally protected from the liabilities of the business such that the entity provides a shield to protect personal assets from claims related to the business. Corporations and LLCs are examples of limited liability entities.

A limited liability company (or LLC) is a type of limited liability entity created under the Rhode Island Limited Liability Company Act. The owners are protected from the liabilities of the business such that they are not personally responsible as long as the owners follow corporate formalities.

A corporation is a type of limited liability entity created under the Rhode Island Business Corporation Act. The owners are generally protected from the liabilities of the business such that they are not personally responsible as long as the owners follow corporate formalities.

A sole proprietor is an individual in business for himself or herself that has not formed a limited liability entity with the Secretary of State. The owner is personally liable for all debts and actions of the business.

A general partnership is an association of two or more people to carry on a business as co-owners for profit that have not formed a limited liability entity with the Secretary of State. In a general partnership, the owners are personally liable for all debts and actions of the business and its partners.

Corporations and LLCs provide the same liability protection and must follow the same corporate formalities. The differences between the entities are the tax consequences. For example, a single member LLC cannot be on payroll and must pay self-employment tax on money taken out of the business. With a corporation, the shareholders can be on payroll to avoid paying self-employment tax. It is important to discuss the tax consequences of each entity with your accountant in determining which entity is best suited for your business.

The most common mistakes include failing to have a written contract that complies with Rhode Island law, not including the contractor's registration number on all advertising (including vehicle advertisements), and using the word "license" instead of "registered."

Every contractor, remodeler, and most subcontractors who are in the business of building or repairing residential structures or demolishes or moves a residential structure must register.

To register, you must file an application with proof of liability insurance in the amount of $500,000 plus workers' compensation insurance (if applicable) and pay a $200 fee.

Your registration must be renewed every 2 years.

No. The registration process only involves submitting paperwork with the registration fee. You do not take a test as you would for a license.

You will not be able to get a building permit or do work in Rhode Island. You will also be subjected to fines by the Contractors' Registration Board.

Most subcontractors must register including carpenters, framers, siding installers, foundation installers, drywall installers, plasterers, insulation installers, ceramic tile installers, floor covering installers, swimming pool installers, masons, and general masonry erectors. In addition, the general contractor is required to maintain a list of subcontractors on each job.

Yes, you must register in Rhode Island if you are doing work in the state.

No, electricians and plumbers are licensed with the state and do not need to register if acting within the purview of the license.

The Contractors' Registration Board is a consumer protection agency primarily designed to protect homeowners in their dealings with contractors.

You cannot prevent a homeowner from filing a claim, but by having an arbitration provision in the contract with the homeowner, you can divest the Contractors' Registration Board of jurisdiction. According to the Contractors' Regulation Board's regulations, the terms of the arbitration provision supersede the regulations.

An individual that does work for a contractor is either an employee or independent contractor. The courts look at the extent the hiring party controls the manner and means in which the worker completes his/her tasks. Contractors prefer to designate workers as independent contractors to avoid paying workers' compensation, unemployment tax, and payroll taxes. Improperly classifying an employee as an independent contractor may result in civil and criminal penalties. All independent contractors must file a written notice of designation as an independent contractor with the Rhode Island Department of Labor and Training. Filing of the form only creates a presumption that the individual is an independent contractor.

Courts look at the following factors: (i) right to accept or reject work, (ii) source of tools, (iii) location of work, (iv) duration of relationship between parties, (v) supervision, (vi) scheduled hours, and (vii) skill.

Yes, subcontractors are independent contractors.

The owners are generally personally protected from the liabilities of the business such that the entity provides a shield to protect personal assets from claims related to the business. For example, a creditor that has a claim against the entity will not be able to get to the owner's personal assets such as real estate and bank accounts. However, you must follow corporate formalities to maintain the liability protection of the owners. Business owners can also waive liability protection by personally guaranteeing an obligation of the entity.

No. When you file Articles of Organization (for a LLC) or Articles of Incorporation (for a corporation) with the Rhode Island Secretary of State, you have protected the name within Rhode Island and allowed the state to charge a tax for the entity. Creating the entity does not give personal liability protection. You must follow corporate formalities which includes avoiding the entity from being undercapitalized, having a corporate minute book, updating it annually by filing annual reports and consents, signing documents properly, using the entity's name properly, and maintaining separateness from the entity.

Yes. This can happen in several ways. First, if the entity is not created properly with proper documentation such as consents, operating agreements, bylaws, and stock certificates. Second, if the business does not follow corporate formalities. Third, if the owner does not sign contracts properly or use the name properly. Finally, An owner can always contract away the liability protection by personally guaranteeing a business obligation either knowingly or unknowingly.

Yes, contractors must maintain no less than $500,000 liability coverage.

No. There are many exclusions in the insurance policy. Liability insurance does not cover the cost of repairing the work performed by the contractor.

Liability insurance does not cover all claims. If the contractor does not perform the work properly, the homeowner can sue the contractor and go after the contractor's personal assets such as a home and bank accounts unrelated to the business.

A mechanics' lien is a type of lien filed against a homeowner's land for non-payment of labor or materials provided by the contractor for improvement to the land. The Rhode Island Mechanics Lien Act is codified at Chapter 28 of Title 24 of the Rhode Island general laws. The regulations adopted by the Contractors' Registration Board require that contractors include written notice of possible mechanic's lien in the contract and be provided to the homeowner.

In order to file a mechanics' lien, the contractor must provide the homeowner with a notice of possible mechanics' lien prior to beginning work on the project. If the notice is not provided to a homeowner, the contractor does not have the right to file a mechanics' lien.

A contractor with its principal place of business located outside of Rhode Island.

Yes, non-resident contractors must register with the Board and provide a Rhode Island attorney as agent of service.

If the contractor is a limited liability entity, the entity must qualify to do business with the Rhode Island Secretary of State prior to registering with the Contractors' Registration Board. In addition to what is required of resident contractors, the non-resident contractor must have appoint a Rhode Island attorney as agent of service with the Board.

In a nutshell, contractors must register with the Board, maintain liability insurance, maintain workers' compensation insurance for all employees, call DIG-SAFE before doing any excavating work, ensure that all permits are secured before performing any work, and have written contracts for each job over $1,000. This may sound straight forward, but compliance can be tricky. For example, having a written contract is only sufficient if the contract complies with all of the regulations governing contractors. These regulations require contracts to (i) include a right of rescission (cancellation) clause, (ii) have certain notices and consumer education materials attached to it for the customer, and (iii) have a place near the signature line for the customer to initial that such notices and materials have been received.

Yes, all residential contractors are required by law to have a written contract with homeowners for each job over $1,000. Residential contracts include painters, roofers, floor covering specialists, finish carpenters, swimming pool installers, deck installers, masons, plasterers, drywall workers, siding installers, foundation installers, insulation installers, and other construction-related specialists.

Subcontractors who are not employees of a registered contractor must register with the Board prior to conducting any work.

A fine of up to $5,000 can be imposed on the non-registered subcontractor and the contractor that hired them.

A general contractor must confirm the subcontractor is registered with the Contractors' Registration Board and keep a list of its subcontractors on each job. The list includes the name, address, and registration numbers for each subcontractor.

No. As the owner of a limited liability entity, you can file a waiver with the Rhode Island Department of Labor and Training waiving your rights to workers' compensation coverage or benefits.

Yes. Contractors with one or more employee must obtain workers' compensation insurance coverage.

No. Contractors are only required to have workers' compensation insurance for employees.