Do not hire an unlicensed contractor, unless they can provide you with a certificate of exemption issued by the Department of Commerce. However, even if they are legally exempt, if something goes wrong, you won't have access to the Contractors Recovery Fund. They also might not carry liability or property insurance that state licensed contractors must have.
Avoid contractors who engage in high pressure sales tactics. Never decide before you investigate. Contractors who refuse to give written estimates or contracts should not be hired or given any money.
Contractors who fail to obtain proper permits or insist that the homeowner get them are questionable. Other warning signs include: refusing to provide their license number (if they are required to be licensed), refusing to show you proof of insurance, or requiring full or substantial payment before work begins. There is an exception to the permit issue. A homeowner may want to get their own permits if they are performing some of the work themselves.
What do you do if you have problems with a contractor? In writing, explain to the contractor the issues you have with your building project. They need to be given the opportunity to correct any problems. If this doesn't correct the problem, call the Minnesota Department of Commerce Enforcement Division (1-800-657-3602). They are responsible for investigating complaints from consumers alleging violations of law and rules. When necessary, disciplinary action is taken against the contractor's license.
While most contractors are reliable, honest, and offer good quality work, their license is no guarantee. It is important for you to thoroughly check them out before entering into a contract.
(This information is from the Builders Association of Minnesota)
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