Can a Residential Contractor Work on Commercial Jobs in California?

If you’re a general contractor working on homes, apartments or other residential spaces, you might wonder if you are legally able to work on commercial jobs, even if you’ve only worked on residential jobs before.

In this article, we’ll cover everything you need to know if you’re a residential contractor looking to make the jump to the bigger, higher-paying commercial jobs in your part of California.

Key Differences Between Residential and Commercial Contractors

The obvious difference between commercial and residential contractors is that one builds residences like homes and apartments, while the other works on commercial properties: offices, data centers, strip malls, and so on.

Both groups tend to stay in their own respective lanes, but there is a fair bit of overlap as well. Here are the main differences (and similarities) between residential and commercial contractors.

1. Scope and Scale of Projects

  • Residential Contractors: Build homes, apartments, and other living spaces. The projects are typically smaller in scale and involve a more personalized approach to meet the homeowner’s needs. They require a fair bit of direct customer interaction – more so than commercial contractors.
  • Commercial Contractors: They construct non-residential buildings like offices, malls, and industrial structures. These projects are almost always larger, involving more complex systems and more stringent regulations than residential jobs.

2. Building Codes and Regulations

Residential Contractors: Adhere to residential building codes, which might be more lenient in aspects like accessibility and materials. Basically, if you’re building a safe and habitable home or apartment that fits the neighborhood, residential contractors have little to be concerned about when it comes to codes and regulations.
Commercial Contractors: Must comply with commercial building codes, which have stricter guidelines concerning safety, accessibility, and durability due to the public nature of the spaces and the sheer amount of people who use commercial spaces.

3. Design and Materials

Residential Contractors: The design often prioritizes aesthetics, comfort, and functionality, with a lot more flexibility and openness to unique designs. Materials used might prioritize cost-effectiveness or visual appeal. There’s a lot more freedom here.
Commercial Contractors: The design must cater to the functionality of the business or industry, often involving the use of more durable and industrial-grade materials to withstand higher traffic and usage.

4. Project Timeline and Budget

Residential Contractors: Residential projects almost always have a shorter timeline and might have a more flexible budget, with a focus on meeting the homeowner’s specific needs and preferences.
Commercial Contractors: Projects often come with a stringent timeline and budget, with a higher emphasis on adhering to the predetermined schedule to prevent financial losses. Commercial contractors have a lot more on their shoulders than residential contractors, with dozens or hundreds of stakeholders pushing hard on the project to meet expectations and deadlines.

5. Licensing and Insurance

Residential Contractors: Licensing requirements might be less stringent, and insurance might focus more on aspects like property damage and injury. However, in most states, residential contractors have strict licensing guidelines.
Commercial Contractors: While all residential contractors are required to have licenses and insurance in California, commercial contractors are often required to have even more comprehensive licenses and insurance policies due to the larger scale and higher risks involved in commercial projects.

6. Client Interaction

Residential Contractors: Interaction is often with individuals or families, requiring a personal touch and understanding of individual needs. This can sometimes mean overly demanding or needy clients when compared to the residential world, where the general contractor is communicating with an intermediary.
Commercial Contractors: Interaction is usually with business entities, requiring a focus on meeting the functional needs of the business and adhering to commercial standards and regulations. Generally, they have less need for shmoozing or working hard to win clients over.

Licensing: The Key Area

In California, the key license required for general contractors looking to work on both residential and commercial projects is the Class B General Contractor License. Both sets of general contractors need this license to do any work in California. This license is designed for individuals specializing in both residential and commercial construction tasks.

The scope of work under this license is broad as you might expect, covering all sorts of general contractor responsibilities. Some of the things that the Class B General Contractor license encompasses:

  • Design & Builds
  • Residential and commercial building construction
  • ADU Builds
  • Tenant Improvements
  • Repairs and fixes
  • Remodeling (in some instances – in others you’ll need a class B-2 license)

It’s extremely important to note that without a Class B license, you cannot do any general contracting work at all – residential or commercial, so you’re going to want to take care of that first.

The Fine Print

However, the General B License comes with its set of caveats. A general building contractor may engage in a project involving framing or carpentry directly. But for projects involving other trades – in California, anyone holding a Class C License – the scenario gets a tad complex.

Here’s the deal:

If a project involves trades beyond framing or carpentry, a general building contractor can take a prime contract only if it necessitates “at least two unrelated building trades or crafts”.
Alternatively, the contractor should hold the appropriate license classification or subcontract with an appropriately licensed specialty contractor to perform the work.

The Legal and Regulatory Rundown

There are a bunch of legal and regulatory guidelines that govern commercial and residential contracts. The main thing to be aware of – as always – is licensing. Generally speaking, license laws are the laws that will govern everything when it comes to residential and commercial general contracting.

A Class B General Contractor License, for example, allows GenCons to take on any general contracting job in the state – including residential or commercial – but many jobs require contractors to acquire further licensing or certifications to perform certain types of work.

The B&P Code §7057, for example, places further limitations on the types of work GenCons can take on, stating that general building contractors cannot engage in certain works unless they add specific classifications to their license or subcontract with a specially licensed contractor.

As always – it’s illegal for unlicensed contractors to work on any construction project valued over $500, and a license is mandated for 40 construction-related trades in California.

Here’s some more specific information.

Commercial Construction Contracts

One of the biggest laws affecting general contractors working in residential and commercial jobs is SB 474, signed back in 2011. This law established the following changes:

  • SB 474 broadened the scope of unenforceable indemnity provisions, particularly the “Type I” indemnity provisions which previously allowed an upstream contractor to be indemnified by a downstream contractor even for liabilities arising from the former’s own active negligence.
  • Imposed stricter limitations on contractors’ ability to require their subcontractors and suppliers to cover the costs of defense in litigation. Specifically, the law added requirements for a formal written tender of the claim before a subcontractor is obligated to contribute to defense costs.

Carpentry & Framing Restrictions

General contractors in California have specific restrictions when engaging in projects outside the domains of framing or carpentry on their jobs. This gets a bit sticky, so we’ll cover this more in-depth in a later article, but here’s a bird’s eye view of how carpentry and framing trades affect residential and commercial general contractors.

  • A general contractor may take a prime contract or a subcontract for a framing or carpentry project.
  • For projects involving trades other than framing or carpentry, a GenCon can only take a prime contract if it requires at least two unrelated building trades or crafts.
  • Similarly, a GC can take a subcontract involving other trades only if it involves at least two unrelated trades or crafts, aside from framing or carpentry.
  • Furthermore, the law restricts general contractors from contracting for projects that include any CSLB Class “C” specialty contractor projects, unless they hold that certification themselves. Even then, they cannot perform the work if there are less than two trades involved. There must be at least two trades involved.

In addition, to these overarching laws, there’s been a number of recent bills and other legislation that dictate the finer points of commercial general contracting. Here are some of the most important ones for contractors to know.

2022 General Contractor Laws

Electronic Records for Contractors and Subcontractors (AB 1023):

  • This regulation was introduced to enable electronic record-keeping, making it easier for contractors and subcontractors to maintain and access their records digitally.

Direct Contractor Liability on Private Works (SB 727):

  • This legislation expands the liability of direct contractors on private works projects. It requires direct contractors to make certain payments and extends their liability, ensuring that subcontractors and laborers are paid appropriately for their work​​.

Property Assessed Clean Energy (PACE) Program (AB 1551):

  • This law concerns the PACE program which provides financing for homeowners and business owners to make energy efficiency, renewable energy, and water conservation improvements.

Enforcement of Liens on Real Property (SB 572):

  • This regulation addresses the enforcement of liens on real property, providing a legal framework for contractors and other stakeholders to claim their financial rights.

Change Order Cap (Los Angeles County ONLY!):

  • A law was enacted that allows Los Angeles County to implement a change order cap of $400,000 for contracts whose original cost exceeds $25,000,000, and a cap of $750,000 for contracts exceeding $50,000,000. These caps are adjustable annually based on the percentage change in the California Consumer Price Index​.

2023 General Contractor Laws

Workers’ Compensation Laws

  • Probably the biggest piece of legislation that went into effect in 2023 are the new Workers’ Comp laws. These laws legally require all contractors to have $25,000 in Workers’ Compensation.

Housing Affordability and Environmental Laws

  • A series of laws were passed aimed at improving housing affordability, tackling climate change, and facilitating the construction of new housing, impacting both residential and commercial contractors. This is an opportunity for general contractors to reach new markets

Procurement Authorities

  • New procurement authorities were introduced for contractors, potentially altering the way contracts are awarded and managed.

Accessory Dwelling Units (ADUs) Laws

  • New laws concerning ADUs were passed to make it easier and more affordable to build such units, impacting residential contractors primarily but also commercial contractors involved in residential projects.

Minimum Wage Increase

  • Effective January 1, 2023, the minimum wage in California will increase to $15.50 per hour for businesses with 26 or more employees, affecting the labor costs for contractors.

Increased Civil Penalties (AB 1747):

  • Contractors who violate building laws will see an increase in civil penalties under AB 1747 in 2023. The bill increases the fine from $8,000 to $30,000 for every violation of BPC Section 7110 (violations of building laws) and amends Section 7099.2 (assessment of civil penalties) regarding building permit violations​.


If you’re a residential contractor in California – good news! You don’t need anything special to do commercial jobs, as long as you’re working on jobs that fit your classification, and making sure that you’re paying attention to all the exceptions to the rules – things like specialized classifications and the “two trade” laws.

Marketing yourself as a commercial contractor is a whole different kettle of fish, though – maybe we’ll write an article with some of the best tips to get you going!


CSLB – Building Official Information Guide
CSLB – Class B General Contractor License
Smith, Currie & Hancock – 2023 Construction Laws
Digital Constructive – Jobs You Can Do With A General B License
Contractors License Guru – What Can and What Can’t General Building Contractors Do
LegalMatch – Can Homeowners Hire an Unlicensed Contractor?
Lorman – Fundamentals of Construction Contracts in California
Pillsbury Law – Shifting of Liability

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