License Limit, Split Contract, and an Expired Subcontractor License
Ridgeline Mechanical holds a Nevada Class C-21 air conditioning and refrigeration license with a $250,000 monetary limit. The owner asks you to sign a $310,000 design-build contract for a 12,000 sq ft tenant improvement. To stay under the limit, the owner proposes two separate contracts dated the same day: $240,000 for HVAC and $70,000 for “controls coordination,” with each scope referring to the other. You also discover that the proposed sheet metal subcontractor’s license expired 45 days ago. The owner says the sub can “work under your license” and asks you to start demolition Monday because the permit is “still in review.” The project is in Clark County, and the owner wants a 10% cash deposit before signing. You have a signed letter of intent but no contract, no approved plans, and no permit. Identify the licensing, contract, and jobsite risks, and decide what to do before mobilizing.
1. Evaluate the owner’s proposal to divide the work into two same-day contracts. Can you sign either contract or both and stay within your license limit?
Read the worked answer
No. The monetary limit attaches to the contract you take as a licensee, and the Board looks at the substance of the transaction, not just the labels. These are two same-day contracts for one tenant improvement, each cross-referencing the other, and the combined value is $310,000 against a $250,000 limit. That structure looks like an attempt to evade the limit, which can support a finding of contracting beyond the license classification or limit and expose you to discipline. You should not sign either document as proposed. Realistic options are to reduce your scope to a self-performed package that is genuinely within your limit, have the prime contract properly held by a licensee whose limit covers the entire project with you as a licensed subcontractor, or decline the prime role. Do not rely on the owner’s assurance that “the Board will see it as two jobs.” Document the advice and get the contract structure reviewed before signing.
2. What should you do about the sheet metal subcontractor whose license expired 45 days ago, and about the owner’s request to start demolition before permit issuance?
Read the worked answer
A Nevada contractor license is not transferable and cannot be lent to another firm. The subcontractor must hold an active license in the proper classification for the sheet metal scope; an expired license means the sub cannot legally contract for that work. Allowing the sub to “work under your license” can be treated as aiding unlicensed contracting and can expose you to Board action, voided warranties, insurance gaps, and payment disputes. Verify the sub’s status directly with the Nevada State Contractors Board and require a current license and certificate of insurance before any submittal or mobilization. Separately, do not start demolition on a permit that is “still in review.” Permit issuance and approved plans are prerequisites to the work, and starting early can result in stop-work orders, fines, and removal of work. The Monday start should be cancelled until both issues are resolved in writing.
3. The owner wants a 10% cash deposit before signing. How should you handle the deposit and preconstruction sequence?
Read the worked answer
Do not accept cash before a fully executed written contract. A $31,000 cash deposit creates accounting, theft, and lien-risk problems and gives you no enforceable scope, schedule, or payment terms. The contract should define the scope, contract price, allowances, schedule, progress-payment milestones, deposit treatment, insurance, indemnity, warranty, change-order procedure, and lien-release requirements. If a deposit is negotiated, require a check or electronic payment to a business account, issue a receipt, and treat the funds consistently with the contract and any trust or project-accounting obligations. Also resolve the license-limit and subcontractor issues first; a deposit does not cure an illegal contract structure. Before mobilization, you need a signed contract, an active licensed subcontractor, an issued permit, approved plans, and a notice to proceed.