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Timothy R. Hughes' Articles > Mid-Atlantic Construction
Timothy R. Hughes, Esq.
Hughes & Associates, P.L.L.C.
Contractors who risk not having proper licenses, also risk not getting
paid. We examine three jurisdictions for the range of their responses to
this issue.
You are probably aware that many states require contractors licenses or
home improvement licenses. What is less well known is that the lack of a
required license may prove a serious impediment to a contractor recovering
payment even when they do their job. Here are the range responses of three
jurisdictions in the region.
The District of Columbia
The District of Columbia mandates harsh results for failure to follow home
improvement license requirements. The D.C. Code authorizes regulations
which are contained at 16 D.C.M.R. § 800.1. The regulations provide that
no person shall accept payment for a home improvement contract in advance
of full completion of the work without a home improvement license.
The case law construing this section creates some harsh results. The
unlicensed contractor’s contracts are illegal and void. In addition to not
being allowed to sue for money damages in the event the contractor is not
paid, the courts may actually require the contractor to return any monies
paid to date to the home owner. [Remsen Partners, Ltd. v. Stephen A.
Goldberg Co., 755 A.2d 412 (D.C. 2000)]
There are a couple of saving graces. Arguably, the contractor can
completely finance the job and get paid at the end. Any payment during the
project destroys this argument. The statute applies only to home
improvement projects so commercial projects are safe from the harsh rule.
Ultimately, the owner can receive the full benefit of contract performance
done properly and still not pay a dime if this rule applies.
Maryland
Like the District of Columbia, Maryland licenses home improvement
contractors. Maryland cases also provide that an unlicensed contractor is
not entitled to recover for a breach of its contract. See e.g. Donmar
Maryland Corporation v. Hawkesworth, 420 A.2d 295 (Md. App. 1980).
Unlike the District of Columbia, the Maryland courts do not have a large
number of reported decisions aggressively enforcing this concept. As such,
evaluation of its precise contours is a bit more difficult to predict.
However, what is clear is that absent a license, a party will have an
uphill battle getting paid.
Virginia
Virginia presents both the best and worst possible scenarios. Virginia has
a far more comprehensive framework for regulation and licensing of
contractors. As such, contractors performing specific amounts of work
measured in total dollar volume are required to obtain specific licenses
(Class A, B or C depending on the volume). The licenses apply not only for
home improvement contracting, like in Maryland and the District of
Columbia, but rather to all construction work. As such, the breadth of
application of licensing doctrine is potentially far broader in Virginia.
Like Maryland and the District of Columbia, Virginia case law indicates
that contracts entered into by an unlicensed contractor are illegal and
thus unenforceable. Virginia statutes, however, do have an escape clause.
If the contractor has substantially performed the contract within the
terms of the contract in good faith and without actual knowledge that a
license or certificate was required by the licensing statutes, then lack
of licensure is not a good defense.
Conclusion
Licensing requirements for contractors are a good idea to protect the
public from predatory contractors. All too often, they can become a trap
for unwary contractors who perform in good faith and do their properly
work under the contract. Make sure that you are aware of and comply with
all applicable statutes and licensing requirements or you may be left with
a very serious problem collecting at the end of the project.
Timothy R. Hughes, Esq., is the principal of the Northern
Virginia law firm of Hughes & Associates, P.L.L.C. He specializes in
construction litigation, corporate and business related representation,
and complex civil litigation. He may be reached at
tim@hughesnassociates.com.
Printed with permission
from Mid-Atlantic Construction
http://midatlantic.construction.com/2005/12/01/MA_12_01_2005_law-01.asp
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