INTERESTED IN FLORIDA CONSTRUCTION CONTRACTING LICENSING???

 

Interested in learning about Florida construction contracting licensing?  Contrary to perhaps popular belief, Florida’s construction contracting licensing law is confusing…even for practitioners.  Below is a portion of a presentation on the requirements for construction contracting licensure and the penalties for unlicensed contracting. 

 

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Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

THE HARSH REALITIES OF A CONTRACTOR NOT BEING PROPERLY LICENSED

imagesThe recent Florida Supreme Court’s decision in Earth Trades, Inc. v. T&G Corp., 2013 WL 264440 (Fla. 2013), demonstrates the harsh realities for an unlicensed contractor. In this case, a general contractor hired a site subcontractor. The subcontractor, alleging nonpayment, filed suit against the contractor and the contractor’s payment bond. The contractor argued that its site subcontractor was unlicensed and therefore was unable to pursue any cause of action against either the contractor or the payment bond. The contractor relied on Florida Statute s. 489.128 which provides in material part: “As a matter of public policy, contracts entered into on or after October 1, 1990, by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.

 

The unlicensed subcontractor argued what is referred to as the in pari delicto doctrine.  This doctrine stands for the proposition that a party who has knowledge and participates in the wrongdoing cannot reap the benefits of the wrongdoing. In other words, the subcontractor was arguing that the general contractor knew it was unlicensed and, thus, cannot reap the benefits of the harsh effects of the statute that would prohibit it from any remedy associated with the contractor’s nonpayment.

 

The Florida Supreme Court held that this in pari delicto doctrine does not apply even if the contractor knows that the subcontractor was unlicensed and hires the subcontractor anyway.

 

General contractors and subcontractors that are required to be licensed by the state (Florida’s Construction Industry Licensing Board) need to ensure they are properly licensed. Otherwise, if they enter into a contract with a party and despite the other party knowing about the lack of license, they will be out of luck. This could mean the other party has no legal obligation to pay it and arguably could seek to recoup monies paid to the unlicensed contractor. Obviously, this could be avoided by ensuring proper licensure, especially now that the defense “well, the other party knew I wasn’t properly licensed” no longer applies.

 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THE IMPORTANCE OF PROPER CONSTRUCTION CONTRACTING LICENSES

imagesFlorida law requires general contractors (and certain specialty subcontractors) to be licensed with the state of Florida. See Florida Statutes Chapter 489, Part I. This is because construction contracting, similar to other professions, is regulated. The law treats the licensure of contractors very seriously in that, “[C]ontracts entered into on or after October 1, 1990, by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.” Fla.Stat. §489.128(1). Therefore, an unlicensed contractor that performs work will be unable to enforce nonpayment, which would include not properly being able to lien or foreclose on a lien. This could financially ruin a contractor that did a great job on a project but cannot secure final payment because it was not properly licensed.

 

Contractors need to ensure they are properly licensed prior to entering into a contract with an owner. Likewise, owners need to ensure that the contractor they are hiring is properly licensed. The construction contracting licensure law can be difficult navigating; therefore, having an attorney assist with any licensure questions is important to save both contractors and owners the heartache that may ensue if proper licenses are not in place.

 

In determining whether a contractor is unlicensed, the law provides:

 

“[A]n individual is unlicensed if the individual does not have a license required by this part concerning the scope of the work to be performed under the contract. A business organization is unlicensed if the business organization does not have a primary or secondary qualifying agent in accordance with this part concerning the scope of work to be performed under the contract. For purposes of this section, if a state license is not required for the scope of work to be performed under the contract, the individual performing that work is not considered unlicensed.
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[A] contractor shall be considered unlicensed only if the contractor was [a] unlicensed on the effective date of the original contract for the work, if stated therein, or if not stated, [b] the date the last party the contract executed it, if stated therein. [c] If the contract does not establish such a date, the contractor shall be considered unlicensed only if the contractor was unlicensed on the first date upon which the contractor provided labor, services, or materials under the contract.” Fla.Stat. §489.128(1)(a), (c).

 

Recently, in Austin Building Company v. Rago, Ltd., 2011 WL 1563797 (Fla. 3d DCA 2011), the Third District dealt with the issue of whether a general contractor and subcontractor where properly licensed. In this case, an owner entered into a contract with the properly licensed general contractor (“GC”) in March 2005 for the construction of a condominium in Miami. The contract provided that once the GC’s affiliate (“Affiliate”) became a licensed general contractor in Florida, the GC would assign the contract and related documents to the Affiliate.

 

After the execution of the contract, GC engaged a structural concrete subcontractor (“Subcontractor”) that immediately commenced work in April 2005 without a formal contract in place. Months later, the Affiliate became licensed and formally executed the subcontract with the Subcontractor. The Affiliate, however, terminated the Subcontractor due to the Subcontractor’s defective work and, as a result, the Subcontractor sued the GC, the Affiliate, and their payment bond for nonpayment, and the Affiliate countersued the Subcontractor. Both parties moved for summary judgment arguing that the other was not a properly licensed contractor and, therefore, should not be entitled to enforce the subcontract.

 

The Third District Court of Appeal found that there remained a question of fact as to whether the GC or the Affiliate served as the general contractor when the Subcontractor started performing work. Notably, at the time the Subcontractor started performing construction activities without a contract, the Affiliate was not a licensed contractor. However, the GC was licensed. If the GC was the contractor at the start of the Subcontractor’s performance, the GC and/or the Affiliate should be in a position to enforce the Subcontract (which would seem to be the case given that it was contemplated when the owner hired the GC that the GC would eventually assign the contract and related documents to the Affiliate when the Affiliate became licensed). However, if the Affiliate is deemed to be the contractor at the start of the Subcontractor’s performance, then the Affiliate should not be able to enforce the subcontract to recover sums associated with the Subcontractor’s defective work because it was admittedly not a licensed contractor when the Subcontractor commenced performance.

 

The Third District further found that the Subcontractor did not need to be licensed and could enforce the subcontract. Although the case does not fully explain, it remains uncertain as to what activities the concrete Subcontractor performed that would have required a state license.

 

This case reveals the importance of proper construction contracting licenses. If the Subcontractor was not properly licensed with the state, then it would have no avenue to recover for nonpayment. This is difficult for many under capitalized subcontractors that rely on timely payments to fund their operations. On the other hand, if the contractor was not properly licensed, then it would have no avenue to recover against the Subcontractor for defective work. This would then make the contractor directly responsible for the Subcontractor’s work without any true avenue to recoup its costs against the Subcontractor.

 

For more on contractor licensing, please see: http://www.floridaconstructionlegalupdates.com/more-on-the-harsh-realities-of-contractors-not-being-properly-licensed/

and

http://www.floridaconstructionlegalupdates.com/the-harsh-realities-of-a-contractor-not-being-properly-licensed/

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.