The Impact of Unlicensed Contractor Activities

If you’re working in construction, you need to have a license from the Florida Department of Business and Professional Regulation. This is important because without a license, any contracts or legal rights you have might not be enforceable. This means that if you want to change your business structure or merge with another company, you need to make sure your new entity is approved by the DBPR before doing any construction work. If a business in Florida is not active or properly licensed, any construction work contracts it signs may not be enforceable. The same goes for any liens it tries to put on a property for unpaid work. If a contractor is not licensed, there could be serious consequences, including losing the right to sue for breach of contract, losing lien and bond rights, having to pay triple damages, facing criminal penalties, and more. It’s important for clients to know these risks before getting involved in any construction work. A contractor is someone who is hired to work on a building, like constructing, repairing, or demolishing it. They need a license and can only work for money, not for free. If someone offers to do contracting work, they also need a license, unless they are selling completed houses on their own property. In Florida, if you want to be a contractor, you need to get a license. There are different types of licenses: certified, registered, and specialty. Certified contractors can work anywhere in the state, while registered contractors can only work in the specific areas where they are licensed. The type of license you have also limits the kind of work you can do. For example, general contractors can work on any type of structure, while building contractors work on commercial and residential buildings, and residential contractors work on one to three family homes. If you want to work as a business, you also need to get a certificate of authority. Division II contractors include sheet metal, roofing, air-conditioning, pool/spa, plumbing, underground utility, excavation, solar, and pollutant storage system contractors. Specialty contractors have a limited scope of work, and there are exemptions from licensure for owner/builders, Jim Walter, and “Big Boy” entities with a net worth of at least $20 million. If you want to sell a completed house that was built by a licensed contractor, you can do so even if you’re not a licensed contractor yourself. However, if the contractor loses their license after you make the contract, you can’t enforce the contract anymore. And if the contractor gets their license back, this rule doesn’t apply anymore. There have been some changes to the rules over the years to make it clearer when a contractor is considered unlicensed. That’s it! If a contractor doesn’t have the right license and you know it, you can’t enforce a contract with them. This rule also applies to subcontractors. There’s also a case where a contractor was able to keep money they were paid even though the subcontractor they hired wasn’t licensed. In these cases, roofing subcontractors and sub-subcontractors were unable to enforce their contracts because they were not properly licensed. The court also ruled that owners may be barred from seeking certain damages if the contractor is unlicensed. Additionally, sureties can also be protected under the law if the contractor they issued a bond for is unlicensed. In some cases, contractors have used fake names in contracts, but they were still allowed to enforce the contracts. This could cause problems for building officials who need to check if the contractor is licensed. The law is a little unclear on this issue. In a 2006 case, the Supreme Court ruled that arbitration clauses in contracts are separate from the rest of the contract, and claims about the contract’s validity must be decided by arbitrators, not the courts. This decision applies to contracts involving construction projects and confirms a previous ruling in Florida. There have also been cases about applying a 2000 law change to a contractor’s right to “cure” a problem with their license. In Michnal v. Palm Coast Dev., the court upheld a contractor’s right to place a lien on a property and enforce a breach of contract judgment, even though the contractor was not licensed when the contract was signed. The court ruled that the contractor was able to “salvage” its license before filing the lien, and that any retroactive change in the law would affect substantive rights. The court also considered a fax from the contractor to the owner as a final furnishing for determining the timeliness of the lien.

In Mivan v. Metric Constructors, a summary judgment in favor of a contractor was overturned in a lien foreclosure case brought by an unlicensed subcontractor. The court found that there was a genuine issue of material fact regarding the subcontractor’s licensure status and their ability to “cure” it. The court also noted that the deletion of the right to cure in 2000 was not intended to apply retroactively, and any such retroactivity could affect substantive rights. The court did not offer an opinion on retroactive application of 2003 amendments. In a case called R.A.M. of South Florida v. WCI Communities, the court said that a contractor who did not have a license at the time they signed a contract could not “cure” or fix their licensing status after a certain date. Another case, Promontory v. Southern Engineering, said that changes to the law in 2003 could be applied retroactively as long as it was clear and didn’t hurt anyone’s rights. A different case, RTM General Construction v. G/W Riverwalk, found that a contractor couldn’t put a lien on a property if they helped an unlicensed contractor. An amendment in 1988 and changes in 2003 and 2005 also affect the rights of contractors and people who have liens or bonds on a property. If a contractor is not licensed, they may have to pay triple damages for any injuries or costs caused by their work. There are also laws that allow for legal action against anyone who violates building codes, whether they are licensed or not. The Department of Business and Professional Regulation (DBPR) can take administrative action against unlicensed contractors, including fines and orders to stop working. If someone does construction work without a license, they can face criminal penalties like fines or jail time. They may also have to pay back any money they were paid for their work. There are rules to protect people from hiring unlicensed contractors, and those rules can be enforced by the court. In Florida, there are laws to protect consumers from unfair or deceptive business practices. If someone does something that is considered unfair or deceptive, they can be sued. This law also allows people to get their money back, plus attorneys’ fees, if they are harmed by these unfair practices. For example, a homeowner sued a contractor for doing a bad job and won because the contractor wasn’t licensed. The law also allowed the homeowner to go after the contractor’s personal assets, not just the company’s, to get their money back. The law allows for attorneys’ fees to be awarded to the winning party in a case, even if the original contract doesn’t mention it. However, the client should be aware that they might have to pay the other party’s fees if they lose. Some administrative rules under FDUTPA were repealed in 1997 because it was hard to list every violation. The Construction Industry Licensing Board (CILB) has used a law to suspend a contractor’s license for not following construction plans. The issue of unlicensed construction is a big debate and has led to complex laws and a lot of court cases. In the future, courts will have to decide if people have a duty to check if someone they’re hiring is licensed, if knowing someone isn’t licensed counts as a reason to stop a case, and if using a false name can be blamed on someone not being licensed. People in charge of making laws might make new rules to protect consumers and punish unlicensed workers. Certain construction licenses, like memberships to the Bar, are only available to individuals. If a company wants to get a construction license, they have to have a qualified business number. There have been changes to the law, and court cases have affected how licensing and contracting works in the construction industry. Some changes have made it so that sureties can’t use the defense that a bonded contractor was unlicensed. This means that unlicensed contractors may not be able to sue for payment on a performance bond. Overall, only professional engineers and architects have the power to prosecute for unlicensed activities in the construction industry. Frederick R. Dudley is a lawyer in Tallahassee who specializes in construction law and estate planning. He has a lot of experience and has served in the Florida government. This column is written on behalf of a group that focuses on real estate and legal issues.

Source: https://www.floridabar.org/the-florida-bar-journal/the-impact-of-unlicensed-contractor-activities/