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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 a job. Here are the range responses of three jurisdictions in the region.
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Timothy R. Hughes, Esq., is the principal of the Northern Virginia law firm of Hughes & Associates, P.L.L.C., www.hughesnassociates.com. He specializes in construction litigation, corporate and business related representation, and complex civil litigation. He may be reached at tim@hughesnassociates.com, or by phone at (703) 671-8200. |
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 [16 D.C.M.R. § 800.1], which 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 homeowner. [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. [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, it 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 work properly 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.
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