It should serve as no surprise that making sure you are appropriately licensed is important. This includes complying with any state requirement that requires licensure, as well as complying with any local licensure requirement. Not doing so can result in the dispute centered on the lack of licensure, as opposed to leading facts relating to the substance of the dispute. In other words, you are dealing with a technicality that could have harsh implications. This lack of licensure issue recently played out in a dispute with a contractor and subcontractor in ABA Interior, Inc. v. The Owen Corp., 2022 WL 386103 (Fla. 4th DCA 2022), dealing with a local licensure requirement.
In this case, a subcontractor was hired by the general contractor for a commercial project in Palm Beach County. The subcontract contained the standard provision that the subcontractor would comply with all federal, state, and local laws and ordinances.
Palm Beach County had a local ordinance that required the subcontractor to obtain a certificate of competency for specialty contracting (that included some of the work the subcontractor was hired to perform). Palm Beach County had a local ordinance that “makes it unlawful for a person who is required but failed to possess a certificate of competency ‘to hold himself/herself out as a contractor, whether as a plaintiff, defendant or witness in any court in this county.’” ABA Interior, supra, quoting Palm Beach County Code section 7-17(b)(2).
When the general contractor learned the subcontractor had not obtained its certificate of competency–which appeared to be learned after the subcontractor completed its performance–it stopped paying the subcontractor. The subcontractor sued the general contractor for payment in Broward County based on the subcontract’s venue provision. The general contractor counterclaimed to recover monies it paid the subcontractor (presumably under a disgorgement theory for unlicensed contracting) and further argued the subcontractor could NOT sue the general contractor relating to its unlicensed work.
The trial court agreed and entered summary judgment in favor of the general contractor. The Fourth District Court of Appeal reversed in part.
The subcontractor argued that because it sued in Broward County, not Palm Beach County, any bar to suing in Palm Beach County due to its lack of licensure did not apply. The appellate court shot this argument down as unreasonable:
[T]he [subcontractor’s] reading of the Palm Beach County Code would make it so that section 7-17(b)(2) could never be enforced outside of Palm Beach County, even when Palm Beach County law applies. If a contract has a venue provision outside of Palm Beach County, as is the case here, a party that falsely holds itself out as possession a required certificate of competency would effectively face no consequence. This would be an unreasonable result.
ABA Interiors, supra.
However, the appellate court maintained that the local ordinance only barred an unlicensed contractor “from litigating claims involving work that requires additional [specialty] licensure. [The subcontractor] was still permitted to prosecute or defend itself on claims that did not require this additional licensure.” Id. The subcontractor’s scope included flooring work which may not have required a specialty license. The appellate court found there was no finding by the trial court that all of the subcontractor’s work required a specialty license and there was also no finding as to whether the subcontractor complied with its contractual requirement “by engaging properly licensed sub-subcontractors to perform the work that required Palm Beach County licensure.” ABA Interiors, supra. For this reason, the appellate court reversed summary judgment.
Moreover, the appellate court maintained that there was no finding by the trial court as to whether the subcontractor’s lack of this specialty license “constituted a breach of the agreement that would negate any obligation for payment, even for the work that did not require such licensure.” Id. For this reason too, the appellate court reversed summary judgment.
As you can see, this case dealt with the technical argument of licensure. It did not deal with the substance of the subcontractor’s work (i.e., was it defective or nonconforming, or was the work performed correctly). This is not the type of fight you want to be in reinforcing the importance of making sure i’s are dotted and t’s are crossed with licensing requirements.
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.