Tag Archives: unlicensed contracting

INTERESTED IN FLORIDA CONSTRUCTION CONTRACTING LICENSING???

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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. 

 

[gview file=”https://floridaconstru.wpengine.com/wp-content/uploads/2016/05/contractor-licensing-presentation.pdf”]

 

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.

 

QUALIFYING AGENTS AND UNLICENSED CONTRACTING – MORE QUESTIONS THAN ANSWERS

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Florida’s licensing requirements for contractors is a complicated statutory framework.  This complication was exemplified in the First District Court of Appeal’s decision in Taylor Morrison Services, Inc. v. Ecos, 163 So.3d 1286 (Fla. 1st DCA 2015), a case I believe leads to more questions than actual answers relating to the status of a contractor’s qualifying agent. 

 

Homeowners entered into a contract with a homebuilder on February 13, 2004 for the construction of a home.  The homebuilder submitted a building permit application (for purposes of obtaining a building permit).  A qualifying agent of the homebuilder that previously resigned from the company prior to the date of the contract executed the application.  This individual testified she had no involvement with the project, did not authorize the homebuilder to pull a permit for this project, did not supervise this project, and doubted the authenticity of her signature on the application. Notwithstanding, the homebuilder had another designated qualifying agent testify he was employed with the homebuilder during various capacities during the relevant contract period.   However, he also did not appear to supervise the project.

 

After closing, the homeowners sued the homebuilder for negligence by an unlicensed contractor (per Florida Statute s. 768.0425) due to construction defects.  The issue turned on whether the homebuilder was licensed at the time of contract. The trial court ruled the homebuilder was not licensed based on the fact that the person that pulled the building permit was no longer affiliated with the contractor at the time of contract and did not supervise the construction.

 

On appeal, the First District focused on the following applicable language in Florida’s contracting licensing law  (embodied in Florida Statutes Chapter 489):

 

Florida Statute s. 489.128

 

(1) [C]ontracts entered into…by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor

 

(1)(a)  A business organization (e.g, company) is unlicensed if the business organization does not have a primary or secondary qualifying agent in accordance with this part concerning the scope of the work to be performed under the contract.

 

(1)(c) A contractor shall be considered unlicensed only if the contractor was unlicensed on the effective date of the original contract for the work, if stated therein, or, if not stated, the date the last party to the contract executed it, if stated therein. 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

 

Florida Statute s. 489.105

 

(4) “Primary qualifying agent” means a person who possesses the requisite skill, knowledge, and experience, and has the responsibility, to supervise, direct, manage, and control the contracting activities of the business organization with which he or she is connected; who has the responsibility to supervise, direct, manage, and control construction activities on a job for which he or she has obtained the building permit; and whose technical and personal qualifications have been determined by investigation and examination as provided in this part, as attested by the department.

 

(5) “Secondary qualifying agent” means a person who possesses the requisite skill, knowledge, and experience, and has the responsibility to supervise, direct, manage, and control construction activities on a job for which he or she has obtained a permit, and whose technical and personal qualifications have been determined by investigation and examination as provided in this part, as attested by the department.

 

 

Based on this language, the homeowners argued that a business organization does not have a primary or secondary qualifying agent unless a licensed contractor (qualifying agent) obtained the building permit for a project and supervised that project.  The First District disagreed and reversed the trial court explaining:

 

The requirement that a business organization have a qualifying agent “concerning the scope of the work to be performed under the contract” refers to the qualifying agent’s type of licensure, not to the agent’s actual performance with respect to a particular job or permit or even to an agent’s assignment to a particular contract. Section 489.128(1)(a)’s requirement that the business organization have a qualifying agent “concerning the scope of the work to be performed under the contract” means the business organization must have at its disposal a person who is recognized as a qualifying agent and licensed as an individual to perform the type of work addressed in the contract.

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In consideration of the date requirement, the statutory definitions of “qualifying agent,” and the modifier “concerning the scope of the work to be performed under the contract,” we conclude that the licensure question under section 489.128(1) turns on whether the business organization is associated with a person licensed for the type of work to be performed under the contract as of the effective date of the contract, irrespective of whether that person ultimately obtains the permit and supervises the construction under the contract.

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[A] person can be a qualifying agent in a general sense, even though the person has not obtained the permit for a particular job. In other words, chapter 489 recognizes “qualifying agent” as a position with respect to a business organization and not only as a position in relation to a specific project.

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Although Appellant may have violated the law by building the home with a contractor other than the one whose name appears on the permit, by using Steiner’s license [person that resigned prior to contract] when she was not affiliated with the project, and by conducting the project with inadequate supervision, these transgressions did not retroactively render Appellant unlicensed within the meaning of section 489.128. Appellant’s apparent violations of the law occurred after the effective date of the contract. Thus, they are irrelevant to the narrow issue of whether Appellant was licensed on that date….

Taylor Morrison, supra, 1290-1292.

 

 

More Questions than Answers

  

What does the First District’s decision actually mean? How far does this decision extend?

 

-Does it mean that a non-licensed contractor that has another licensed contractor pull a permit becomes a licensed contractor simply by having the contractor that pulled the permit testify that he/she served as the qualifying agent? 

 

-Does it mean that a licensed contactor can simply loan his/her license by pulling permits and testifying he/she served as the qualifying agent despite having no involvement or, perhaps, knowledge of the project?

 

-Does it mean that a contracting company that loses its qualifier can have any licensed contractor testify that he/she was serving as the qualifier of the company?

 

-Does it mean that an unlicensed contracting company can have a permit pulled by a sister company, parent company, or related company as long as the person that pulled the permit testifies that he/she served as the qualifier of the company?

 

-Does it mean that it is acceptable for a contractor to construct a project by another person/ licensed contractor that was not identified on the permit?

 

Here, the homebuilder had another employee testify that he served as a qualifying agent of the homebuilder even though he did not pull the permit or supervise the construction.  Apparently, though, he was listed as a qualifier of the company on the effective date of the contract.  Thus, even though the qualifier did not sign the permit application, the homebuilder still had a qualifier, and was thus licensed, as of the effective date of the contract.  This makes sense; it is just uncertain how far this rationale extends relating to qualifying agents when determining whether a contractor was licensed or unlicensed (see unanswered questions above).

 

Importantly, and irrespective of whether the homebuilder was licensed, the court noted that whether the qualifier carried his responsibility faithfully was a separate question not before the court.  Thus, the court left open the door for potential claims and transgressions relating to this issue in other analogous matters. 

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.

 

MORE ON THE HARSH REALITIES OF CONTRACTORS NOT BEING PROPERLY LICENSED

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Previously, we posted an article about the Florida’s court’s decision in Earth Trades, Inc. v. T&G Corp., 2013 WL 264440 (Fla. 2013), which demonstrates the huge risk an unlicensed contractor undertakes by entering into a contract based on Florida Statute s. 489.128 that would render contracts by the unlicensed contractor unenforceable in law or equity.

 

Well, unfortunately for the unlicensed contractor, there are more harsh realities further demonstrated by the Fourth District Court of Appeal’s ruling in Home Construction Management, LLC v. Comet, Inc., 2013 WL 440101 (Fla. 4th DCA 2013). This case references Florida Statute s. 768.0425 which provides in material part: “In any action against a contractor for injuries sustained resulting from the contractor’s negligence, malfeasance, or misfeasance, the consumer shall be entitled to three times the actual compensatory damages sustained in addition to costs and attorney’s fees if the contractor is neither certified as a contractor by the state nor licensed as a contractor pursuant to the laws of the municipality or county within which she or he is conducting business.”

 

In Home Construction Management, an owner hired an unlicensed contractor to complete the construction of a residence. Due to issues that are not discussed in the case, the owner sued the contractor for treble damages pursuant to s. 768.0425 and recovered a judgment against the unlicensed contractor (although the appellate court found that the representative of the unlicensed contractor–likely the person that signed the contract–was not a specific party to the contract and could not be liable for treble damages).

 

Besides the unlicensed contractor being unable to enforce its contract in any way, shape, or form in the event they are not paid, they could expose themselves to treble damages under s. 768.0425 (in addition to having to pay back all funds it received as an unlicensed contractor since a party cannot profit from an illegality). Statute 768.0425 is potentially extremely harsh because this statute would extend to contractors that do not necessarily need to be licensed by the state, but need to be licensed by a local jurisdiction in which they are performing work!!!  Thus, ensuring proper licensure is important to any contractor performing work, regardless of whether that work requires a license by Florida’s Construction Industry Licensing Board.

 

 

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

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The 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

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Florida 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.
***
[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: https://floridaconstru.wpengine.com/more-on-the-harsh-realities-of-contractors-not-being-properly-licensed/

and

https://floridaconstru.wpengine.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.