No Ticket, No Payment
Lack of proper licensing can have a tremendous impact on your ability to secure payment for work performed. In some states, lack of licensure inhibits claims for payment. In others, lack of licensing can be a complete bar to recovery. Lack of licensure can actually create a claim where an owner can force disgorgement of all monies paid to the unlicensed contractor for work performed.
A recent District of Columbia case highlights the extreme risk associated with failure to comply with applicable licensing regulations.
In application, this bright line test has resulted in some harsh cases. The courts have ruled that an owner can accept the benefit of a fully and properly performed contract. The owner has a complete defense to payment. Indeed, the owner can even institute its own offensive claim for disgorgement of funds paid to the contractor and will win under the law of the District of Columbia.
The condominium association made a single progress payment. Before the work was completed, the association learned the contractor was not licensed as a home improvement contractor. The association refused to make further payments. The contractor sued for breach of contract, and the association counterclaimed seeking return of all funds paid.
The trial court ruled that the regulations required contractors working on condominium projects to obtain home improvement contractor licenses. Based on the regulations, the trial court granted summary judgment to the association and ordered the contractor to refund all monies paid.
On appeal, the District of Columbia Court of Appeals affirmed the trial court's rulings. Reviewing the statute, the court found that "home improvement" as defined included work on "residential property." This language expressly included individual apartments. The court found no reason to distinguish between apartments being included and condominiums being excluded from application of the license requirements. The statute further expressly required licensure for areas that were "appurtenant" to residential property. As such, even common areas were included within the license requirements. The court upheld summary judgment in favor of the owner and return of all funds paid to the contractor.
About the Author
Tim Hughes is Of Counsel to the law firm of Bean, Kinney & Korman in Arlington, Va. He can be reached by email at email@example.com or by phone at 703-671-8200.