Are You Securing Lien Rights? Be Careful, a Contractor’s License May Be Required
As if understanding mechanic’s lien laws wasn’t complicated enough, it’s also vital that you understand and adhere to the licensing requirements for each state.
Did you know, an unlicensed contractor in California cannot recover unpaid monies via a mechanic’s lien? It’s true:
(a) …no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person…
California is not alone. Arizona, Florida & South Carolina, to name a few, have similar statutory guidelines.
Arizona: 33-981 C. A person who is required to be licensed as a contractor but who does not hold a valid license as such contractor issued pursuant to title 32, chapter 10 shall not have the lien rights provided for in this section.
Florida: 713.02 Types of lienors and exemptions. — (7) Notwithstanding any other provision of this part, no lien shall exist in favor of any contractor, subcontractor, or sub-subcontractor who is unlicensed…
South Carolina: Section 29-5-15 (A) To file a mechanics’ lien, a contractor must provide the county clerk of court or register of deeds proof that he is licensed or registered if he is required by law to be licensed or registered. As proof of licensure or registration, the contractor must record his contractor license number or registration number on the lien document when the lien document is filed.
This week, we shared two articles which both address the consequences of failing to be a licensed contractor.
In “The Importance of Proper Licensing for Contractors”, author Jennifer Therrien, advises readers that licensing requirements not only vary by state, but also vary based on the type of work provided. Therrien’s article references several recent cases where contractors, of varying trades, learned the costly lesson of failing to comply with licensing requirements.
In one case, an unlicensed contractor who provided road work services had to pay back over $750,000 to the prevailing party.
Another case involved a homeowner & its landscaper. At the time of contract, the homeowner was aware the landscaper was not licensed. Prior to contract completion, the landscaper did obtain its license and some of its work was performed while licensed. Then, the homeowner filed suit against the landscaper to recover ALL monies paid. Unfortunately, California statute is unforgiving, and the landscaper had to refund the entire amount it received – even funds paid while their license was intact. Further, the court said it was irrelevant that the homeowner knew the landscaper wasn’t licensed! Talk about dirt-y.
The second article shared, Unlicensed Contractor Shoots for the Stars . . . Sputters on Takeoff, recaps a recent Appeals case involving Elon Musk’s Space X. In this case, the contractor argued, among other things, that it furnished non-construction services, relieving it of the requirement for a contractor’s license. Author, Garret Murai, reminds readers “…[I]f you are performing construction work in California (with a value of $500 or more) you are required to hold valid contractor’s license. If you don’t, there could be dire consequences.”