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By: Thomas H. Welby Gregory J. Spaun Published: January 2020

Unlicensed Subcontractor Denied Recovery On Residential Work Even Thought It Contracted With Licensed General Contractor

The construction industry often suffers its worst public image because of those few contractors who prey on the least sophisticated clientele: private home owners. In order to stave off some of what is portrayed as “preying on unsuspecting grandmothers”, many counties—particularly in the downstate region—require a “home improvement” contractor or construction manger to have a license. In order to put teeth into these regulations, courts will not permit contractors without such a license to maintain a lawsuit (on any theory) to recover for that work.

Often left open, however, is the question of what happens when an unlicensed contractor is not retained directly by the homeowner but, rather, a licensed general contractor. In the recent case of Forman Construction, Inc. v P.D.F. Construction, this question was answered to the disappointment of those contractors, and the court denied a recovery for the unlicensed subcontractor—despite that the general contractor was, in fact, licensed. 

Background

At some point prior to 2008, Pier and Debra D’Alessandro desired to have certain work performed on a property owned by them. The D’Alessandros undertook the work through P.D.F. Construction, a general contractor owned by Pier that had its home improvement contractor’s license. P.D.F. entered into a subcontract with the plaintiff, Forman Construction, for Forman to perform a portion of the required work. Forman, unlike P.D.F., did not have a home improvement contractor’s license. Subsequently, a payment dispute arose between P.D.F and Forman, and Forman commenced a lawsuit against P.D.F. and the D’Alessandros to recover the monies which it claimed were due to it.

Decision

After discovery, the defendants moved for summary judgment dismissing Forman’s complaint. In support of the motion, the defendants argued that Forman did not have a home improvement contractor’s license and, therefore, had forfeited its right to recover under any legal theory. In opposition to the motion, Forman argued that it did not need to be licensed since it did not contract with the homeowners but, rather, P.D.F., a licensed general contractor.

The motion court granted the motion dismissing Forman’s complaint, and the appellate court affirmed. In doing so, the appellate court cited to case law discussing the protective purpose of the licensing statutes, and held that the logic applies not only to the contractor who directly enters into the contract with the homeowner, but also all other contractors who perform work on such a residential property. It must also be noted that although the case did not turn on the relationship between the D’Alessandros and P.D.F., the appellate court made note of that relationship and found that the defendants also established that Forman entered into the contract with a party who actually resided on the property upon which the work was performed.

Comment

While the appellate court’s reference to the D’Alessandros’ residence on the property upon which Forman performed its work may seem to blunt its warning effect, that court’s citation to numerous cases discussing the protective purposes behind the licensing statutes should highlight the danger. Contractors or construction managers who work on residential property—in any capacity, and not just as a general or prime contractor to the owner—without a home improvement license (or, if in a licensed trade, without the appropriate trade license)—forfeit their right to recover for their work, under any legal theory, including foreclosing a mechanic’s lien asserted against the property. Accordingly, contractors would be well advised to research whether a license is required for the work they are about to undertake (and, if so, make sure to have such a license).

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