Business Monday

Risks are associated with unlicensed contractors

Construction boomed in Florida in 2015 and continues to do so in 2016 with overall construction spending outpacing last year. Each year, thousands of both residential and commercial property owners, businesses and even general contractors in South Florida are solicited by and contract with unlicensed contractors offering construction services. As contractors become busier, the opportunity for unlicensed contractors also increases. An unlicensed contractor is one who makes improvements to real property without the appropriate license to perform the specified work. Typically, unlicensed contractors perform construction services for less than licensed contractors because they avoid fees associated with licensure as well as avoid worker’s compensation and liability insurance.

In many circumstances, those who contract with unlicensed contractors are often defrauded out of thousands of dollars and face significant risks:

▪ Unlicensed contractors cannot obtain permits, so their work may not fall within the Florida Building Code and will not be inspected by local building departments.

▪ Unlicensed work may prevent a sale of real property because an unpermitted modification may not show up on a prior plan or survey and could delay or preclude financing.

▪ Improper installation by an unlicensed contractor of mechanical or plumbing equipment, roofing or appliances may result in the voiding of product warranties.

▪ Likewise, improper installation by a unlicensed contractor of mechanical or plumbing equipment, roofing or appliances may result in the denial of insurance coverage in the event of a claim.

▪ Incomplete work by an unlicensed contractor may require removal of existing work and complete rework.

▪ There is no entitlement to pursue recovery from Florida Homeowners’ Construction Recovery Fund.

While the above circumstances are not cumulative of possibilities that can arise from unlicensed contracting, they are representative of the fact that contracting with unlicensed contractors can lead to significant exposure and costs in the event of improper or incomplete work.

On a statewide level, Chapter 489 of the Florida Statutes governs the regulation of the construction industry as well as the licensure of categories of contractors through the Department of Business and Professional Regulation’s (DBPR) Construction Industry Licensing Board. Counties and municipalities may also have their own governing authorities.

Businesses and individuals can easily determine whether a contractor they are considering hiring is licensed by contacting the DBPR or their county or municipal department.

The resources shown in the box provide a starting point when considering hiring a contractor, but verification of licensure is only the first step in the business of construction contracting.

For those who are already dealing with the ramifications of hiring an unlicensed contractor, Florida law provides certain safeguards and remedies. The lien law provides that a contractor who is unlicensed as required by state statute cannot enforce lien rights. This is a significant protection for those who encounter incomplete or improper performance followed by threats of liens by an unlicensed contractor.

Separately, Florida law provides that when a contractor is neither certified as a contractor by the state nor licensed pursuant to the laws of the municipality or county within which business is being conducted, the consumer, in the pursuit of legal action, is entitled to the recovery of treble damages and attorney’s fees as a result of injuries sustained resulting from the contractor’s negligence, malfeasance or misfeasance.

Even more significantly, the law provides for forfeiture by the unlicensed contractor. Specifically, the law regulating the licensure of contractors, Chapter 489, provides that contracts entered into by an unlicensed contractor are unenforceable in law or in equity by the unlicensed contractor.

State and local regulations also impose civil and criminal penalties for failure to comply with licensure requirements and unlicensed contractors can be prosecuted for these criminal violations.

It is important to mention that, notwithstanding the regulation of contractors, not all construction requires that the work be performed by licensed contractors and not all categories of construction services even require licensure.

For individuals and businesses that work in the construction industry — although navigating the regulations and application requirements may have hurdles — compliance is critical, especially since the law does not allow an unlicensed contractor to cure a lack of a license after the fact. Likewise, for individuals and businesses that are considering improvements to their properties, although the initial cost may be less expensive, understanding the risk associated with unlicensed contractors is critical to avoiding future exposure.

Board Certified Construction attorney Warren E. Friedman is senior counsel in the Miami office of Peckar & Abramson. He focuses his practice on construction law and real estate counseling and litigation. He may be reached at wfriedman@pecklaw.com.

The Department of Business and Professional Regulation’s website features a verification page for state license categories and even has a mobile app (http://www.myfloridalicense.com/dbpr/HowtoVerifyALicense.html). Likewise, Miami-Dade, Broward and Palm Beach counties have websites for similar verification:

Miami-Dade: http://www.miamidade.gov/building/contractor-inquiry-search.asp

Broward: https://dpep.broward.org/BCS/Default.aspx?PossePresentation=SearchForContractorLicense

Palm Beach: http://www.pbcgov.com/PRStatusAndInspections/Contractors/Contractor_Search.aspx

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