New Case Opening Door for Unenforceability of Contracts With Subcontractor Lacking Local License
All construction contracts entered into with contractors lacking state licenses are unenforceable. The contractor also loses lien rights and the ability to claim under a bond. However, the consequence of unlicensed subcontracting is less clear and made more so by a recent court case.
A subcontractor’s failure to maintain the required license may not deprive it of payment from the general contractor for whom they worked. Poole & Kent Co. v. Gusi Erickson Const. Co., 759 So.2d 2, 6 (Fla. 2d DCA 1999), held the unlicensed subcontractor was entitled to payment because it was the general contractor’s responsibility to ensure its subcontractors are licensed and, if the contractor could avoid paying unlicensed subcontractors, then contractors would be encouraged to hire unlicensed subs. However, there is at least one case holding to the contrary. Deep South Systems, Inc. v. Heath, 843 So. 2d 378, 381 (Fla. 2d DCA 2003).
The new case of MGM Const. Services Corp. v. Travelers Casualty & Surety Co. of America, 2011 WL 710191 (Fla. 3d DCA 2011), is a landmark case in which the court reversed a trial court’s finding that a subcontract with an unlicensed drywall subcontractor was unenforceable. The appellate court correctly determined that section 489.128 of the Florida Statutes, rendering contracts with unlicensed contractors unenforceable, only applied to state licenses and had no bearing on local licenses like drywall. However, the court went on to hold that, where the Legislature has not added the penalty of non-enforceability to a licensing provision, the courts may nevertheless still do so after weighing the relative strength of the policies behind the local licensure requirement and any competing policies of injustice. Therefore, in summary, although local ordinances requiring local licenses like drywall may not expressly make a contract with an unlicensed subcontractor unenforceable, the courts may nevertheless do so with their own powers after weighing various policy considerations on a case by case basis.