Unlicensed Contractors’ Time Has Run Out

Since 1 July 2008, residential contractors and general contractors must comply with licensing laws.  Failure to comply with those laws can have disastrous financial and legal consequences.  A recent case serves as a reminder of the importance of complying with licensing laws. In that case, the Court of Appeals considered whether an unlicensed contractor could recover on a contract entered into before 1 July 2008. According to O.C.G.A. § 43-41-17(b), contracts entered on or after 1 July 2008 are unenforceable. But this case considered a contract entered into before this date.

In this case, in May 2007, Contractor and Owner’s father verbally agreed that if Contractor would perform renovations and repairs, the father would convey certain property to Contractor. In October 2008, Owner died, leaving the property to Owner. Sometime between January and March 2011, Owner and Contractor entered into a written agreement acknowledging: (i) that Contractor and Owner’s father had a prior verbal agreement and (ii) that Contractor had performed the required work.

Despite the written agreement, Owner refused to convey the designated property to Contractor. Contractor sued for breach of contract, quantum meruit, and foreclosure of a lien.

Owner moved for summary judgment, in part, because Contractor was unlicensed. But Contractor responded that the applicable statute applied only to contracts entered into on or before 1 July 2008. Owner countered that the written contract was executed long after 1 July 2008.

After considering the arguments, the Court ruled in favor of Contractor. Rejecting Owner’s argument, it concluded that a material dispute existed regarding the date the contract was entered. While the written agreement was executed in 2010, the original verbal agreement was entered in May 2008. Thus, Owner was not entitled to summary judgment.

While this contractor’s case survived to fight another day, today’s contractors would not be so lucky. Instead, contractors and subcontractors would be wise to review the licensing requirements to ensure they can pursue payment by litigation or liens, if necessary.

 

 

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