Supreme Court Issues Landmark Decision on Unlicensed Contracting

Under Florida Statute 489.128, unlicensed contractors have no rights under their contracts or the Lien Law. However, those who contracted with unlicensed contractors, such as owners or subcontractors, retain all their legal rights to enforce the contract and claim against the contractor’s bond. A common defense raised by the unlicensed contractor to claims of unlicensed contracting was that the party with whom they contracted knew the contractor wasn’t licensed and therefore ought not benefit in a legal action from the lack of licensure. The validity of this defense was an unresolved issue until the Florida Supreme Court ruled last week in Earth Trades, Inc. v. T&G Corp., Case No.: SC10-1892 (Fla. January 24, 2013) [citation pending]. In that case the Supreme Court held the legislature put the burden of licensure on the contractor, not those with whom the contractor contracted, and therefore only the contractor bears the ramifications of unlicensed contracting regardless of whom else may have acquiesced to, or knew about, it.

Although not as clearly stated, this opinion also appears to make an unlicensed subcontractor solely responsible for its lack of licensure, even if the contractor that hired them knew of the lack of license. Previously, courts were split about whether a contractor could avoid its payment obligations to an unlicensed subcontractor, because some courts feared such an outcome would encourage contractors to hire unlicensed subs. The Supreme Court appears to rule that the contractor may indeed avoid any obligations under the contract with an unlicensed sub, since 489.128 requires the sub to be licensed and puts the ramifications of unlicensed subs solely on the subs.