Can unlicensed contractors defend against homeowner’s claims?
Yes, an unlicensed contractor can defend claims according to the Fifth District Court of Appeal in Brock v. Garner Window & Door Sales, Inc., 187 So. 3d 294 (Fla. 5th DCA 2016).
In Brock, the homeowners sued a window installation contractor alleging that the contractor defectively installed windows which caused water intrusion. Garner Windows, the contractor, was not licensed. Garner Windows raised the statute of limitations defense.
The homeowners argued that Garner Windows could not rely on the statute of limitations because the four year statute of limitations in section 95.11(3)(c), Florida Statutes, states that the limitations period begins to run on the date of completion or termination of the contract between the . . . licensed contractor and his employer. In this case, since Garner Windows was not licensed, the homeowner argued that the 4 year statute of limitations did not apply.
The Fifth District disagreed with the homeowner finding that the 4 year statute of limitations did apply even though the contractor was not licensed. The court reasoned that the term “licensed contractor” was only referring to wen the statute starts to run and not the type of actions to which it applies. The court held that although section 489.128, Florida Statutes, prohibits an unlicensed contractor from enforcing its contract, it does not preclude an unlicensed contractor from defending against an action to enforce a contract by the owner.
What is the Statute of Limitations for Breach of a Construction Contract?
In Florida, section 95.11(3)(c), Florida Statutes, requires actions brought within four years if it is “founded on the design, planning, or construction of an improvement to real property, with the time running from the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest . . . “
There is also also a discovery rule which extends this limitations period for latent defects.
In the recent case of Brock v. Garner Window & Door Sales, Inc., 2016 WL 830452 (Fla. 5thd CA March 4, 2016), Brock hired Garner Window to install windows in their home. The home sustained water intrusion and Brock sued Garner Window. The lawsuit was filed more than 4 years after discovery of the latent defect, but less than 5 years. Garner argued that the general five year statute of limitations for actions founded on written contracts applied. The basis of this argument was that Garner Window was not a licensed contractor.
The Fourth District Court of Appeal rejected this argument and held that the statute of limitations is still four years, and that an unlicensed contractor can raise this defense.
When is a Contractor Unlicensed in Florida?
Section 489.128, Florida Statutes, states that any contracts entered into by an unlicensed contractor are unenforceable in law or in equity by the unlicensed contractor. A contractor is considered unlicensed only if the contractor was unlicensed on the effective date of the original contract for the work, if stated. If no date is stated, the court will look at whether the contractor was licensed on the first date upon which the contractor provided labor, services, or materials under the contract.
In Taylor Morrison Services, Inc. v. Ecos, the First District Court of Appeal analyzed whether a contractor is unlicensed where its qualifying agent does not obtain the permit or supervise the construction under the contract. 2015 WL 3407929 (Fla. 1st DCA 2015). In Taylor Morrison, Ecos hired Taylor Morrison to construct a home. After closing on the home, Ecos discovered defects and sued Taylor Morrison for negligence by an unlicensed contractor.
On the effective date of the contract with Ecos, Taylor Morrison had four qualifying agents. One such agent was Lisa Marie Steiner – who had recently resigned her employment with Taylor Morrison prior to the Ecos contract. Taylor Morrison pulled the construction permit in the name of Steiner without her authorization. Additionally, Steiner did not supervise the construction and no licensed contractor ever supervised the construction. The trial court held that Taylor Morrison was unlicensed due to these facts.
On appeal, the First District reversed, holding that Taylor Morrison did have a qualifying agent concerning the scope of work to be performed under the contract as of the effective date of the Ecos contract. There were other qualifying agents besides Steiner on this effective date. Since Taylor Morrison possessed this license on the effective date, it was not “unlicensed”. It was irrelevant whether the qualifying agent obtained the permit or supervised the construction. Accordingly, Ecos could not support a claim for unlicensed contracting against Taylor Morrison.
Can an Unlicensed Contractor Use the Other Party’s Knowledge as a Defense to Enforcement of the Contract?
No. The Florida Supreme Court just ruled in Earth Trades, Inc. v. T&G Corporation that the other party’s knowledge that a contractor or subcontractor is not properly licensed to perform the construction work of the contract is legally insufficient to establish the defense that the parties stand in pari delicto or in equal fault.
T&G was the general contractor on a parking garage project and entered into a subcontract with Earth Trades to perform site work on the project. Earth Trades was not licensed to perform this site work. A dispute arose and Earth Trades sued T&G for breach of contract. T&G filed a counterclaim against Earth Trades for breach of contract. T&G argued that since Earth Trades was unlicensed that its breach of contract claims were barred as a matter of law under section 489.128, Florida Statutes. Earth Trades countered that T&G was also barred from enforcing the contract because the parties were in pari delicto because T&G was aware Earth Trades was not properly licensed. The in pari delicto defense is based on the principle that the plaintiff who participated in the wrongdoing may not recover damages resulting from the wrongdoing.
The Supreme Court held that the in pari delicto defense did not preclude T&G from enforcing the contract. The Court held that the unlicensed contractor and the party that hired the unlicensed contractor were not at equal fault as required by this defense. The unlicensed contractor is commiting a crime for which the first offense is a first-degree misdemeanor and the second is a third-degree felony. The party who hires an unlicensed contractor is subject to a cease and desist notice and a fine of up to $5,000. Additionally, the legislature made it clear that section 489.128 only punishes the unlicensed contractor and states that only the unlicensed contractor may not enforce its contract or lien rights.