Subcontractor Dirty Pool
Brut El (“Brut”), a general
contractor, successfully bids on building a new church in
Virginia, as many other states, has various
licensing requirements for contractors. There
are “A,” “B,” and “C” class
licenses, which are based on the monetary size of the contracts undertaken.
Brut knows that A-Z Drywall
Inc., the contractor retained to do the drywall in the new church, is not
licensed under
Many companies engaged in
business may not be aware that if they are not properly licensed they cannot
lawfully perform certain services and in some cases may be subject to criminal
penalties. Aside from potential sanctions, there are practical reasons to be
properly licensed to do business where services are performed.
For example, if an unlicensed
contractor enters into a contract in a state where they are required to be
licensed and is not paid some or all of the contractor price, the contractor may
be unable to institute a collection suit for the unpaid amounts.
Frequently, minority workers
will learn a trade as an employee and then go out on their own without the
knowledge that they need to be licensed. Another
problem is language. Those who do
not speak English well have considerable difficulty in obtaining licenses
because often the exams are given only in English.
Despite the abilities of many of the subcontractors and the good work
done, they are sometimes brutalized financially by the failure to have a
license. Many such contractors have
performed good work and then been unable to get paid because they did not have a
license.
Virginia
legislators apparently saw that
this type of advantage might be gained by some unscrupulous general contractors
such as Brut. A law was enacted which states that if there has been
“substantial performance” of a job or contract without actual knowledge that
a license was required, it is not permissible to raise the lack of a license to
avoid payment for the services provided.
In this example, could Brut
block A-Z from maintaining a lawsuit to claim amounts due for the services
provided if the work is substantially completed? There is little reported case
law in
Could A-Z file a Mechanics’
Lien and prosecute it if Brut refuses to pay A-Z in this example?
Since A-Z would be prohibited from instituting a legal action except
possibly under the exception referred to above, it would not generally be able
to enforce a Mechanics’ Lien. Readers may want to see our January/February
2001 issue of Newland’s Business Notes entitled “Has a Mechanic
Liened on You Yet?”
The Mechanics’ Lien law
requires that after the lien itself has been filed against the property, it must
be enforced within six months. If
the subcontractor is prohibited from taking legal action in the state of
The simple answer might be to
state that all contractors need to be licensed or they should not be providing
services in the state. Unfortunately,
that is too simplistic. There are many contractors from many backgrounds which
let their licenses expire or in some cases never got their licenses,
particularly if they are working in a jurisdiction other than their home
jurisdiction. If an immigrant
contractor has sufficient language skills to obtain a license, he or she should
do so, and failing to get a license where required may put the contractor in a
position where he can be brutalized by companies such as Brut.
The interplay between subcontractors and general contractors presents many problems. The lack of licenses by some subcontractors and the desire of some general contractors to be exploitive create such situations that could be described as “dirty pool.”
If you have questions about this
area or need business assistance, please contact Newland & Associates.
Copyright 2008
Published by the law firm of Newland & Associates, PLC
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