TN Court Clarifies the Effect Licensing Limits have Upon Contractors’ Ability to Recover the Amount Owed per a Contract

Aug 30, 2018

The court’s ruling ends a discrepancy between somewhat different previous statutory provisions

Most, if not all, states have statutes that stipulate that contractors must obtain contractor’s licenses. (In some states there are exceptions for projects that do not exceed a relatively small dollar amount.)

Unlicensed contractors do not have the same legal recourse as licensed contractors if owners fail to pay them the amount stipulated in a contract. In Tennessee, prior to 2009, unlicensed contrators could only recover for “actual documented expenses.”

The Tennessee Code was revised in 2009. It has been unclear to what extent the Tennessee Code Section 62-6-103 made it more difficult for licensed contractors that do not adhere to all the regulations in Section 62-6-103 to recover for unpaid invoices.

Matthew Devries’ article in BEST PRACTICES CONSTRUCTION LAW examines a TN Court of Appeals ruling that clarifies this issue. Clayton Pickens v. John R. Underwood (Tenn. Ct. App. June 12, 2018)

In this case the contractor was licensed but entered into a contract that exceeded his contractor’s license limit.

The question before the court was whether the provisions of the pre-2009 statute, in effect when the contract was signed, or the more restrictive provisions of the 2009 amended statute, in effect when the lawsuit was filed, applied in determining whether the rules limiting the amount an unlicensed contractor could collect on unpaid invoices applied to a licensed contractor whose license limit was less than the contract amount.

“The court held the old law applied: ‘We believe the date of the contract to be more significant here than the date of the complaint. By the time Pickens filed his complaint, all the operative, underlying events of this case had transpired…The effect of the amendment was to expand the limitation of actual documented expenses to any contractor required to be licensed under the statute and rules, whereas before this limitation only applied to unlicensed contractors…Pickens is not limited retroactively by the provisions of the amended statute.’”

Mr. DeVries ends his discussion with the following admonition— “Currently, the law states that if you exceed your licensing limit or otherwise violate some provision of the licensing laws, you cannot file a lien and your damages will be limited to actual documented expense proven by clear and convincing evidence.”

Source—

“Was Not” versus “Is So”; Court Clarifies Whether Exceeding Monetary License Limit Affects Contractor’s Recovery, Matthew DeVries, BEST PRACTICES CONSTRUCTION LAW, June 18, 2018.