Law Review: Contractor’s license glitch means no recovery money due
The Law Review has analyzed a few cases where a contractor was denied recovery of money rightly due from an owner because the contractor was not “properly licensed at all times during performance of the work.” In most of the cases, the contractor was not licensed due to a technicality with the license. E.g., A contractor licensed as a sole proprietor cannot sue for fees if he later incorporated because the new corporation must be licensed. Scary stuff for builders.
Worse yet, if the contractor is not properly licensed, he/she/it not only may not go to court to recover money due but is subject to refunding money paid by the owner – disgorgement.
SAN FRANCISCO INTERCONTINENTAL HOTEL CASE
InterContinental Hotel entered into a construction contract in September 2005 with Webcor Construction, Inc. dba Webcor Builders, Webcor was the general.
In July 2007 approximately halfway through construction, Webcor Construction, Inc. merged into Webcor Construction, LP (limited partnership). Webcor Construction, LP obtained a contractors license prior to the merger, while Webcor Construction, Inc.’s license was allowed to expire in December 2007.
A Notice of Completion was recorded in 2009 when the hotel project was complete. Total payments by InterContinental Hotel $144 million.
In 2013, the hotel discovered defects in some of the windows and a lawsuit was filed. The parties were off to the races with their lawyers. Around that time, many years after the project was completed, InterContinental learned of the merger. It claimed the general was not properly licensed.
BUSINESS AND PROFESSIONS CODE SECTION 7031
InterContinental sued to be reimbursed all the monies it had paid claiming the general contractor was not properly licensed at all times during performance of the work given the merger and lapse of the original corporate license notwithstanding that Webcor Construction, LP, the successor construction entity, was properly licensed.
Webcor Construction, LP defended the lawsuit claiming InterContinental had to file suit within one year after the project was completed – not more than eight years after project completion. The First Appellate District Court of Appeal ruled against InterContinental allowing Webcor Construction, LP to dodge a very large bullet. The obvious point being: contractors have to pay attention to the details of their licensing, especially if changes are made to the business entity.
Jim Porter is an attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. Jim’s practice areas include: real estate, development, construction, business, HOAs, contracts, personal injury, accidents, mediation and other transactional matters. He may be reached at firstname.lastname@example.org or http://www.portersimon.com.
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