As a construction lawyer, contractor licensing is a very key aspect of my practice. This can include new contractor applications, increase or changes in monetary limits or license classifications, change in ownership or qualifying agent , and, of course, licensing violations.
The recent decision in Incident365 Florida, LLC v. Ocean Pointe V Condominium Association serves as an important reminder for general contractors and subcontractors regarding the significance of proper licensing and thorough contract review in disaster recovery and construction services.
Case Overview
In this case, Incident365 Florida, LLC entered into disaster recovery agreements with several condominium associations (“Associations”) following Hurricane Irma. The agreements involved various tasks such as water damage mitigation, dehumidification, and the removal of unsalvageable materials. However, Incident365 lacked the appropriate contractor’s license when performing the work, which became a focal point in the dispute when the Associations refused to pay the remaining balance of $1 million, citing the absence of the required licensure.
The Associations argued that under Florida law, particularly section 489.128, Florida Statutes, Incident365 was acting as an unlicensed contractor, which made the contracts unenforceable. The Associations contended that Incident365 engaged in significant demolition and repair work, which required a contractor’s license. Without the appropriate licensure, the company could not legally enforce its claims for breach of contract or seek payment for the services performed.
Incident365 countered by arguing that many of the tasks it performed, such as water extraction, dehumidification, and sanitation, did not fall under the statutory definition of “contractor” as outlined in section 489.105(3), Florida Statutes. According to Incident365, these tasks did not constitute “construction,” “repair,” or “improvement” to the structure of the buildings, and therefore did not require a contractor’s license. They maintained that if some services did require a license, only those portions of the agreements should be severed, allowing them to recover payment for the services that did not require a license.
The court found that the statutory definition of a “contractor” under section 489.105(3) was pivotal. It defines a contractor as someone who, for compensation, undertakes activities such as “constructing, repairing, altering, or improving a building or structure.” The Associations asserted that Incident365 was performing activities that constituted repairs or improvements, including removing unsalvageable materials and performing structural dehumidification, which, under the statute, required licensure.
However, the court acknowledged that some of the activities performed by Incident365, such as water extraction, dehumidification, and anti-microbial application, were not clearly tied to building repairs or improvements and may not fall within the scope of work requiring a contractor’s license. Therefore, the court reversed the summary judgment for most of the claims and remanded the case for further proceedings on whether specific activities like structural removal of affected materials required licensure under Florida law. This case highlights key licensing requirements and their critical role in contract enforceability.
Key Takeaways for General Contractors and Subcontractors
This case provides vital lessons for general contractors and subcontractors involved in construction work. Here are three actionable tips to avoid similar legal pitfalls:
1. Ensure Proper Licensing for All Contracted Work
One of the main reasons Incident365 was unable to recover the full amount owed was due to performing work without the required contractor’s license. Under Florida law, services such as repair, remodeling, or any work involving structural components typically require a building contractor’s license.
Tip: Always review your contracts to ensure that the scope of work aligns with your licensure. Subcontractors should also confirm their compliance with licensing requirements before accepting jobs. Some states, like Tennessee, require that only some subcontractor trades have appropriate licensing. Working without the required license can result in unenforceable contracts, jeopardizing payment for completed work.
2. Regularly Review and Revise Construction Contracts
The agreements between Incident365 and the Associations lacked clarity on the severability of tasks that did not require a license. The court touched on whether tasks like water extraction and general dehumidification fell under activities needing licensure. While the trial court’s ruling was reversed for some tasks, the lack of clarity in the contract’s language regarding severability led to further litigation.
Tip: Regularly review and revise your construction contracts to ensure they include clear provisions about the scope of work and any licensing requirements. Including severability clauses can protect your right to recover payment for work that does not require a license, even if other parts of the contract do. Well-crafted contract language is crucial in safeguarding against total contract invalidation.
3. Maintain Detailed Records and Documentation
One of the factors leading to disputes in this case was the ambiguity over whether certain tasks, such as mold remediation or structural removal, required a license. Without detailed records or clear industry standards provided, determining the licensing requirements became a point of contention.
Tip: After reviewing your contract, ensure it includes provisions for keeping thorough records of the scope of work performed. This documentation can help support your case in court if a licensing or payment dispute arises. Detailed records are essential for clarifying whether certain tasks fall under regulatory requirements for licensure.
Conclusion
The Incident365 Florida, LLC v. Ocean Pointe V Condominium Association case serves as a crucial reminder for general contractors and subcontractors to ensure they comply with all licensing requirements, regularly review and revise their construction contracts, and maintain comprehensive documentation to avoid legal disputes that could affect their ability to collect payment. Implementing these practices can provide contractors with the tools they need to safeguard their business operations and financial interests.