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Maryland’s Non-Licensed Residential Subcontractor Loophole

Maryland subcontractors need to ensure they are in compliance with all regulatory and licensing requirements before performing work on residential buildings or they may be left with nothing to show for it.  Maryland law clearly prohibits a subcontractor from performing work on a residence without a home improvement license and the failure to have a home improvement license at the time payment is due will allow the general contractor to withhold payment, even in situations where the work has been completed and there are no complaints.  A recent case, however, provided a small loophole for unpaid (but unlicensed) subcontractor to get paid for residential construction projects in Maryland.

In Plus One-MidAtlantic Co. V. Visnic Improved Props., LLC, No. 2214, Sept. Term, 2015, 2017 WL 1251090 (Md. Ct. Spec. App. April 5, 2017), the Maryland Court of Specials Appeals directed a general contractor to remit payment to its subcontractor, who was unlicensed when the work was performed, but obtained a license before payment was due.  Specifically, Plus One-MidAtlantic Co. (“Plus One”) performed work on behalf of Visnic Improved Props., LLC (“Visnic”) for the renovation of a residential building.  Plus One completed the work, but was only paid $9,196.50 of its billed $117,608.10.  Plus One filed a lawsuit for breach of contract against Plus One and a Petition for Mechanic’s Lien against the owner.  The trial court dismissed the lawsuit against both Visnic and the owner, stating that because Plus One did not have a MHIC license, it was not entitled to payment.  Plus One, however, obtained its MHIC license after the trial court dismissed the case and requested reconsideration of the court’s ruling.  The trial court denied the Motion for Reconsideration and Plus One filed its appeal.

The Maryland Court of Special Appeals held that because Plus One obtained its MHIC license before payment was due, it was entitled to payment from Visnic, despite the fact that Plus One was not licensed during the time it performed work.  From a practical standpoint, any subcontractor performing residential construction work in Maryland should have a MHIC license; however, if the subcontractors does not have one, it may not fully preclude them from obtaining payment from the general contractor.

For additional information on construction law in Maryland, contact Michael W. Siri at 410-583-2400 or via email at siri@bowie-jensen.com.

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