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Contractor Loses Despite License Renewal
Carolinas AGC Weekly Bulletin
Kenneth T. Lautenschlager and Gary J. Welch

In a recent decision, the North Carolina Court of Appeals upheld summary judgment in favor of a Wake County homeowner despite the General Contractor having performed the work while it was properly licensed. Currin & Currin Construction, Inc. v Lingerfelt, 2003 N.C. App. Lexis 1228. The decision reinforces North Carolina Court's requirement that contractors be in "strict" compliance with the licensing statutes to have a valid contract.

In May 1999, Currin & Currin agreed with the homeowner to build a home on a cost plus basis. The homeowner then went to the Wake County Planning Commission to obtain appropriate permits. The homeowners learned that the Contractor's license had not been renewed. Currin & Currin informed the homeowner that there was a mistake and that the license was being renewed. Currin & Currin claims that the parties then agreed that construction would only start after the license was renewed and a permit issued.

Under North Carolina General Statutes 87-10(e), a general contractor's license expires on December 31 following its issuance or renewal and becomes invalid 60 days from that date unless renewed. Currin and Currin's license became invalid on March 1, 1999 and was renewed on June 30, 1999, approximately one month after the parties' agreement was reached. Construction did not begin until August 1, 1999 and all work was performed while Currin & Currin was properly licensed as a general contractor. The contractor worked on the house until July 20, 2000. The homeowners ran out of funds and admittedly owed the contractor approximately $42,000.

Currin & Currin filed a lien and a lawsuit to recover amounts due. However, the court upheld Summary Judgment for the homeowners stating that a contract illegally entered into by an unlicensed contractor may not be validated by subsequent procurement of a license. The Court of Appeals cited a 1983 North Carolina Supreme Court decision in holding that the existence of a valid license at the time of entering into the contract is determinative, and not when construction begins. Brady v Fulgham, 309 N.C. 580 (1983).

The court also rejected the contractor's claim that the parties modified the original contract by agreeing that it would not be effective until the license was obtained. The court held, "an unlicensed contractor may not circumvent Brady by including a condition precedent that the contract will become effective after the contractor obtains a valid license." The contractor's claim that the homeowners could not prevail as they knew about Currin & Currin's expired license was also rejected. The court held that a contractor may not escape the harsh results by advising one of his customers that he is acting in violation of the licensing statutes.

The Currin case reemphasizes the need for contractors to strictly comply with licensing and renewal guidelines. General contractors should follow two simple rules to avoid the problems cited in Currin: (1) renew their general contractor's licenses prior to December 31 of each year, and (2) never sign contracts, negotiate contracts or bid upon projects while their license is expired.