On May 5, 2020, the Georgia Court of Appeals upheld a summary judgment of the trial court dismissing a residential contractor’s claims against a landlord because the contractor was not duly licensed. In LFR Investments, LLC v. Van Sant, after being terminated by the owner, a homebuilder brought actions for breach of contract and unjust enrichment against the owner. The owner sought summary judgment on these claims, arguing that the builder did not have the capacity to perform the contract because he was not authorized to build houses.
Under Georgian law, an unauthorized general contractor cannot enforce the terms of a contract in law or in equity. To obtain an appropriate license, Georgian law allows a business organization to rely on the license of a “qualified agent” who holds a valid residential or general contractor license. The qualified agent must apply for and be approved for a license expressly on behalf of the company so that the company can rely on that license.
In this case, the entrepreneur was registered as an LLC with only one member. This single member was licensed and registered as a qualified agent for a separate entity, but not for the LLC that contracted with the owner. The LLC attempted to impute the license of its only member to the LLC by denying the owner’s motion for summary judgment. The appeals court disagreed, holding that the contractor’s interpretation would override the express requirements of the licensing law that a qualified agent applies for and holds a license directly on behalf of a business.
Contractors often use multiple affiliated entities to pursue different types of work. The Georgia court ruling reminds these entrepreneurs to check their compliance with applicable licensing regulations. If your business is wrongly relying, for example, on the license of an affiliate or the license of someone who is not registered as a qualified agent in a state like Georgia, it may be prove disastrous for the recovery of otherwise meritorious claims. Additionally, some licensing laws may provide criminal penalties for unlicensed operation, which is another reason to confirm compliance. Also note that there may be delays in processing new license applications during the current pandemic, and you should consider this potential when planning your work.