The North Dakota Supreme Court recently issued an opinion that clarifies the rules for contractors regarding when to obtain a contractor’s license and the risks they face if not properly licensed. It is important to note that the decision clarifies that a contractor is not entitled to recoup the services provided until he has obtained a contractor’s license, even if the work is impeccable and the contractor obtains the license during A construction project.
In Snider c. Dickinson Elks Bldg., LLC, 2018 ND 55, RJ Snider Construction (Snider) signed a contract on December 26, 2011 to supply materials and labor for work to be done on a property owned by Dickinson Elks Building, LLC (“Dickinson Elks “). Snider began work shortly after the contract was signed, but Snider did not obtain his contractor’s license until February 6, 2012. Dickinson Elks paid Snider for materials and services provided until February 2, 2012, but not after. As a result, Snider sued Dickinson Elks for the value of materials supplied after February 2, including those supplied prior to obtaining his license on February 6.
The Court held that the Contractors Licensure Act, NDCC § 43-07-02, prevents a contractor from recovering damages for work performed during periods when the contractor was not the holder of a contract. ‘a licence. If so, the court interpreted the law to only allow a contractor to recover for services rendered while licensed.
After Snider, two points are now clear. First, a North Dakota contractor does not need to be licensed at the time of entering into the contract or agreeing to provide contractor services to claim compensation for work performed. Second, if the contractor begins performance before receiving a license from the state, the contractor will not have the right to recover anything for the services provided without a license. Thus, based on the Snider decision, courts in North Dakota will focus on when the contractor started providing services and when the contractor was licensed.
From a practical standpoint, the decision creates potential problems for contractors and homeowners. In a case like Snider, parties are likely to have difficulty establishing the exact services that were provided before or after a specific date. At the same time, one can understand the fairness of the Court’s decision. If the court ruled that a contractor cannot recover when he signed a contract before obtaining his license, even if all services were actually provided after the license, this could constitute a substantial windfall for the owner.
It is important to note that NDCC § 43-07-02 has been amended since the events leading to the Snider Case. First, the law now provides that it is a Class A offense to work as a contractor without obtaining a license. If such a provision existed at the time of the events of Snider, the contractor could have been sued for having completed the work before February 6, 2012, even though the owner did not object to the quality of the work and Snider eventually obtained his license.
In addition, NDCC § 43-07-02 now provides that a person commits the offense of construction fraud if the contractor abandons a construction project after receiving payment. The law defines “abandonment” as occurring when a contractor does not substantially start work within 60 days of an agreed start date, or 90 days of the contract date if no start date is agreed by. writing. Therefore, if a contractor signs a contract to provide services and waits weeks or months to obtain their license, such delays could result in a request for abandonment under the Construction Fraud Act.
Indeed, after the clarifications provided by the Court in Snider and the addition of criminal penalties added to NDCC § 43-07-02, the consequences of not being licensed as a contractor for work performed in North Dakota can be significant. Now not only can an entrepreneur waive his right to payment for services provided before the entrepreneur is approved, but the entrepreneur could also face criminal fines and even imprisonment.