Florida’s contractor licensing laws and construction lien laws are quite strict, and a company that finds themselves out of compliance with either one can be penalized severely. Because the rules differ depending on a company’s role on a project, the requirements can be difficult to interpret when the lines between roles are blurred. Interior designers have their own compliance process that is separate from the contractor licensing rules. But what if that designer is acting as a general contractor — a role which requires a license? A Florida District Court recently considered this scenario after a property owner challenged an interior designer’s lien, claiming the designer was, in fact, operating as an unlicensed GC.
The problem with unlicensed contractors in Florida
Florida requires that contractors performing specific types of work must be licensed to do so. Unlicensed contractors in the Sunshine State are faced with two significant penalties.
The first: Unlicensed contractors can’t enforce their contract if they run into a payment problem.
“[a]s a matter of public policy, contracts entered into on or after October 1, 1990, by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.”
The second problem: Not only can they not enforce their contract, they are also barred from claiming a construction lien.
“Notwithstanding any other provision of this part, no lien shall exist in favor of any contractor, subcontractor, or sub-subcontractor who is unlicensed…
As simple as this may seem, things get tricky when trying to define a “contractor” for the purposes of these statutes. What type of work makes an individual a contractor? When is someone who isn’t a contractor acting as a contractor? This was the topic of discussion in a recent Florida District Court of Appeals case.
Related: Mechanics Lien Rules for Design Professionals
Owner challenges interior designer’s lien claiming they acted as an unlicensed contractor
The case in question is SG 2901, LLC v. Complimenti, Inc.
Project Snapshot
- Owner: SG 2901, LLC (SG)
- Interior Designer: Complimenti, Inc. (Complimenti)
SG purchased a 2-story condo unit and hired Complimenti as an interior designer. Initially, the plan was relatively simple. However, as time passed, the plans to renovate the property became more and more extensive. At some point, Complimenti had advised SG that the work requested would require licensed professionals. So, at SG’s request, Complimenti recruited a few licensed professionals (GC, architect, HVAC contractor, etc.) to be approved by SG.
After completion of the project, SG was not satisfied with the renovations and refused to pay Complimenti. In turn, Complimenti filed a lawsuit under claims of breach of contract, unjust enrichment, and foreclosure of a mechanics lien, among others.
SG countered by claiming that Complimenti was not a licensed contractor, and thus, did not have an enforceable contract.
After a 3-day trial, the court concluded that Complimenti was acting as a representative of the owner, facilitating the project while SG was out of the country. Complimenti was awarded a judgment of $181K. SG appealed.
Appeals court upholds interior designer’s construction lien
SG’s main argument on appeal was that Complimenti was acting as an unlicensed general contractor. Thus, the contract between the parties is unenforceable, and Complimenti wouldn’t have lien rights, either.
What does “contractor” mean under Florida lien law?
Florida courts have established a two-prong test for determining whether an individual was acting as a contractor as defined under the law:
1. The individual must construct, repair, alter, remodel, add to, demolish, subtract from, or improve a structure; &
2. The individual who engages in such an undertaking must have a job scope that is “substantially similar” to a job scope as described in subsections (a) through (q) of 489.105(3), which includes ‘general contractor,’ ‘roofing contractor,’ and ‘specialty contractor.
(In 2006, the type of work that constitutes “contractor work” was analyzed more fully in another case, Full Circle Dairy, LLC v. McKinney.)
Upon review of the evidence, the court established that there was a licensed general contractor performing work on the project named Antonio Luvara. Furthermore, the court said, “Complimenti’s job scope was specifically limited to providing design and/or decorating services and acting as a point of contact in a representative or agency capacity on [SG]’s behalf. Any hiring and/or contracting of work done at the property — licensed or not — was done and approved directly by SG himslef, and or the licensed General Contractor, Mr. Antonio Luvara.”
Accordingly, Complimenti was not acting as a “contractor” as defined under Florida law, and the prohibition against the enforcement of such contracts is inapplicable.
Entitlement to Florida lien rights
SG’s other argument on appeal was whether Complimenti was even entitled to lien rights under Florida’s lien laws. There were two potential arguments that would invalidate the claim. The first being, that Complimenti was an unlicensed contractor, and therefore not entitled to lien rights. But since the court has already established that they were not acting as a contractor, that argument is moot.
The other argument proposed by SG was that even if Complimenti were classified as interior designers, they were required to be licensed as such to be afforded lien rights. This argument is partially correct. It is true that design professionals must be licensed to have lien rights, but only if a license is required. Under the Florida licensing statutes, an interior designer is required to be licensed. But there is an exception pursuant to §481.229(6)(a), which specifically exempts “a person who performs interior design services or interior decorator services for any residential application.”
The project clearly involved a residential property, and thus, the court affirmed the trial court’s decision to uphold Complimenti’s lien claim.
Takeaways: Know the rules, and your role
Determining the company’s role on the project, licensing requirements, and eligibility for lien protection is crucial before a project begins.
Complimenti did everything right on this project, despite the potential landmines that they could have tripped. When the owner requested more work, they informed them that licensed work was required. The designer didn’t make any decision without the owner’s approval, and left the hiring of professionals to the general contractor. Importantly, they didn’t perform any services outside the scope of their work as an interior designer.
This goes to show that individuals may act as the owner’s agent without reaching the level of contractor work as defined by Florida law.
Whenever the scope of a project expands, it’s important to have a clear scope of work defined in the contract and to avoid performing any work that may put your payment rights into question. This is particularly important on residential projects, as they tend to follow the more informal, “shoot-from-the-hip” mentality.
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