Georgia Contractors Forfeit Contract Rights If Performing Work While Unlicensed – Corporate/Commercial Law

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A recent Georgia Court of Appeal case highlights the serious risks contractors face when operating in Georgia without a valid license from the contractor: They lose all rights to enforce their contracts.

In Saks Management and Associates, LLC v Sung General Contracting, Inc. 1, general contractor Sung General Contracting, Inc. (“Sung General”) has entered into an agreement with Saks Management and Associates, LLC (“Saks”) to renovate a company Apartment complex owned by Saks.2 Saks fired Sung General for failing to complete his work properly and on time, and sued Sung General for damages.3 Sung General responded with counterclaims against Saks for nonpayment. The parties filed duel requests for a summary assessment of their claims, which were denied by the court, and both parties appealed

On appeal, Saks argued – and the Court of Appeal agreed – that Sung General’s claims for payment were excluded because Sung General did not have a valid general contractor license.5 The court found that Georgia’s Contractor Licensing Act6 prevented individuals or organizations from agreeing to it engage in business with general contracts without a current, valid license from the contractor issued by the state.7 The consequences for the conduct of business that are not licensed under the Licensing Act are obvious. It provides that:

[A]ny Contract concluded on or after July 1, 2008, for the execution of work that requires a license from a residential company or general contractor … and which are not otherwise exempted … and between an owner and a There is a contractor who does not have a valid and current license required for such work.is not enforceable by the licensed contractor either legally or in equity… a contractor will only be deemed unlicensed if the contractor does not for the work at the time the original contract entered into force, if specified therein, or, if not stated, at the time the last party performed this contract licensed was stated therein … 8

The court found that Sung General was not licensed at the time the contract was signed.

Sung General argued that the exemption from the repair rule was applicable to the general contractor license as Sung General’s work did not interfere with any structural element. The exemption for repair rules states:

Nothing in this chapter prevents a person from offering or commissioning or performing or performing repair work, provided that the person performing the repair work notifies the owner that this person does not hold and provide a license under this chapter, furthermore this work does not have one Influence on the structural integrity of the property. The Board of Directors further defines by rules or regulations the term “repair” used in this subsection and any other terms required for the scope of this exemption

The State Licensing Board for Residential and General Contractors defines “repair” as the repairing, mending, servicing, replacing, or restoring part or all of real estate. The rule issued by the Board also provides:

Nothing in it
[r]ule excludes any person or facility (including the staff of this facility) offering or commissioning repair work to perform or perform or perform repair work, provided that: (1) the person performing the repair work notifies the owner in writing that this is the case is a person / organization is not licensed as a residential or general contractor under this chapter; (2) The work does not include the delegation or commissioning or commissioning of any person or organization other than the employee to supervise, manage or supervise the execution of any part of the work performed. (3) The work does not affect the life safety requirements or the structural integrity of the property. These repairs do not include removing or adding a load-bearing wall, or removing or cutting a joist or support. and (4) The person performing the repair must obtain permits and inspections as required by the local authority. 10

The court found that Sung General was not eligible for the repair rule exemption because Sung General did not provide evidence that it was “disclosed in writing” [Saks] The [Sung General
Contracting was] not approved as residential or general contractor “which is an express requirement for the application of the repair rule exemption.11 As a result, the Court ruled that Sung General’s payment claims failed on legal grounds because it was not licensed when it signed the contract with Saks.

The Saks Management case is a clear reminder that there are significant ramifications for contractors in Georgia who enter into contracts without a license. Note that only the unlicensed contractor will lose the right to enforce the contract. The other contracting party furthermore reserves the right to enforce and assert claims from the contract

Footnotes

1 Saks Management and Associates, LLC v Sung General Contracting, Inc. et al .; and vice versa 356 Ga. App. 568, 849 SE2d 19 (Ga. Ct. App. 2020).

2 Id. At 23.

3 Id. At 24.

4 Id.

5 Id.

6 OCGA § 43-41-1 ff.

7 OCGA § 43-41-17 (a).

8 Saks Management and Associates, LLC, 849 SE2d, 24-25; OCGA § 43-41-17 (b) (emphasis in original).

9 OCGA § 43-41-17 (g).

10 Ga. Comp. R. & Regs. r. 553-8-.01

11 Saks Management and Associates, LLC, 849 SE2d, 25.

12 Id.

Originally published by Smith Gambrell, January 2021

The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.

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