In South Carolina, a contractor must be properly licensed to file a lawsuit or mechanic’s lien to collect money owed.  It is well-known that a general or mechanical contractor’s license is required for commercial construction with a total cost over $5,000.  However, proper licensure does not simply mean having a Group One general contractor’s license.  Proper licensure varies according to the specific project, but it may require holding a license for certain subclassifications (such as concrete, masonry, roofing) or holding an appropriate group license for larger projects.  The consequences of not holding the proper license are dire, since it may prevent a contractor from recovering any damages.

A recent case decided by the South Carolina Court of Appeals illustrates the potential dangers.  In Miller Construction Company, LLC v. PC Construction of Greenwood, Inc., a subcontractor, Miller Construction Company, sued the general contractor, PC Construction, for withholding payment of $53,695.00 after the subcontractor completed its work.  PC Construction asserted that Miller Construction Company was not properly licensed and could not collect any damages for breach of contract.

Miller Construction Company had subcontracted with PC Construction to provide site work for a sports complex at Lander University, including installing a storm sewer.  Miller Construction held a Group 4 General Contractor’s License in the grading subclassification.  This license allows the license holder to perform “the soil preparation and rehabilitation of streets, roads, highways, railroad beds, building sites, parking lots and storm sewers.”

At trial, PC Construction argued that Miller Construction Company was required to hold a license in the “Water and Sewer Lines” subclassification to work on the Project’s storm drainage system because the project involved installing a storm drainage system. The trial court rejected this argument and awarded Miller Construction Company damages of $51,270.08.  PC Construction appealed.

The Court of Appeals upheld the decision refusing to bar Miller Construction from enforcing the contract.  Importantly, the Court observed that statutes barring improperly licensed contractors from collecting damages are designed to protect the public.  The Court noted that there was no claim that Miller Construction was not properly licensed during the course of the project nor had the job been shut down as a result of improper licensing.

The lesson is that not holding a proper contractor’s license may make collection impossible. Miller Construction was lucky since the Court generously interpreted the licensing statute, in part because the case involved a dispute between two contractors.  However, the Court suggested that it would reach a different result if the lawsuit involved an owner, instead of a general contractor.  Check your license before you being work to avoid payment issues down the road.

If you have any questions about your contractor’s license or other design and construction topics, we would be glad to help you. The attorneys of Gibbes Burton are passionate about helping professionals and businesses to minimize risk and build success.