Does a New York Contractor Need A License To Sue For Breach of Contract?

New York Contractors who perform work without the requisite license could find themselves lacking the necessary tools to bring legal action against residence owners they contract to do business with.

In a recent New York case, the parties entered into a written contract that required the plaintiff to renovate the defendant’s residence. This included, among other tasks, building a second-story addition to the master bedroom. Enko Const. Corp. v. Aronshtein, 2011 WL 5222881 (N.Y.A.D. 2 Dept.). The project became larger than originally planned, resulting in the demolition of most of the original structure of the defendant’s residence. After the plaintiff had performed extensive work but before he had completed the project, the defendant terminated his services. The plaintiff sued in New York Supreme Court to recover damages for breach of contract and in quantum meruit (the measure of value) for services performed. The defendant moved to dismiss the complaint, claiming the plaintiff was not a licensed home improvement contractor. The Court granted the defendant’s motion, and the plaintiff appealed.     

New York law provides that “no person shall own, maintain, operate, engage in or transact a home improvement business…unless he [or she] is licensed therefore.” Nassau County Administrative Code, § 21–11.2 CPLR 3015(e) states that a complaint that seeks to recover damages for breach of a home improvement contract or to recover quantum meruit for home improvement services is subject to dismissal if it does not allege compliance with the licensing requirement. “An unlicensed contractor may neither enforce a home improvement contract against an owner nor seek recovery in quantum meruit.” J.M. Bldrs. & Assoc., Inc. v. Linder¸ 67 A.D.3d 738, 741.      

The plaintiff conceded that it did not possess the requisite license. Instead, it argued that it did not need a license, due to a statutory exemption to the requirement that applies to the construction of new homes. However, the Appellate Division of the Second Department of the Supreme Court of New York concluded that “[t]he statutory exemption for ‘construction of a new home’ is limited to the creation of a structure, where none previously existed…Even if a dwelling is stripped to the frame and rebuilt, the work constitutes the renovation of an existing home, not the erection of a new one.” J.M. Bldrs. at 740. Because it was undisputed that there was an existing home on the property when the plaintiff began its work, the Court held that the plaintiff was engaged in “home improvement” and thus was required to have the requisite license for such work. Additionally, the Court held that the defendant’s home fell within the Code’s definition of buildings “used as a private residence or dwelling place” even though the homeowners moved out temporarily while the plaintiff performed the renovations. 

The Court’s decision highlights the importance that contractors engaged in “home improvement” in New York ensure that they have the requisite license to perform their work before taking on such tasks. Failure to do so might leave them without legal grounds to recover from parties who terminate their services while a project is ongoing.

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