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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

Under the Michigan Occupational Code, residential building, maintenance and alteration contractors must be licensed to perform certain types of work. The Michigan Supreme Court held in Stokes v. Millen Roofing, 649 N.W.2d 371 (2002) that under MCL 339.2412(1), a residential building contractor cannot sue an unpaying customer for compensation if the contractor did not have a license for the act or contract it performed. The court recognized that this is a severe penalty on unlicensed contractors — in fact, the customer in Stokes knew the contractor was unlicensed before signing the construction contract and had used this provision to render prior construction contracts with other contractors unenforceable. Ultimately, though, the court said that it was simply applying the statute the way the legislature drafted it. With no amendments to this section of the statute since then, Michigan courts still apply this seemingly one-sided rule, preventing contractors from obtaining payment for work that they already completed.

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But Michigan law does not render an unlicensed contractor completely helpless if it finds itself in a payment dispute with a customer. For example, in&nbsp;Epps v. 4 Quarters Restoration LLC, 872 N.W.2d 412 (2015), the Michigan Supreme Court held that unlicensed contractors can still defend lawsuits brought against them by customers. In&nbsp;Epps, homeowners sued a contractor for allegedly failing to complete repairs and argued that it was not entitled to compensation because it was unlicensed. The court rejected that argument and allowed the contractor to substantively defend itself in the lawsuit. Importantly, the court noted that the statute is meant as a “shield” for the public, not as a “sword” for customers to wield carte blanche and preempt any defense by a contractor.

Further, an unlicensed contractor&nbsp;can&nbsp;sue a customer for compensation if the act or contract it performed does not require licensure under the Michigan Occupational Code. In&nbsp;San Marino Iron, Inc. v. Haji, 991 N.W.2d 828 (2022), an unlicensed contractor sued a homeowner for failing to pay it for designing and installing an iron railing on a wooden staircase. The court held that installing an iron railing was not “carpentry” or any other “craft or trade” as defined by MCL 339.2404(3). Therefore, the statute did not prevent the unlicensed contractor from filing a lawsuit against the customer for payment for its work.

Lastly, Michigan courts recognize the doctrine of “substantial compliance.” If an unlicensed contractor agrees to perform work that it does not have a license for, but then obtains a license before doing the work, then the contractor has a right to seek payment from the customer. This essentially allows a contractor to make deals with customers while it is still going through the licensing process.

Overall, these cases highlight the importance of understanding the nuances of contractor licensure in Michigan as well as the draconian consequences of errors in this area. With attorneys specializing in licensure, construction litigation, environmental law and more, Warner is a one-stop shop for a contractor’s licensure, corporate governance, dispute, environmental compliance and other legal needs.

For questions on contractor licensure in Michigan, or any other construction or real estate matter, please do not hesitate to reach out to Brandon Cory, Jon Lauderbach, a member of our Construction Disputes Practice Group or your Warner attorney.

Warner Associate&nbsp;<a rel="noreferrer noopener" href="https://www.wnj.com/people/john-weston-franke/" target="_blank">John-Weston Franke</a>&nbsp;was a contributing author of this eAlert.

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Brandon J. Cory

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Jonathan E. “Jon” Lauderbach

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Contractors Beware: Licensure Foot-faults Could Make Your Construction Contract Unenforceable

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Contractors Beware: Licensure Foot-faults Could Make Your Construction Contract Unenforceable

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