The Michigan Occupational Code requires residential construction, maintenance and remodeling contractors to be licensed to perform certain types of work. The Michigan Supreme Court ruled Stokes v. Millen Roofing649 NW2d 371 (2002), that under MCL 339.2412(1), a residential contractor cannot sue a delinquent customer for damages if the contractor was not licensed for the act or contract he performed. The court recognized that this represents a severe penalty for unlicensed contractors – in effect, the customer Stokes knew the contractor was unlicensed before signing the construction contract And had used this provision to invalidate previous construction contracts with other contractors. Ultimately, however, the court declared that it was simply applying the law as the legislature had formulated it. Because this section of the statute has not been changed since then, Michigan courts still apply this seemingly one-sided rule that prevents contractors from receiving compensation for work already completed.
But Michigan law doesn't render an unlicensed contractor completely helpless if they find themselves in a payment dispute with a customer. For example in Epps v. 4 Quarters Restoration LLC872 NW2d 412 (2015), the Michigan Supreme Court ruled that unlicensed contractors can still defend claims brought against them by customers. In EppsHomeowners sued a contractor for allegedly failing to make repairs, arguing that the contractor was not entitled to compensation because he was unlicensed. The court rejected this argument and allowed the contractor to present a factual defense in the lawsuit. Importantly, the court noted that the law is intended to be a “shield” for the public, not a “sword” for customers to exercise carte blanche and prevent any defense by a contractor.
Additionally, an unlicensed contractor may sue a customer for damages if the act or contract he performed does not require a license under the Michigan Occupational Code. In San Marino Iron, Inc. v. Haji991 NW2d 828 (2022), an unlicensed contractor sued a homeowner for failing to pay him for the design and installation of an iron railing on a wooden staircase. The court held that the installation of an iron railing was not “carpentry” or any other “craft or trade” within the meaning of MCL 339.2404(3). Therefore, the law did not prevent the unlicensed contractor from filing a lawsuit against the customer for payment for his work.
Finally, Michigan courts recognize the “substantial compliance” doctrine. If an unlicensed contractor agrees to perform work for which it is not licensed, but then obtains a license before performing the work, the contractor has the right to seek payment from the customer. This essentially allows a contractor to do business with customers while still going through the licensing process.
Overall, these cases highlight the importance of understanding the nuances of contractor licensing in Michigan and the draconian consequences of mistakes in this area. With attorneys specializing in licensing, construction litigation, environmental law and more, Warner is a one-stop shop for contractor licensing, corporate governance, litigation, environmental compliance and other legal needs.
Warner employees John Weston Franke was a contributing author to this eAlert.