New York City requires contractors performing services for homeowners or their tenants to have a home improvement license to be entitled to receive payment for their work. This provision was recently interpreted in a case brought by a contractor against an LLC that refused to pay for renovation work. At issue was whether LLCs have the same rights as other homeowners under New York City law. The New York Appellate Division, First Department determined that an entity (such as the LLC) that owned a residential property was entitled to the same protections as an individual owner under the Administrative Code of the City of New York Section 20-387(a). As a result, the contractor couldn’t sue for payment because it wasn’t licensed.

In KSP Construction LLC v. LV Property 2 LLC, et al., the plaintiff, a contractor, sought payment for renovation work it performed at a Manhattan townhouse owned by two limited liability companies. The defendants moved to dismiss the case on the ground that the plaintiff was precluded from seeking payment for services it provided because it had failed to maintain a valid Home Improvement License issued by the City of New York. The lower court agreed with the defendants dismissing the case and the Appellate Division affirmed on appeal.

The Appellate Division looked to the purpose of New York City’s law which was to “safeguard and protect the homeowner against abuses and fraudulent practices by licensing persons engaged in the home improvement, remodeling and repair business.” (Administrative Code Section 20-385). The subchapter goes on to state that “no person shall solicit, canvas, sell, perform or obtain a home improvement contract as a contractor from an owner without a license therefore.” (Administrative Code Section 20-387(a)).  

In KSP, it was undisputed that the plaintiff was a contractor, that the work performed was a home improvement and that the property was a residential townhouse (with the appropriate certificate of occupancy for a residence). The plaintiff nonetheless argued that an entity owner is not entitled to the same protections as individual owners because an entity cannot “live” on the premises. The Court, in reviewing the legislative history, noted that the statute defined “persons” to include “an individual, firm, company, partnership, or corporation, trade group or association.” Further, the Court reasoned that the legislature could have provided that the licensing requirement would not apply where a title owner is not an individual but declined to do so. Accordingly, in order for the plaintiff to enforce its claim for payment it needed to be licensed at the time it entered the contract to perform the work. As such, the Court upheld the lower Court’s determination and affirmed the dismissal of the plaintiff’s claims.

Although the Court seemed to place importance on the way “persons” was defined, certain unique facts existed in KSP. One of the members of the Defendant LLCs submitted an Affidavit stating that he planned to reside on the premises after the work was complete. This could make this matter distinguishable from other instances where the owner of a New York City residence is an entity. 

If you are a contractor in New York City (as well as in Nassau or Suffolk County each of which has its own licensing requirements), you need to be aware of and comply with the various licensing requirements in order to avoid finding yourself in the same position as the plaintiff in KSP Construction.

Should you be a contractor or a homeowner who has an issue like the situation in KSP, please contact one of our business attorneys.