New York City (and various other counties throughout the State) now impose a requirement that all contractors doing home improvements must have licenses issued by the municipality where the work is to be performed. Indeed, in 2006, the NYC Administrative Code added Title 20, Chapter 2, Subchapter 22 which addresses home improvements and sets out the requirements which a contractor must meet in order to perform such services within the five boroughs. This section was enacted to ensure that homeowners would not be taken advantage of by unscrupulous and unlicensed contractors. While this offers some protection, both homeowners and contractors should be aware of the risks of work done without a proper license.

In a recent case the Appellate Division, Second Department in Rusin v. Design-Apart USA, Ltd. addressed the issue of whether a homeowner was entitled to receive a refund of monies paid to an unlicensed home improvement contractor solely on the ground that the contractor was not licensed. The homeowner in Rusin brought an action against the Defendant contractor seeking (1) a refund of all monies paid to the Defendant ($61,449.34) on the ground that the Defendant did not have the required license and (2) damages for an alleged breach of contract by the Defendant on the ground that Defendant’s work was defective. The lower court granted the Plaintiff’s motion for judgment on the first cause of action and awarded Plaintiff a judgment in the amount of $61,449.34.

The Second Department reversed the lower court’s decision and dismissed the homeowner’s first cause of action seeking to recover the amounts it paid to the contractor on the basis that the contractor did not have the required license. The appellate court held that where, as here, a homeowner receives a benefit from an unlicensed contractor he or she is not entitled to a refund of monies paid solely on the ground that the contractor was unlicensed. However, it appears that the homeowner’s breach of contract claim seeking damages for allegedly defective work by the contractor remained.

While a homeowner cannot get a refund solely because a contractor is unlicensed, the contractor takes a big risk by failing to get a license. This is because there is a long line of recent decisions which hold that an unlicensed home improvement contractor does not have the right to sue for any unpaid amounts, even if the homeowner has accepted and has no problem with the work. The lesson here is that a homeowner should always ask the contractor for a copy of its home improvement license before signing a contract and the contractor must procure and maintain its license if it wishes to be able to enforce its contractual rights to sue for money owed by the homeowner.

If you are a homeowner or contractor who needs assistance with this type of matter contact one of our attorneys.