By: Jennifer M. Horn
For over ninety years, Maryland’s Court of Appeals has refused to honor the claims of unlicensed entities, including those of subcontractors and contractors who failed to adhere to the applicable regulatory licensing requirements. In late October, however, Maryland’s high court upheld the reversal of this precedent and allowed an unlicensed subcontractor to enforce its contract against a general contractor on home improvement work.
In Stalker Brothers, Inc. v. Alcoa Concrete Masonry, Inc., subcontractor Alcoa Concrete did not obtain the proper license in accordance with Maryland law, yet performed residential home improvement work pursuant to its contract with general contractor Stalker Brothers. Stalker Brothers promised to pay Alcoa for the concrete work Alcoa performed; however, ultimately withheld payment. It was undisputed that Alcoa was not licensed with the State of Maryland Department of Labor, Licensing and Regulation prior to March 26, 2008, and the Maryland Home Improvement Commission confirmed Alcoa’s status as an unlicensed entity. On this basis, Stalker Brothers moved to dismiss Alcoa’s plea for payment, asserting that contracts made by an unlicensed entity are “illegal” and “will not be enforced.” The Circuit Court agreed.
In overturning the Circuit Court opinion, the Court of Special Appeals and, most recently, the Maryland Court of Appeals determined that the contract between Stalker Brothers and Alcoa was enforceable despite Alcoa’s status as an unlicensed subcontractor. In so doing, the high courts recognized that Maryland Home Improvement Law was intended to protect consumers from unlicensed contractors – not licensed general contractors from their unlicensed subcontractors.
Of course, every contractor should be licensed to perform their work in every appropriate jurisdiction in accordance with Maryland law. However, Maryland Home Improvement Law, according to the Alcoa case, is not intended to serve as a shield for contractors like Stalker Brothers who seek to elude payment for their just debts. For those reasons and others, the contract between Stalker Brothers and Alcoa was enforceable.
As contractors expand their geographic jurisdictions to gain more work in other areas, the Alcoa case serves as a reminder to all companies to update all appropriate professional licenses.
Jennifer M. Horn is Senior Counsel at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.