Can you file a mechanics lien if you don’t have a contractors license? The short answer is: it depends. In some states, unlicensed contractors are forbidden from filing a lien. In other states, it’s allowed. Consult your state’s lien laws to find out if you can file a mechanics lien, and read on below for a more specific answer to this all-too-common question.
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Video Summary of Filing a Lien As an Unlicensed Contractor
Get licensed if it’s required… regardless of the lien laws
The first thing to say about this subject is that if you’re doing work that requires a license without having that license, you’re treading in dangerous water regardless of your state’s laws. While some states are more liberal and allow unlicensed parties to collect amounts owed to them, it is very rare that the unlicensed contractor is not penalized in some way. Therefore, if you’re unlicensed and doing construction work that requires a license….get licensed!
The issue we’re really talking about here is: what happens if a contractor ends up having a payment issue on a project when they did not have a license (for whatever reason).
And like so many other aspects of mechanics lien laws and requirements, the answer to this question is, “it depends on the state.”
A state-by-state issue
In some states such as New York, the answer to this question is an unequivocal, “NO.” In other states like Colorado, the answer is a clear, “YES.” Then there are several states such as California, Florida, and Georgia where the answer is neither yes nor no. In these states, the answer is usually much more complicated and depends on several other factors.
Scenario 1: Unlicensed contractors have no recovery options
The question here is whether you can file a mechanics lien if you’re unlicensed. Unfortunately for unlicensed contractors, this question may be just the tip of the iceberg. In reality, unlicensed construction participants must ask a more significant question: can they recover payment for their work at all?
I’ll discuss the laws in California and Washington, and then in Louisiana, to compare how the answer to this question may vary by state.
In California and Washington, the laws against unlicensed contractors are very strict — unlicensed contractors have no recovery rights whatsoever. This means they cannot file a lien, or a lawsuit, or anything at all. If an unlicensed contractor provided $1,000,000 of work, and a party refused to pay them, the contractor would be without a remedy to collect the payment.
Scenario 2: Unlicensed contractors are penalized, but can file a mechanics lien
Is it fair to strip unlicensed contractors of all collections tools?
There are two schools of thought on this. In Washington and California, the legislature considers it more important to regulate the unlicensed contractor market than to ensure that unlicensed contractors get paid. States like Louisiana take a different approach. In Louisiana, the unlicensed contractor is still penalized (i.e. he can get penalized by the licensing board, his contract is declared null and void, and he can only recover the “minimum value” of his work), but he is still allowed to recover some sort of compensation for the work he performed… and that means, an unlicensed contractor in Louisiana can file a mechanics lien.
If you’re doing work in California or Washington and are unlicensed, you’re really out of luck. If you’re in Louisiana, you have some legal ground. Elsewhere, it’s really important to examine that state’s liens laws to determine if it is possible for unlicensed contractors file a mechanics lien.
Unlicensed contractors in the West are living dangerously — and potentially working for free
While there are licensing and/or registration requirements in states all throughout the county, if a party is performing work in a western state there is a good chance a license is required. Washington, Oregon, California, Nevada, Arizona, and New Mexico all have at least some licensing and/or registration requirements, and they can be very strict.
In California, a relatively new case has again underscored the importance of being licensed in that state. In Twenty-Nine Palms Enterprises Corporation v. Bardos, an unlicensed contractor was required to return over $750,000 for work done on a casino. It is important to note, here, that whether or not the work was performed (or even the quality of the work) was not the material issue – the lack of a valid license [for most of the project] was. This contractor performed three-quarters of a million dollars worth of work, and was required to pay the money back because he was an unlicensed contractor. Wow.
Not only can unlicensed contractors be denied payment in some states, but they may also be required to give back money already paid. That’s about the worst accounts receivable (or credit management) disaster there can be. New Mexico also prohibits mechanics liens for unlicensed contractors and also prohibits suit to recover money unpaid even without mechanics lien protection. Further, like the California case above, New Mexico may also require unlicensed contractors to return money already paid to the property owner.
It is also worth noting that in some states an unlicensed contractor may be subject to fines and/or penalties, may be liable to the property owner for damages, and may be guilty of a misdemeanor or even a felony.
Long story short – get licensed.