Many states have licensing requirements for construction participants in order to claim a valid and enforceable mechanics lien. If a contract is required for the work performed and the claimant doesn’t have a license, they can’t file a lien. The extent to which the penalty extends depends on the lien laws of the state where the claimant’s project is located.
States like California and Washington ban all recovery by unlicensed contractors – not only can an unlicensed contractor not file a lien, he can’t file a lawsuit to recover, either. Other states, like Louisiana, penalize unlicensed contractors and limit recovery to the minimum value of the work they performed but do not shut them off from recovery entirely. And, some states don’t have licensing requirements for mechanics liens at all.
When required, making sure you are licensed can be critical to your ultimate payment. But it can be confusing for contractors or companies with licenses in multiple states to determine which license is required. A company with a headquarters in one state (that may even be where the contract was executed) but who is performing work in a different state may worry about which licensing information to provide.
While an error in this manner could probably be corrected if the company actually has whichever license is required (depending on whether the information is required on the face of the lien claim itself), nobody wants to further complicate matters or get involved in frustrating disputes unrelated to the payment issue.
So, what license is required?
License Where Work Performed
To examine the issue a little bit, we’ll use an example of a state that requires lien claimants to be licensed. In Arizona, “a person who is required to be licensed as a contractor but who does not hold a valid license as such contractor issued pursuant to title 32, chapter 10 shall not have the lien rights provided for in this section.” [emphasis added]
Accordingly, since the required license is one provided pursuant to the Arizona contractor licensing provisions, an Arizona license is required of the party doing the work for which the license is required in order to claim a valid lien, whether or not the party may have a California or Nevada license.
Note, however, that the licensing requirement is a requirement of “a person who is required to be licensed as a contractor” – and this is true in many states. This means that some parties, such as material suppliers and equipment lessors, who are not required to be licensed as a contractor, do not need any contractor’s license to claim a valid and enforceable mechanics lien provided all other requirements are met.
Further, while providing the license number on the lien can cut off one potential avenue for the other interested parties to claim the lien is unenforceable, providing the license number on the lien claim itself is not strictly necessary in many states. Staying with our Arizona example, while a license is required, the license number does not appear on the list of mandatory inclusions on the lien claim document.
According to Arizona statute: “The notice and claim of lien shall be made under oath by the claimant or someone with knowledge of the facts and shall contain:
1. The legal description of the lands and improvements to be charged with a lien.
2. The name of the owner or reputed owner of the property concerned, if known, and the name of the person by whom the lienor was employed or to whom he furnished materials.
3. A statement of the terms, time is given and conditions of the contract, if it is oral, or a copy of the contract, if it is written.
4. A statement of the lienor’s demand, after deducting just credits and offsets.
5. A statement of the date of completion of the building, structure or improvement, or any alteration or repair of such building, structure or improvement.
6. A statement of the date the preliminary twenty-day notice required by § 33-992.01 was given. A copy of such preliminary twenty-day notice and the proof of mailing required by § 33-992.02 shall be attached.”
So, to the extent a lien claimant wishes to provide the licensing information on the claim of lien for informational purposes, the claimant’s Arizona license (if required) is the license at issue. But, just because a state has a licensing requirement, it doesn’t mean that a license is required for every role on the project, or is a mandatory inclusion on the face of the claim itself.