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Can a construction contract be enforced if the company doesn’t have a business license under the contract name

We have a construction contract and project that is stalled for defective work; there are four large punch list items remaining. The company that we have the contract with had its business license terminated 2 years ago but the owner of the company we contracted is part of a different company WITH a business license. 1. Can that individual put a lien on our residence? 2. Is the contract under the business name with no license even a legal contract?

2 replies

Sep 26, 2019

If a contractor is performing work without a license, that contractor will not be entitled to file a mechanics lien. Virginia is strict about making sure mechanics lien claimants are licensed, and parties down the chain from an unlicensed contractor can lose lien rights simply because the prime contractor isn't licensed. Further, Virginia (like most states) doesn't allow one business to use the license of another for compliance. Though, in a situation where the two separate businesses are heavily intertwined, that might not be so black and white. It's common for a license to be under one business name, but for the business to actually conduct their affairs under a different name. With that being said, there's generally no requirement that an owner be licensed. Further, an owner will not have any mechanics lien rights against the contractors and subs who perform work at their property. Parties will be entitled to file a mechanics lien against the project property if they perform work there but go unpaid - but that doesn't work in both directions. A property owner will never be entitled to mechanics lien rights against their contractors' businesses or residences (unless that owner has performed authorized work and gone unpaid for it at those locations). Licensure and contracts A company's failure to obtain a business license, if one is required for their business, shouldn't automatically void a contract between an owner and their contractor. Rather, it's more common that the other party to the contract - the one who has not broken licensure rules - could void the contract. But, when someone has failed to obtain the proper license, they typically won't then be entitled to use that as a defense to void their own contract. As a final note - it sounds like this is quite the complex dispute, and it may be worth consulting a local construction attorney. They'll be able to review the circumstances as well as any relevant documentation, then advise on how best to proceed. We've got some Virginia attorneys featured on the Expert Center, here: Construction Payment Experts in Virginia.

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Sep 26, 2019

Thank you for the response. If I may please clarify—the basic question is: Is a contract we have with a person (the contractor) and a company (the company had their business license terminated two years ago) a legally enforceable contract if the person we have the contract with (the contractor) has a business license for under a different company name, not specifically mentioned in the verbiage of our contract? Further, 1. Can the person who contracted with us under a certain company name use a different business license to file a mechanics lien against our property? 2 If this individual fails to complete the work or stops responding, do we have the right as the client of the construction project, to terminate the contract on the grounds that this company name used in our contract is unlicensed, hereby nullifying the contract ? thank you very much

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