Home>Levelset Community>Legal Help>I have executed a remodel job for 70k in Alabama, I didn't know that I must have a home builders License. How can I avoid legal penalties if reported?

I have executed a remodel job for 70k in Alabama, I didn't know that I must have a home builders License. How can I avoid legal penalties if reported?

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Client refusing to pay due balance & threatening to report me to Home Builders Association. We didn't know that we needed that license! we finished the job. Client knew that we didn't have the license before we started the job. I don't think he knew about it either, and he agreed on working with us. what can we do now to avoid legal action against us? can we pursue legal action against client to collect our money?

1 reply

May 2, 2019
I'm sorry to hear about that - it sounds like a frustrating situation to be in. First, let's look at the rules regarding Alabama licensure for home construction projects. For those remodeling residential property in Alabama, a home builder's license is required for projects that exceed $10,000. When a home builder's license is required, but not held, the contractor performing work may find themselves charged with a Class A misdemeanor and a fine of up to $2,000. But, more importantly, unlicensed home builders are not allowed to bring any legal action in order to enforce their contracts with the homeowner in order to obtain payment under 34-14A-14 of the Code of Alabama. Perhaps the best way for an unlicensed contractor to avoid legal penalties for work performed on residential property is to avoid having the homeowner report the contractor. Naturally, if the owner understands this, they might attempt to leverage this position to avoid making payments owed under the contract. If that's the case, it could be very hard for an unlicensed contractor to obtain payment. Potentially, one option might be to threaten a mechanics lien. Due to the drastic nature of mechanics lien claims, most property owners will want to avoid having to battle a lien filed against their property. So, by threatening a lien if payment isn't made - like with a Notice of Intent to Lien - a contractor might be able to convince the owner to make payment in order to avoid the lien dispute. Further, under 34-14A-14 of the Code of Alabama, an action to enforce the contract may not be maintained. However, filing a mechanics lien does not constitute a legal action. Rather, a mechanics lien is merely a filing in the property record, and a lien claim will not automatically initiate a lawsuit. Note, though, that the ability to actually enforce a filed lien might not be present since that would require legal action. Still, most lien actions don't make their way to a full-fledged legal dispute, so if negotiations or threats of lien won't be effective to compel payment, then actually filing the lien might be a fruitful option. Speaking of negotiating - keep in mind that, considering payment recovery will be tough sledding for unlicensed contractors, it might be possible to negotiate a lower rate of payment in order to cut losses while also covering some costs. If an owner knows that the contractor is unlicensed, they'll be in a position of power - but they might also be willing to pay less than full value in order to avoid further dispute, and after all, they did receive something of value in the transaction. But, at the end of the day, it might be pretty tough for an unlicensed contractor to force payment on a residential construction project. Going forward, it might be wise to be sure that all necessary licenses are held prior to accepting work. For more information about Alabama's mechanics lien laws, this resource might be useful: Alabama Mechanics Lien Overview.
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