“Was Not” versus “Is So”: Court Clarifies Whether Exceeding Monetary License Limit Affects Contractor’s Recovery

After a great extended weekend on the beaches of Florida, we embarked upon the drive back to Nashville with six kids. Despite the clearly defined travel rules, the antagonizing kid was putting his feet on the emotional kid. The creative kid was writing on the seat with markers, while the perfect kid screamed foul. The lazy teenagers slept. Mom and dad were triggered for eight hours.

Many Tennessee contractor’s have felt the same way with the changes in the licensing laws over the past few years. The rule relating to the effect of a contractor who exceeds its licensing limit is now clear based upon the decision in Clayton Pickens v. John R. Underwood (Tenn. Ct. App. June 12, 2018). In that case, the dispute was whether the “old law” or the “new law” applied. Here’s how it went down:

  • On June 2, 2008, contractor entered into an agreement with owner to construct house for $572,000, but at the time the contract was signed the contractor’s license limit was $350,000.
  • Under the prior version of Tennessee Code Section 62-6-103, an “unlicensed contractor” was limited to recover only the actual documented expenses that could be shown by clear and convincing evidence.
  • The question that often came up was whether a contractor who exceeds its monetary limit was “unlicensed” for purposes of this rule on damages.
  • The Legislature amended Tennessee Code Section 62-6-103(b) effective June 23, 2009, which clarified that: “[a]ny contractor required to be licensed under this part who is in violation of this part or the rules and regulations promulgated by the board shall not be permitted to recover any damages in any court other than actual documented expenses that can be shown by clear and convincing proof.”
  • In Anchor Pipe Company, Inc. v. Sweeney-Bronze Development, LLC (Tenn. Ct. App. Aug. 2, 2012), the court held that a licensed contractor who contracts above his or her monetary limit still is considered “licensed” for application of the rule on damages above. The Anchor Pipe court was interpreting and applying the prior version of Section 103.

In Clayton Pickens, the evidence showed that the parties signed the contract in 2008, which was one year before the statute changed, but filed the lawsuit one month after the statute was amended. The court held the old law applied:

We believe the date of the contract to be more significant here than the date of the filing of the complaint. By the time Pickens filed his complaint, all the operative, underlying events of this case had transpired. The amendment to Tenn. Code Ann. § 62-6-103 was substantive in nature. The effect of the amendment was to expand the limitation of actual documented expenses to any contractor required to be licensed under the statute and rules, whereas before this limitation applied only to unlicensed contractors. When Pickens signed the contract and performed the work for the Underwoods, he was not subject to that limitation as he was not unlicensed. Pickens is not limited retroactively by the provisions of the amended statute.

It appears that all of the loops have been closed. Currently, the law states that if you exceed your licensing limit or otherwise violate some provision of the licensing laws, you cannot file a lien and your damages will be limited to actual documented expenses proven by clear and convincing evidence.

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