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It’s no surprise to most people that many professions in the modern world require a government license to operate lawfully, and the categories of licenses can cover a shocking number of job categories. Here’s what contractors, developers, and licensed trades need to know. 

Why Licensing Matters for D.C. Contractors 

The District of Columbia is no different than most other jurisdictions. Licensed professionals such as engineers, plumbers, sports agents, private detectives, HVAC mechanics, and funeral directors could have multiple levels of licensure for a practitioner to achieve.  

But, if you’re running a business, what does it really take to be completely licensed? This often means that you need a license for your business to perform a specific trade. Your business may need to have a licensed individual with a master license, and the rest of your employees may need licenses of their own. Any shortcoming in your licensure could jeopardize your business’s ability to collect its fees.  

Which Trades Face the Highest Risk? 

Businesses that face specific problems include trades that operate in residential real estate, such as electricians, plumbers, and HVAC mechanics.  

The Home Improvement Contractor Rule: No License, No Deposit  

Under District of Columbia Municipal Regulations, residential home improvement contractors are prohibited from accepting any down payment or deposit for work unless they have a District of Columbia home improvement contractor’s license. 

If they violate these regulations, the homeowner can sue them and demand that the contractor return all of the money that was paid to them regardless of whether the contractor completed all the work perfectly. The Courts consider these rules as protection for the public against unlicensed contractors, and refuse to allow contractors to keep any money for labor, materials, or any other expense.   

Are Electricians, Plumbers, and HVAC Mechanics Exempt? 

Electricians, plumbers, and HVAC mechanics are exempt from this requirement but only if they are:  

1) licensed AND 

2) their work is limited to their licensed occupation.  

That seems straightforward, but the details are more complicated than they seem at first. Trades in the District of Columbia frequently have employees who are licensed, but sometimes they’re licensed in Maryland or Virginia but not in the District. Does it make a difference?  

Case Study: Highpoint Townhouses, Inc. v. Rapp 

In Highpoint Townhouses, Inc. v. Rapp, a plumbing company filed a mechanic’s lien against a developer for failing to pay for plumbing installation services.  

The developer countered that the plumber didn’t have any employees with a master plumber’s license, as required by law, and therefore couldn’t enforce its mechanic’s lien. The plumber contracted with a licensed plumber to “pull the permit” for the job, but the licensed plumber took no part in the rest of the project.  

The Court agreed with the developer and found that the plumber was not licensed as required by law. The Court also noted that the work was not even supervised by the licensed plumber, and therefore the lien was unenforceable.  

The Takeaway: How to Protect Your Business 

A business operating in the District as an electrician, plumber, or HVAC mechanic could still sacrifice all of their fees for a project if they don’t have their licenses fully compliant. If it’s a residential project and a Court finds that the business wasn’t properly licensed, the Court could force the contractor to repay any and all fees they received from their client.  

Licensed trades should ensure that their businesses and employees have the proper licenses to perform work in the District of Columbia and that the properly licensed professionals perform only the minimum necessary work to preserve the legality of their contracts. Licensing slip-ups could cost a business its entire invoice.  

Brian McIlhargie is a senior counsel in the Firm’s Real Estate Litigation and Commercial Litigation groups. For more information, contact bmcilhargie@fmlaw.com.  

The content on this blog is for informational purposes only and does not constitute legal advice. The information provided should not be relied upon as a substitute for professional legal counsel.