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New York City Sparkies Beware – Be Licensed or be Square

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  • Posted on: Apr 12 2024

By Jonathan H. Freiberger

This BLOG has previously addressed issues related to proper licensure for contractors and the problems that arise for them if they perform work without a license. See, e.g., [here], [here] and [here]. We have previously noted that home improvement contractors are frequently required by municipalities to be licensed. Unlicensed home improvement contractors are precluded from collecting payments due from homeowners. Brightside Home Improvements, Inc. v. Northeast Home Improvement Services, 208 A.D.3d 446, 449 (2nd Dep’t 2022).

The purpose of such licensing legislation was previously described in this BLOG when we noted that in Millington v. Rapoport, 98 A.D.2d 765 (2nd Dep’t 1983), in reversing the court below and dismissing plaintiff’s complaint which sought to foreclose a mechanic’s lien, the Court stated:

Since the purpose of [New York City’s Administrative Code] is to protect the homeowner against abuses and fraudulent practices by persons engaged in the home improvement business, it is well established that the lack of a license bars recovery in either contract or quantum meruit. Since strict compliance with the licensing statute is required, recovery is barred regardless of whether the work was performed satisfactorily or whether the failure to obtain a license was willful. The fact that the homeowner was aware of the absence of a license or even that the homeowner planned to take advantage of its absence creates no exception to the statutory requirement [citations omitted].

Millington, 98 A.D. at 766 (citations omitted); see also Callos, Inc. v. Julianelli, 300 A.D.2d 612, 2013 (2nd Dep’t 2002) (“It is well settled that licensing statutes are to be strictly construed and that an unlicensed contractor forfeits the right to recover damages based either on breach of contract or on quantum meruit.”)

Section 27-3017(a) of the New York City Administrative Code (Electrical Code) prohibits the performance of electrical work without a license. This furthers the purpose of the Electrical Code, which provides that “[s]ince there is danger to life and property inherent in the use of electrical energy, the electrical code is enacted to regulate the business of installing, altering or repairing wiring and appliances for electrical light, heat, power, signaling, communication, alarm or data transmission in the city of New York and the licensing of all persons who engage in such business.” New York City Administrative Code § 27-3002.

The significance of the Electrical Code and the strictness with which compliance will be construed was reinforced on April 10, 2024, by the Second Department in Electrical Contracting Solutions Corp. v. Trump Village Section 4, Inc. The defendant in Electrical Contracting owned several buildings. The electrical systems of those buildings were damaged during a storm and had to be replaced. The plaintiff electrical contractor entered into contracts with the defendant to perform the work. While the plaintiff’s vice president held a master electrician’s license (NYC Admin Code § 27-3017), the plaintiff corporation did not. The Plaintiff’s vice president obtained permits for the electrical work from the New York City Department of Buildings under the name of his own (but different from the Plaintiff) company. The plaintiff’s vice president supervised the electrical work that was performed by the Plaintiff’s own employees.

The defendant owner failed to pay the plaintiff for the work once completed. The plaintiff filed a mechanic’s lien and commenced and breach of contract action against the defendant. During a bench trial, the defendant asserted that the plaintiff was an unlicensed contractor and that it was not entitled to recovery. The motion court determined that the plaintiff was entitled to recovery on the unpaid invoices. “With respect to the issue of non-licensure, the [motion] court found that the “breach was insubstantial and nominal only.”

On the defendant’s appeal, the Second Department modified the judgment by dismissing the complaint. After noting that the NYC Administrative Code requires electrical contractors to be properly licensed, and that the Code provisions were promulgated to protect the public health and safety, the Court reiterated that the plaintiff was not licensed and held:

The plaintiff’s contention that recovery should not be denied because [the plaintiff’s vice president’s other company] was a duly licensed subcontractor which performed the electrical work is without merit. This Court has previously held that such a relationship is insufficient to permit an unlicensed contractor to recover for work performed in the City (see JME Enterprises, Inc. v Kostynick Plumbing and Heating, Inc., 273 AD2d 201; Fisher Mech. Corp. v Gateway Demolition Corp., 247 AD2d 579). “‘So strict has been judicial construction of the statutory requirement through concern for the public health and welfare that the requirement may not be satisfied by employing or subletting’ the work to an appropriately licensed person” (Charlebois v Weller Assoc., 72 NY2d 587, 592-593, quoting Vitanza v City of New York, 48 AD2d 41, 44). Moreover, that the plaintiff’s vice president had a master electrician’s license, and that the defendant’s architect knew that the electrical work permits were issued to an entity other than the plaintiff, does not bar the application of the above rule (see Bronold v Engler, 194 NY 323; Fisher Mech. Corp. v Gateway Demolition Corp., 247 AD2d at 580; Piersa, Inc. v Rosenthal, 72 AD2d 593). [Hyperlinks added.]

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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