Nevada’s Licensing Statutes–Can an Unlicensed Contractor Ever Recover?

Posted by: on Thu, Oct 18, 2012

Share this post

Nevada’s Licensing Statutes—Can an Unlicensed Contractor Ever Recover?

What if an unlicensed contractor, architect or designer (to name a few) performs professional services for a client in Nevada and is not paid for the services rendered? Can he or she still file a complaint to recover damages for breach of contract, file a lien, or seek to recover in equity for unjust enrichment? What if the owner was well aware of the fact that the contractor was not licensed, but hired him anyway specifically with the intent to save a few dollars?

NRS 108.222 provides that a lien is not available to an unlicensed contractor in Nevada who must be licensed to perform the work or services provided. Subsection (2) provides as follows: “If a contractor or professional is required to be licensed pursuant to the provisions of NRS to perform the work, the contractor or professional will only have a lien pursuant to subsection 1 if the contractor or professional is licensed to perform the work.”

With respect to Nevada contractors, NRS 624.320, states as follows:

“No person, firm, co-partnership, corporation, association or other organization, or any combination of any thereof, engaged in the business or acting in the capacity of a contractor shall bring or maintain any action in the courts of this State for the collection of compensation for the performance of any act or contract from which a license is required by this chapter without alleging and proving that such person, firm, co-partnership, corporation, association or other organization, or any combination of any thereof, was a duly licensed contractor at all times during the performance of such act or contract and when the job was bid.”

“The primary purpose of Nevada’s licensing statutes is to protect the public against both faulty construction and financial irresponsibility.” Interstate Commercial Bldg. Services, Inc. v. Bank of Am. Nat’l Trust and Sav. Ass’n, 23 F. Supp. 2d 1166, 1173 (D. Nev. 1998) (quoting MGM Grand Hotel v. Imperial Glass Co., 533 F. 2d 486, 489 (9th Cir. 1976)). For this reason, courts have only recognized a few narrow exceptions to the licensing requirements when a contractor is not paid for his services. See Id. at 1173 – 75.

An unlicensed contractor can maintain a cause of action in law for breach of contract only if they “substantially complied” with the Nevada licensing statutes. Interstate Commercial Bldg. Services, 23 F. Supp. 2d at 1173.

For Example, in Day v. West Coast Holdings, Inc., 101 Nev. 260, 265 (1985), the contractor was not in strict compliance with NRS 624,320 because it had not obtained a specialty landscaping license prior to commencing the work. Nonetheless, the Nevada Supreme Court held that the contractor had “substantially complied” with the licensing statutes because it held a general contractor’s license, its application for a sub or specialty license was pending, the defendant had full knowledge of the contractor’s noncompliance with the licensing requirements of the project, the job had been completed to the defendant’s full satisfaction and benefit, and the defendant would otherwise be unjustly enriched if the contractor was not reimbursed or compensated for its services rendered. Id. ; see also Nev. Equities, Inc. v. Willard Pease Drilling Co., 84 Nev. 300, 303 (1968) (stating that a licenses well-driller, though it did not hold a specialty license, had substantially complied with the licensing statutes) .

Similar to the narrow exception for a breach of contract action at law, an unlicensed contractor (presumably this would apply to other types of builders, designers and architects) may only state a claim to recover in equity (for example under an unjust enrichment claim) under two limited exceptions: (1) where there has been substantial compliance with the Nevada licensing statute, or (2) where the weight of a four-factor test balances in the unlicensed claimants’ favor, such that the doctrine of in pari delicto (illegality) should not be applied. Interstate Commercial Bldg. Services, 23 F. Supp. 2d at 1174 (citing Magill v. Lewis,, 74 Nev. 381, 386 (1959)). The Nevada Supreme Court has delineated the second “equitable exception” to noncompliance and its four part balancing test in Magill as follows:

The rule that the courts will not bend their aid to the enforcement of an illegal agreement or one against public policy is fundamentally sound. The rule was conceived for the purposes of protecting the public and the courts from imposition. It is a rule predicated upon sound public policy. But the courts should not be so enamored with the Latin phrase “in pari delicto” that they blindly extend the rule to every case where illegality appears somewhere in the transaction. The fundamental purpose of the rule must always be kept in mind, and the realities of the situation must be considered. Where, by applying the rule, the public cannot be protected because the transaction has been completed, where no serious moral turpitude is involved, where the defendant is the one guilty of the greatest moral fault, and where to apply the rule will be to permit the defendant to be unjustly enriched at the expense of the plaintiff, the rule should not be applied. 74 Nev. at 386 (citation omitted). However, “[i] n cases of “blatant, substantial, and repeated’ violations of Nevada law, neither exception will protect the equitable claims of unlicensed contractors.” Interstate Commercial Bldg. Services, 23 F. Supp. 2d at 1175 (quoting Loomis v. Lange Fin. Corp., 109 Nev. 1121, 1129 (1993)).

In other words, an unlicensed contractor may be able to persuade the court to order reimbursement for its first equitable claim for compensation, particularly where the owner knew about the unlicensed status of its contractor. However, with each equitable complaint filed thereafter itwill obviously grow increasingly more difficult for the unlicensed contractor to prevail in equity without obtaining a proper license. Continuing to perform services without the requisite Nevada license may also make it difficult, if not impossible, to eventually obtain a license if knowledge of this type of behavior becomes an issue before the appropriate Nevada licensing board.

By G. Mark Albright Esq.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on real estate, secured finance and litigation.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.