As a continuation of our series regarding contractor licensing, this article focuses on the District of Columbia (“DC”). Like most states, the primary purpose of licensing in DC is to protect the general public. Similar to the licensing laws of Virginia and Maryland discussed in our two prior newsletters, an unlicensed contractor in the District of Columbia risks civil and criminal penalties and may be prevented from enforcing its contract or mechanic’s lien rights. One major difference in DC from the other states previously discussed is that a special home improvement license is required for home improvement work. In addition, DC has various other requirements for obtaining a license. Compliance with these licensing requirements is essential for conducting any business in DC.

KNOW THE LICENSING REQUIREMENTS

The Division of Occupational & Professional Licensing of the District of Columbia Department of Consumer & Regulatory Affairs (“DCRA”) regulates the licensing of general contractors and construction managers, as well as contractors that perform electrical, plumbing, asbestos abatement, HVACR and home improvement work.

At a minimum, all contractors and suppliers must have a Basic Business License (“BBL”) to conduct business in DC.[1] What constitutes “doing business” in DC is defined as “any trade, profession or activity which provides . . . goods or services to the general public . . . for hire or compensation in the District of Columbia.”[2] Currently, nearly all business activities in DC require some form of licensure.

Prior to obtaining a license, an entity must be registered with the DCRA Corporations Division to conduct business in DC.[3] D.C. Code §29-101.06 requires any corporate entity to file and register with the DCRA or be subject to sanctions for failing to file and register. This is also true for any foreign entity that conducts business in DC.[4]

General Contractor/Construction Manager

Any individual or business acting as a general contractor[5] or construction manager[6] is required to have an endorsement as such to its Basic Business License.[7] There are five classes of licenses (Class A through Class E) based on the contract value of any single project, with Class A having no limit, Class B for contracts up to $10 million, Class C for contracts up to $5 million, Class D for contracts up to $2 million and Class E for contracts up to $500,000.[8]

Applicants must file an application which can be done by mail, online or in person with the DC Business Licensing Division along with the requisite fees. Certain supporting documentation such as the following must also be submitted[9]:

An application signed by the owner or authorized representative of the business entity[10];

A Credit Report[11];

A Clean Hands Certification Form which certifies that the contractor does not owe DC more than $100 in fines, penalties, interest or taxes[12];

A registered Tax Number (SSN or FEIN)[13];

A Certificate of Occupancy or Home Occupancy Permit for businesses operating in a building in DC to show that it is in compliance with building and zoning codes;

A Certificate of Insurance for the specific Class of License applied and naming the DCRA as the holder of the Certificate. The Certificate will be in effect for the entire license period and a single violation of the insurance requirement can be grounds for suspension or revocation of the license[14];

Three copies of sample contracts and receipts; and

An applicant is also subject to a 30 day background investigation. The general contractor/construction manager may be required to provide a bond as a condition for the issuance of the license as well.[15]

The general contractor/construction manager license can be assigned or transferred but only if approved by the DCRA. The license is valid for 2 years and the DCRA may send notice of impending termination to the licensee 60 days prior to the expiration date. A license can be renewed up to 6 months after expiration for additional fees and penalties. If a license has been expired for more than 6 months, the DCRA will treat the licensee as a new applicant.[16] If a licensee works in the period during the six months after the expiration date, the contractor will be viewed as conducting business without a license and will be liable for fees and fines and penalized.[17]

A contractor’s license can be denied, suspended or revoked by the DCRA if a licensee fails to maintain any qualifications for a license.[18] Grounds for action include material misstatements, failure to comply with laws and regulations, conviction, misrepresentation, fraudulent conduct, false, misleading or deceptive advertising of contracting services, working beyond the scope of the license, refusal or failure to complete the work, and other conduct.[19] If it is determined that there has been a pattern of substantial code violations[20] a temporary suspension may be issued for a period of 10 days, during which time the contractor shall have the opportunity for a hearing.[21] If there is sufficient evidence of code violations, suspension can be for a longer period or the license can be revoked.

Subcontractor

A subcontractor is any person that performs construction related services for a general contractor, construction manager or another subcontractor.[22] All subcontractors hired by the general contractor must be licensed and registered as required under DC law. The Board of Industrial Trades of the DCRA’s Occupational and Professional Licensing Administration (the “Board”) governs trades such as such as electrical, plumbing, asbestos abatement, gasfitters and HVACR contractors. The Board has additional qualification and examination requirements for obtaining a trade license in DC.[23] Most trade licenses have bonding and insurance requirements as well.

Home Improvement Contractor

Any contractor that performs home improvement work on contracts that exceed $300.00 must have a home improvement contractor license. Home improvement work is defined as the addition to or alteration, conversion, improvement, modernization, remodeling, repair, or replacement of a residential property[24], or a structure adjacent to the residential property, including a driveway, fence, garage, porch, deck, or swimming pool.[25] It does not include new residential construction, work performed by tradesmen (electricians, plumbers, HVAC and gasfitters) limited to their licensed profession or work done by a homeowner on his or her own property.[26] It is important to note that a homeowner under DC law includes any residential property owned or occupied by the homeowner.[27]

Similar to the general contractor/construction manager license requirements discussed above, a home improvement contractor must submit a Basic Business License Application for the Home Improvement Category , a Clean Hands Certification, Tax Number, a Certificate of Occupancy/ or Home Occupancy Permit and be subject to a 30 day background investigation.[28] In addition, applicants must provide a Police Criminal History Report from the jurisdiction in which they reside.[29] Applicants must post a cash or surety bond in the amount of $25,000 which is held by DCRA for at least 3 years after the expiration of the license.[30] Insurance in the amount of $50,000 to $100,000 for liability and $10,000 to $25,000 for property damage are also required.[31] Applicants must also submit sample contracts and receipt forms for approval by the DCRA.[32] Home improvement contracts must be reduced to writing, signed by the homeowner and contractor, and must contain certain information such as license number, name, address and phone number for contractor, payment terms, start and completion dates, specifications, and notice in large bold type that homeowner shall not sign the contract until all blank spaces are filled in and no changes without written approval of the homeowner.[33] Other provisions regarding no delay damages for unforeseeable circumstances not caused by the contractor, period of review and rejection of the contract and refund of any payment may also be included. A contractor cannot accept payment from a homeowner until a receipt has been given to the homeowner upon completion of the work.[34]

A general contractor with a Basic Business License for the general contractor categorywho performs work on residential property does not require a Basic Business License for the home improvement category if the general contractor complies with 3 additional requirements for a home improvement contractor’s license.[35] They include the requirements for home improvement contracts, sample contracts and receipt forms for approval and not accepting payment from a homeowner until a receipt has been given to the homeowner as discussed in the prior paragraph.

Home improvement contractor’s licenses are valid for two years. The DCRA issues identification cards which must be carried by the contractor and who must also display it or present it in any dealings with a homeowner.[36] The identification card shall be returned to the DCRA within 5 days upon termination of the licensee.

A home improvement contractor’s license can be denied, suspended or revoked by the DCRA for failing to maintain all qualifications.[37] Other grounds for denial, suspension or revocation include material misstatements, failure to comply with laws and regulations, conviction, misrepresentation, fraudulent conduct, false, misleading or deceptive advertising of contracting services, refusal or failure to complete the work within a reasonable time and other conduct[38] If the DCRA decides to deny suspend or revoke a license, the contractor will be given notice including which statute or regulation has been violated, the action proposed and an opportunity to appeal the decision. [39] Notice to the licensee can be made in person or by first class mail. A contractor may appeal the decision by filing an appeal with the Office of Administrative Hearings.

CONSEQUENCES OF VIOLATING THE LICENSING LAWS

Besides the authority to deny, suspend or revoke a contractor’s license, the DCRA has the authority to investigate complaints by homeowners and toaward monetary damages against licensed contractors. Funds from the bond provided by a home improvement contractor per DCMR §16-802 may be used to pay a homeowner that has obtained judgment against the licensed contractor for violation of the licensing laws which resulted in a monetary loss. To the extent a contractor violates any provision of the DC licensing laws and regulations, the contractor can be fined up to $300 or imprisoned for up to 90 days or both upon conviction.[40]

Violation of a licensing statute or regulation that is designed for the regulatory purpose of protecting the public will result in a contract being void and unenforceable.[41] Therefore a contractor will not be able to recover monies for work performed or exercise any mechanic’s lien rights. Several cases have ruled that an unlicensed contractor who accepts payments under a home improvement contract prior to completion of the project loses all rights to receive or keep any payment, including any progress payments. [42] Courts have also held that a contractor cannot recover on an unjust enrichment or quantum meruit theory.[43] Even where a homeowner was aware that a contractor was not licensed and that money advanced to the contractor was for purchase of materials only, the court allowed the homeowner to rescind the contract and recover the monies advanced.[44] In that particular instance, the court found that there was a good faith dispute about the quality of the work performed by the contractor. It is important to note that only in home improvement cases and health care cases have the courts determined that all monies be returned.[45]

The license must be in effect at all relevant times.[46] There can be no performance in anticipation of a license and courts have held that an after-acquired license will not be recognized. In Cevern, Inc. v. Ferbish, 666 A.2d 17, (D.C. 1995), the contractor had applied for and been approved for a license before he entered into a contract with the homeowner and accepted his first progress payment. However, the contractor did not pay the fees for the license until after the first progress payment. The court found that this anticipation of a license was legally insufficient and that the contract was void and unenforceable. As a result the contractor could not enforce its mechanic’s lien rights. Relying on the Cevern case, a subsequent decisions stated that a license acquired after entering into a contract and obtaining payment will not be recognized, that the license must be “in effect during the entire time of the home improvement work and the receiving of advance payments . . .”

A contractor that violates the licensing regulations can also be subject to a violation of the District of Columbia Consumer Protection Act (the “Act”).[47] The Act applies where a home improvement contractor required or accepted payment from the homeowner and the contractor was not licensed as a home improvement contractor. Courts can award the homeowner up to three times the actual damages suffered by the homeowner as well as attorney’s fees for a violation of the Act.[48]

Due to the complexities of the District of Columbia licensing statutes and regulations, it is important for all contractors in the District of Columbia and from foreign jurisdictions to comply with the licensing regulations in order to avoid civil and criminal penalties and to be able to enforce your contract and/or lien rights.

[1]DC Code §47-2851.01 et seq.

[2] Id.

[3] Registration can be done online at: http://dcra.dc.gov/service/corporate-registration

[4] Id. For Foreign Registration see: http://dcra.dc.gov/sites/default/files/dc/sites/dcra/publication/attachments/Foreign_Registration_Statement_FN-1.pdf

[5] Any person who, for a fee, is contracted to do construction on real property owned, controlled, or leased by another person of commercial, industrial, institutional, governmental, residential or accessory use buildings or structures including remodeling, repair, improvement or demolition of these buildings or structures. It also includes those that perform heavy construction, land development, and new construction of buildings. This does not include architects or engineers acting as such. DC Municipal Regulations (DCMR) §17-3999.1

[6] Any person who, for a fee, is contracted to supervise and coordinate the work of design professionals and multiple general contractors, while allowing the design professionals and general contractors to control individual operations and the manner of design and construction. DCMR §17-3999.1

[7] DC Code §47-2851.03d.

[8] DCMR §17-3901.2

[9] For fees and form: http://dcra.dc.gov/service/get-general-contractorconstruction-manager-license

[10] Basic Business License forms are available at: http://dcra.dc.gov/service/basic-business-licensing-bbl-forms

[11] DCMR §17-3901.5

[12] http://dcra.dc.gov/publication/dcra-clean-hands-self-certification-form

[13] http://otr.cfo.dc.gov/publication/fr-500-combined-business-tax-registration-application for registration with Office of Tax & Revenue

[14] DCMR §17-3902

[15]DC Code § 47-2851.03d

[16] DC Code § 47-2851.10

[17] Id.

[18] DCMR §17-3908.1

[19] Id.

[20] Defined in DCMR §17-3999.1 as 5 or more violations of building code that affects the public health or safety or 2 or more violations of any stop work order issued under the Code, or any combination of 5 or more violations of the Code within a 6 month period at 1 or more construction sites within DC.

[21] DCMR §17-3908.1

[22] DCMR §17-3999.1

[23] Forms and publications for the individual trades can be found at http://www.pearsonvue.com/dc/industrial_trades/

[24] Includes a single-family dwelling or two-family dwelling (flat), including an individual apartment unit in a condominium or cooperative apartment building, together with any structure or grounds appurtenant to the single-family or two-family dwelling. DCMR §16-899.1. See, Carlson Constr. Co. v. Dupont W. Condo., Inc., 932 A.2d 1132 (D.C. 2007), holding that condominium units are residential property thus requiring contractors to be licensed per the DC regulations.

[25]DCMR §16-899.1

[26] Id.

[27] Id.

[28]Applicants for a home improvement contractor’s license can file in person, online or by mail. For fees and forms: http://dcra.dc.gov/service/get-home-improvement-contractor-license

[29] If the applicant is a partnership or corporation, all partners and officers of the corporation must provide a Police Criminal History Report. Form PD-70 can be obtained from the DC Metropolitan Police Department for DC for those who reside in DC.

[30]DCMR §16-802

[31] DCMR §16-803

[32]DCMR §16-811

[33] DCMR §16-808

[34]DCMR §16-810

[35]DCMR §17-3900.7

[36] DCMR §16-806

[37] DCMR §16-813

[38] Id.

[39] DCMR §16-814

[40] DCMR §16-800.7 & DCMR §17-3909.2

[41] Bathroom Design Institute v. Parker, 317 A.2d 526 (D.C. 1974)