Both buyers and builders in South Carolina have certain statutory protections that serve to prevent unscrupulous characters from taking advantage of the unwary.
To summarize, a builder or contractor who was required by law to acquire a license for construction cannot, if that builder or contractor never acquired the license, file a mechanic’s lien or bring an action to enforce the contract. However, a builder that meets all the requirement can file a lien or lawsuit to enforce a contractual debt.
Mechanic's liens protect a builder from non-payment of a contract. Where the builder meets all the requirements (like having a license at the time of contract formation), the builder may file a mechanic's lien, which acts as a security interest to protect the value of the labor and materials that the contractor has put into the job. The lien encumbers the title of the property on which the work was completed. A title encumbrance makes the sale of the property more difficult than the sale would be without the encumbrance. Buyers of real estate generally want a title free of encumbrance.
In Duckworth v. Cameron, 244 S.E.2d 217, 270 S.C. 647 (1978) the Supreme Court of SC held that a contractor who was unlicensed at the time the contract for the construction of a new home was formed could not then file a mechanic’s lien or a lawsuit to enforce the contract, notwithstanding the fact that the contractor eventually became licensed prior to completing the home. The Court found that his lack of licensure at the time the contract was formed was fatal to the contractor’s ability to file suit. “Any builder who violates [S.C. Code Ann. § 40-59-130 (1976), now § 40-59-30(B)(2015)] by entering into a contract for home construction without obtaining the required license simply cannot enforce the contract.” A more recent case, C-Sculptures, LLC v. Brown, Op. 4826 (S.C. App. 2011) affirmed that pursuant to § 40-59-30(B) a builder who was unlicensed at the time the contract was formed could not enforce the contract.
S.C. Code Ann. § 40-59-30(B) (2015) provides “notwithstanding Section 29-5-10, or another provision of law, a person or firm who first has not procured a license or registered with the commission and is required to do so by law may not file a mechanics' lien or bring an action at law or in equity to enforce the provisions of a contract for residential building or residential specialty contracting which the person or firm entered into in violation of this chapter.” (emphasis added).
Where a building project was in excess of $5,000.00, S.C. Code Ann. § 40-11-30 (2015) requires a license. That statute provides “no entity or individual may practice as a contractor by performing or offering to perform contracting work for which the total cost of construction is greater than five thousand dollars for general contracting or greater than five thousand dollars for mechanical contracting without a license issued in accordance with this chapter.”
Further, S.C. Code Ann. 29-5-15 (A)(2015) also acts to prevent the builder from filing a mechanic’s lien, at least where the builder has not yet procured the requisite license. However, like in Duckworth above, this statute would not prevent the act filing of a lien where the contractor procured the license after the formation of the contract but prior to filing the lien. In this situation both § 40-11-30 and § 40-59-30 would still operate to prevent enforcement of the contract by lien or suit, where the would-be lien filer was required by those sections to hold the license at the time the contract was formed.
Finally, if you have any trouble with unlicensed contractors, call Surasky! Our attorneys can help you avoid needless headache and worry. We will help protect your investment in real estate and get on with your life.