March 5, 2008

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How the New Georgia Licensing Law Affects You
State licensing for Georgia building contractors, first mandated by a 2004 law, will be required as of July 1, 2008. Recently, the Georgia Board of General and Residential Contractors posted on its website a directive (pursuant to the requirements of OCGA 43-41-17(f)) that exempts pool and spa builders from this requirement. In the posting, pool and spa contractors are recognized in the category, “Outdoor Environmental Limited Service Specialty Contractor,” and may complete or coordinate these types of work without a state license:

If the full scope of your work is contained in the list, a state license is generally not required. Projects not in the list may require licensing, such as gazebos, decks above the grade, and bathhouses. Such work may still be allowed without a state license under the “$10,000 or 25% rule,” meaning, if (1) the total scope of the work is mainly within a listed specialty, and (2) the value of such work (determined at the time of contracting) does not exceed the greater of $10,000 or 25% of the total value of the contracted project.

The new directive is the outcome of much hard work by the Georgia Chapter of APSP and its consultant, attorney Kevin Veler. When the law was first passed, though it exempted “specialty contractors,” it defined them as companies “with direct employees”—in other words, not general contractors. Recognizing the potential effect on the industry, the Georgia Chapter retained Mr. Veler, who attended meetings of the Board and was able to persuade them that pool and spa contractors’ work involves multiple disciplines and trades, and should therefore include general contractors.

If a local city or county license is required for pool and spa work, that requirement remains. The law under OCGA 43-41-17(c) states that local licensing requirements in effect prior to July 1, 2004, can remain in effect. If they are as stringent as the state requirements, a contractor holding a local license may even continue to operate without a state license, though only in his local jurisdiction.

Gray Areas
(1) If a local jurisdiction attempts to pass a new licensing requirement for pool contractors, there may be questions on whether the state law preempts that effort. 
(2) The state law provides that there are fines and penalties for building officials who issue permits to those who do not have a license and are required to be licensed. Some local officials may think it means that all contractors, including specialty contractors, must be licensed. Pool and spa professionals may have permit problems during the initial rollout period. They should explain this to their customers in advance, to manage customer expectations and avoid contract disputes.

What does the law mean for you?
Mr. Veler writes: “The law contains a provision intended to protect consumers from unlicensed contractors, which I often refer to as the ‘heavy hammer.’ Under OCGA 43-41-17(b), any contract entered into on or after July 1, 2008, for the performance of work for which a residential contractor or a general contractor license is required (and not otherwise exempted) and which is between an owner and a contractor who does not have a valid and current license required for such work is UNENFORCEABLE in law or in equity by the unlicensed contractor.

“To ignore the law and undertake a contract without a license which is not within the Outdoor Environment specialty trade exception may mean that you do not get paid. Take a subcontract for a project from an unlicensed general contractor and, even though your work may be within the exemption, the owner may refuse to pay the unlicensed general contractor, and you may have no recourse to the owner for payment. Attempt to manipulate values and cost allocations in your contract to, say, inflate the value of the pool and to offer the bathhouse for $1, not only put a contractor at risk with the owner (subject to a dispute regarding this provision), but will also likely result in Board action.

“I expect many construction contract disputes to use this heavy hammer to force specialty contractors to prove that their work is within the exceptions of the law. Thus, I recommend that, if you can qualify for a state contractor license, do so. The simplest defense to this type of claim is to be able to show your license. Also, many consumers will not understand the nuances of the licensing law. The simplest form of marketing advantage is to hold a state license. Those who rely on the exemption should have appropriate provisions in their contracts and marketing materials to indicate that they are not state licensed.”

This article was substantially contributed to by attorney Kevin M. Veler of Alpharetta, Georgia. Additional information may be found at www.georgiaresidentialcontractor.com under the licensing information tab. This article is for general purposes only, providing legal information and does not constitute specific legal advice. You should consult a legal advisor for specific information regarding your specific circumstances.

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