Appellate Court Reverses Ruling Requiring Contractor’s License for Disaster Mitigation

The firm’s latest Miami Herald “Real Estate Counselor” column was authored by partner George T. Breur.  The article, which is titled “Appellate Court Reverses Ruling Requiring Contractor’s License for Disaster Mitigation,” focuses on a recent opinion by the state’s Third District Court of Appeal that reversed a lower court’s decision that had concluded a contractor’s license was required for those who perform disaster restoration work. The article reads:

. . . The appellate opinion came in a case that stemmed from disaster mitigation services performed in 2017 by Incident365 Florida in the aftermath of Hurricane Irma at the Ocean Pointe community near Key Largo in the Florida Keys. The company executed service agreements with the community’s condominium associations and ultimately billed them $1.4 million for restoration services. This included water removal and dehumidification; installing plastic sheeting; mold removal; and removing unsalvageable drywall, flooring and ceiling materials.

Incident365 did not possess a Florida contractor’s license when it entered into those  agreements and performed the work, and state law strictly prohibits unlicensed construction work. The licensing requirement is designed to protect property owners from untrained and unskilled workers that lack the necessary knowledge of building code requirements and insurance coverage, which could lead to property damage, financial losses and injuries. Unlicensed contracting is a crime, and offenders can be charged with felonies and face jail time.

Incident365 completed the agreed-upon restoration work with the Ocean Pointe condo associations, which then failed to pay the approximately $1 million remaining balance. The company subsequently filed suit for breach of contract and unjust enrichment, and the associations responded by filing for summary judgment based on the state’s laws governing unlicensed contracting and unlicensed mold remediation. They argued that Incident365 was not entitled to payment for the work it performed because it was an unlicensed contractor.

Incident365 responded by arguing its restoration work does not require a contractor’s license under state law. It also posited that if some of the services it performed required a license, those portions of the agreement should be severed and it should be paid for the work that did not require a license.

The trial court analyzed the applicable Florida statutes to determine whether the mitigation services provided by Incident365 required licensure. In reaching its decision that a license was indeed required, the court relied on dictionary definitions for the statutory terms “remodel,” “repair” and “improve,” and concluded that each of the tasks in the service agreements and all the work performed constituted repairs and improvements. It found the scope of the work was substantially similar to that of a building contractor, and Incident365 is clearly a contractor under Florida law.

Accordingly, after finding that Incident365 was unlicensed, it could not enforce its contracts with Ocean Pointe or recover the $1 million outstanding balance. The court acknowledged the “harsh outcome” for the company, but concluded it “must apply the applicable statutes without considerations of fairness.”

In the ensuing appeal, the Third DCA panel considered the statutory definitions for “contractor” and “building contractor,” as well as the broad dictionary definitions used by the lower court. The appellate court concluded the trial court incorrectly relied on those dictionary definitions in isolation, without considering “the specific context in which the language is used, and the broader context of the statute as a whole.”

After applying the standard principles of statutory interpretation, the panel disagreed with the trial court’s determination that a building contractor’s license was necessary for the work completed in six of the seven types of tasks performed by Incident365. It concluded the terms “remodel,” “repair” and “improve” were tied in the statute directly to the words “buildings or structures.” Since the water extraction and mitigation services did not involve the physical buildings or structures themselves, it found no license was required.

“When the statute is considered as a whole, it would be absurd to interpret it as requiring a building contractor’s license to lay plastic sheeting, plug in electric fans to dry out a wet building, to apply anti-microbial solutions for sanitation and to dispose of materials,” concludes the unanimous opinion.

The panel also agreed with a brief submitted by the Restoration Industry Association contending that “the trial court’s broad interpretation of the statute would have a severe and draconian impact on the restoration industry not intended by the Legislature. Specifically, it would impose a barrier to entry — requiring a building contractor’s license — for basic cleaning services or water extraction or mitigation activities, which is not textually supported by the plain language of the statute.”

As to the remaining scope of work performed by Incident365 that may arguably require a license, namely the “structural removal of affected substrates” and the removal of materials affixed to the buildings, the panel concluded there remained genuine issues of material fact for the trial court to determine. It reversed the lower court’s ruling and remanded the case back for further proceedings. . .

George concludes his article by noting that with so many regions of the state impacted by hurricanes Helene and Milton, this recent ruling by the Third DCA clarifies that a contractor’s license is not needed for the majority of the services performed by disaster restoration companies. He writes that these professionals provide essential services for many Florida property owners, particularly during and after emergencies, and their ability to contract for basic water removal and related mitigation services are not hamstrung by the state’s contractor licensing requirements.

Our firm salutes George for sharing his insights with the readers of the Miami Herald on this recent appellate decision, which should be well received by those who provide and utilize disaster restoration services in Florida. We write about important matters for community associations in this blog and our Herald column, which appears every two weeks on Sundays, and we encourage association directors, members and property managers to click here and subscribe to our newsletter to receive our future articles.