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Voiding Contracts with Unlicensed Builders

There has been some confusion in the past as to whether a contract with a builder who is not licensed by the State of Michigan is “voidable” or “void.”  In a case decided last year, the Supreme Court of Michigan declared that contacts with licensed builders are voidable, not void from the outset.

This means that a homeowner who learns that his builder was not properly licensed while performing the work can immediately stop the work and cancel the contract. In that case, the builder is legally barred from suing to collect any amount still owed by the homeowner on the contract.

Cancelling the contract going forward may not be much of a remedy for a homeowner who has already paid for incomplete or substandard work.  The Supreme Court of Michigan’s decision confirms that the homeowner may still file a lawsuit to pursue any damages for the unlicensed builder’s breach of contract.  Moreover, the contractor cannot respond in kind and sue the homeowner, because that contractor was not licensed when the work was performed.  The contractor may defend the suit, but may not sue on its own claim.

This decision underscores the importance of contractors maintaining their license and homeowners making sure their contractor is indeed licensed.  There are remedies for both parties if things go awry, but all parties are best served by getting the licensing question right in the first place.

 

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