Qualifying Agent for Licensed Contractors and the Lake Eola Builders Exception
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Construction is a risky business. One risk is the danger to the public from activities of incompetent contractors. The Florida Legislature has addressed this risk. Chapter 489, Florida Statutes, regulates construction “contracting,” as defined in Section 489.105(6). To protect the public, a business organization that wishes to engage in contracting must be “licensed.” To be licensed, a business organization must have a “qualifying agent” in accordance with Chapter 489 concerning the scope of the work to be performed under the contract. Fla. Stat. 489.128(1)(a) (2014). This requirement raises questions: Who is a qualifying agent? How does a company register a qualifying agent in accordance with Chapter 489? When does a company need to register a qualifying agent? This blog answers these three questions and addresses the federal Lake Eola Builders case that tries to craft an exception to the strict rules of Chapter 489.
Who is a qualifying agent? A qualifying agent must have the skill and responsibility to control the contracting activities of the business. Fla. Stat. § 489.105(4). A qualifying agent must meet certain eligibility requirements. Fla. Stat. 489.111. He or she must pass examination and be approved by Florida’s Construction Industry Licensing Board (“CILB”). Fla. Stat. § 489.113. Further, he or she must be registered or certified pursuant to Fla. Stat. § 489.115. In this way, a person gets licensed to engage in contracting.
There are additional requirements for a licensed individual to qualify a company. To become a company’s qualifying agent, a duly licensed individual must have final approval authority for all construction work performed and must have final approval authority on all financial matters of the contracting business, including authority to make payments.
How does a company register a qualifying agent? Chapter 489 includes a certain process that must be followed to register a qualifying agent for a company. The process is set forth in Section 489.119. The license-holder must submit an application to the CILB to become the qualifying agent of the company. An application fee must be paid. The application includes a sworn affidavit “that the applicant has final approval authority for all construction work performed by the business organization and that the applicant has final approval authority on all business matters, including contracts, specifications, checks, drafts, or payments, regardless of the form of payment, made by the business organization, except where a financially responsible officer is approved.” Fla. Stat. § 489.119(2)(b)(2). The applications are available online at the CILB website. The CILB must approve the application before the license-holder becomes registered as the company’s qualifying agent.
When does a company need to register a qualifying agent? A company must register a qualifying agent before the effective date of a contract that includes scope of work that requires licensure. Fla. Stat. § 489.128(1).
For purposes of this section, a contractor shall be considered unlicensed only if the contractor was unlicensed on the effective date of the original contract for the work, if stated therein, or, if not stated, the date the last party to the contract executed it, if stated therein. If the contract does not establish such a date, the contractor shall be considered unlicensed only if the contractor was unlicensed on the first date upon which the contractor provided labor, services, or materials under the contract.
Fla. Stat. § 489.128(1)(c) (2014) (emphasis added). A contractor must be licensed on the effective date of the contract. To be licensed, a company must have a registered qualifying agent. Fla. Stat. § 489.128(1)(a). Thus, a company must have a registered qualifying agent before it starts contracting.
There is no “cure provision” to this rule. Prior to the year 2000, Section 489.128 contained an exemption, also known as the cure provision, that addressed the situation where a company had submitted an application for qualifying agent prior to the effective date of the contract, but the application was not yet approved by the effective date. Fla. Stat. 489.128(1)(b) (1997). According to that cure provision, a contractor was not considered unlicensed if the application was approved after the effective date of the contract. The cure provision no longer exists. The Florida Legislature eliminated this exemption from the Statute in 2000. Ch. 2000-372, § 35, at 3143, Laws of Fla. Florida law is now clear that the qualifying agent must be registered (approved by the CILB) before the effective date of the contract. Vill. at Dolphin Commerce Ctr., LLC v. Constr. Serv. Solutions, LLC, 143 So. 3d 942, 943 (Fla. 3rd DCA 2014); R.A.M. of S. Fla., Inc. v. WCI Cmtys., Inc., 869 So. 2d 1210, 1215 (Fla. 2nd DCA 2004). Merely “submitting an application” is no longer sufficient. Id.
There may be an exception to the strict registration requirements set forth in Chapter 489… at least in Federal court. In Lake Eola Builders, LLC v. Metro. at Lake Eola, LLC, 416 F. Supp. 2d 1316 (M.D. Fla. 2006), the court decided that failure to register a company’s qualifying agent does not prevent such company from enforcing the contract. Instead, the court, placing substance over form, held that the definitive inquiry is whether a company has a qualifying agent on the effective date of the contract, regardless of whether an application has been submitted or approved.
The Lake Eola Builders court looked at the totality of the facts in that case and determined the company did have a qualifying agent, even though the qualifying agent was not registered yet. The court relied on the following facts. LEB, the contractor, did not have a registered qualifying agent. However, Owens was acting as the qualifying agent for LEB on the date of the contract. Owens was licensed. Owens was a managing member of LEB. Owens signed the contract on behalf of LEB. Owens supervised and was responsible for the project from its beginning. Owens pulled the permit. In substance, but not in form, Owens satisfied the requirements to be LEB’s qualifying agent.
Lake Eola Builders appears to have created a split between Florida’s state and federal courts. No Florida state appellate decisions cite Lake Eola Builders. Moreover, various state court decisions since have held that registration with the DBPR is the definitive inquiry. See e.g. Vill. at Dolphin Commerce Ctr., LLC v. Constr. Serv. Solutions, LLC, 143 So. 3d at 943. However, one federal district case has followed Lake Eola Builders. Baker County Med. Servs. v. Summit Smith L.L.C., 2007 U.S. Dist. LEXIS 30386, *20 (M.D. Fla. 2007) (“[T]here is evidence in the record, including a project manual listing C.D. Smith as the contractor on the project, that establishes that C.D. Smith was supervising the project. As such, there is at a minimum a genuine issue of fact as to whether Third Party Plaintiffs were properly licensed.”) It remains to be seen whether the federal courts will continue to follow Lake Eola Builders. We feel that it is bad law and clearly contrary to the intent of Florida’s Legislature and state court precedent.
In conclusion, contractors in Florida would be wise to study Chapter 489 and strictly follow the qualifying agent registration procedures set forth therein. It is foolish to rely on the Lake Eola Builders exception as a basis to put off the qualifying agent registration process. A company that performs contracting without a registered qualifying agent violates Florida law.
There are certain, harsh ramifications for contracting without a qualifying agent. For instance, contracts entered into by an unlicensed contractor are unenforceable by the unlicensed contractor. Fla. Stat. 489.128(1); Earth Trades, Inc. v. T&G Corp., 108 So. 3d 580 (Fla. 2013). An unlicensed contractor has no lien rights. Fla. Stat. 489.128(2). For additional consequences see Unlicensed Contracting and the Doctrine of In Pari Delicto.
 Under Chapter 489, there are two types of qualifying agent. The first is a primary qualifying agent, defined as
a person who possesses the requisite skill, knowledge, and experience, and has the responsibility, to supervise, direct, manage, and control the contracting activities of the business organization with which he or she is connected; who has the responsibility to supervise, direct, manage, and control construction activities on a job for which he or she has obtained the building permit; and whose technical and personal qualifications have been determined by investigation and examination as provided in this part, as attested by the department.
Fla. Stat. § 489.105(4). The second is a secondary qualifying agent, defined as
a person who possesses the requisite skill, knowledge, and experience, and has the responsibility to supervise, direct, manage, and control construction activities on a job for which he or she has obtained a permit, and whose technical and personal qualifications have been determined by investigation and examination as provided in this part, as attested by the department.
Fla. Stat. § 489.105(5).
 There is an exception to the latter requirement. The primary qualifying agent need not have financial authority if the business has registered a “financially responsible officer.” See Fla. Stat. §§ 489.105(14), 489.119(2)(b)(2), and 489.1195(1).
 Take note that “the attempted sale of contracting services and the negotiation or bid for a contract on these services also constitutes contracting.” Fla. Stat. § 489.105(6) (2014).