Unlicensed Contracting in Florida: Beware of Arbitrating This Issue

The Florida Statutes provide for licensing of certain contractors performing work in this state. If a contractor does not have the requisite licensing, that contractor will not be able to enforce its contract or lien rights. See Florida Statute Section 489.128. This is a dagger to any person seeking to enforce such an illegal contact. While on its face, this statute appears clear, when a party is in arbitration, such an illegal contact may still be enforceable.  The Village at Dolphin Commerce Center, LLC, vs. Construction Service Solutions, LLC.

In Village, the owner contracted with an unlicensed contractor. When the unlicensed contractor was not paid, it recorded a claim of lien against the property which was the subject of the contract and demanded arbitration. In response to the arbitration demand, the owner asserted, in part, that the contract was unenforceable under Section 489.128. The owner also filed an action in circuit court seeking a declaration that the contractor’s claim of lien was invalid under Section 489.128. The trial court granted the contractor’s motion to compel arbitration and stay the action.

In the arbitration, the parties appear to have litigated the issue of enforceability of the contract. Despite being unlicensed, the arbitration panel ruled in favor of the unlicensed contractor. When the contractor filed a motion to confirm the award with the circuit court, the owner filed a motion to vacate the award based on the contractor being unlicensed and the contract being unenforceable. The trial court entered final judgment in favor of the contractor for the amount awarded by the arbitration panel, enforced the claim of lien, and awarded attorneys’ fees to the contractor.

On appeal, the owner argued the trial court erred in confirming the award because doing so resulted in the enforcement of an illegal contract. The appellate court rejected this argument because the determination of the legality of the construction contract was a decision for the arbitrator, and the Court was not permitted to revisit the determination, absent certain circumstances enumerated in Section 682.13 of the Florida Statutes.

Under Section 682.13 of the Florida Statutes (part of the Revised Florida Arbitration Code), a Florida trial court can vacate an arbitration award only if:

(a) the award was procured by corruption, fraud, or other undue means;

(b) there was:

1. evident partiality by an arbitrator appointed as a neutral arbitrator;

2. corruption by an arbitrator; or

3. misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;

(c) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to hear evidence material to the controversy, or otherwise conducted the hearing contrary to Section 682.06, so as to prejudice substantially the rights of a party to the arbitration proceeding;

(d) an arbitrator exceeded the arbitrator’s powers;

(e) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection under Section 682.06(3) not later than the beginning of the arbitration hearing; or

(f) the arbitration was conducted without proper notice of the initiation of an arbitration as required in Section 682.032, so as to prejudice substantially the rights of a party to the arbitration proceeding.

It appears the appellate court in Village ultimately concluded none of the above-referenced reasons for vacating the arbitration award existed and, therefore, confirmed the arbitration award.

The holding in Village is another example of a party’s inability to vacate an award if the arbitration panel does not follow the law. While the appellate court noted in its opinion that the contractor was not licensed, it was powerless to vacate the arbitration award. This case stresses the importance of considering whether to include arbitration provisions in construction contracts, or any contracts for that matter, since the ability to overturn an arbitration panel’s decision is extremely limited.