Relating to Real Estate

Contractor May Maintain Suit for Payment If It Has Substantially Compiled With the Licensing Law

Glen Valley Builders, LLC v. James S. Whang, No. 1141, Sept. Term, 2014, unreported (Md.Ct.Spec.App. Oct. 6, 2015), involved a lawsuit by a contractor against the homeowners who had engaged it. James S. Whang and Haibin E.C. Whang purchased the residential property in Potomac on April 10, 2009 from Mr. and Mrs. Lewis Friedman for $3,550,000. A condition in the purchase agreement was that Mr. Friedman would be engaged to complete construction projects at the house.

On February 19, 2010 the Whangs entered into a contract with Glen Valley Builders, LLC, the sole member of which was Lewis Friedman. Mr. Friedman guaranteed the contract. Through April, 2012, the Whangs paid Glen Valley a total of $2,220,000, but that was less than Glen Valley claimed was owed, so it sued for the difference. In response, the Whangs alleged that the work was incomplete and defective and that because Glen Valley was not a licensed home improvement contractor it was not entitled to enforce the contract.

During all relevant times, Glen Valley had neither a home improvement license under the Maryland Home Improvement Law (MHIL) nor a Montgomery County New Home Builder (MC NHB) license. Mr. Friedman held an MC NHB license, but not a license under the MHIL.

The Circuit Court for Montgomery County determined that Glen Valley did not actually comply with the MHIL licensing requirement and did not substantially comply with the MHIL; therefore, in its view Glen Valley was unable to enforce the construction contract. Glen Valley appealed to the Court of Special Appeals.

The Court of Special Appeals noted the rule that a person performing home improvements must comply with the MHIL to enforce a construction contract. However, it also found that a contractor may be able to enforce a construction contract if it substantially complies with the MHIL. The court found that there was a material factual dispute about whether Glen Valley substantially complied with the MHIL because Mr. Friedman, whom the court called “arguably a party to the contract,” was a licensed MC NHB contractor and there were many similar requirements for the two licenses. The court stated that the circuit court should not have decided this point on summary judgment.

The Court of Special Appeals focused on whether the purposes of the licensing law – to protect the public from unskilled builders, to ensure that contractors are fiscally responsible, and to provide a remedy for consumers – were satisfied. The court found that Glen Valley presented a material factual dispute concerning its substantial compliance with the MHIL licensing requirement, and so it remanded the case for further proceedings by the circuit court.

For questions, please contact Ed Levin (410) 576-1900.