WHAT LICENSE? Many people and businesses in Minnesota work in the construction trades. Unfortunately, not everyone in the industry these days is aware of certain rules that must be followed to legally work in the construction trades. One requirement that is often overlooked is the state license. If you need one but do not have one, you could face trouble enforcing your contracts and liens, and eventually obtaining payment.

WHICH LICENSE? State law has created four primary licenses, and cities often require additional licensing to do work within the city limits. The four primary state licenses are:

Residential Building Contractor License

Residential Remodeler License

Manufactured Home Installer License, and

Roofer license

The licenses that are most often overlooked are the Residential Building Contractor License (“Building License”) and the Residential Remodeler License (“Remodeler License”). Unless a contractor confines itself to one special area of work, it is probable that a license will be required to build or remodel residential real estate. If a license was required, the failure to have one could come back to haunt the unlicensed contractor in many ways.

WHEN DO I NEED A LICENSE?

SPECIAL SKILLS: The state legislature has created laws that require a contractor to be licensed if it is in the business of performing two or more “special skills.” These “special skills” are divided into eight categories:

Excavation: This includes work in any of the following areas:

• Excavation
• Trenching
• Grading
• Site Grading

Masonry and Concrete: This includes work in any of the following areas:

• Drain Systems
• Poured Walls
• Slabs and Poured-in-place Footings
• Masonry Walls
• Masonry Fireplaces
• Masonry Veneer
• Water Resistance and Waterproofing

Carpentry: This includes work in any of the following areas:

• Rough Framing
• Finish Carpentry
• Doors, Windows and Skylights
• Porches and Decks, excluding footings
• Wood Foundations
• Drywall Installation, excluding taping and finishing

Interior Finishing: This includes work in any of the following areas:

• Floor Covering
• Wood Floors
• Cabinet and Counter Top Installation
• Insulation and Vapor Barriers
• Painting (Exterior or Interior)
• Tile (Ceramic, Marble and Quarry Tile)
• Ornamental Guardrail and Installation of Prefabricated Stairs
• Wallpapering

Exterior Finishing: This includes work in any of the following areas:

• Siding
• Soffit, Fascia and Trim
• Exterior Plaster and Stucco
• Painting
• Gutters, Down Spouts and Other Rain Carrying Systems

Drywall and Plaster: This includes work in any of the following areas:

• Installation
• Taping
• Finishing
• Interior Plaster
• Painting
• Wallpapering

Roofing: This includes work in any of the following areas:

• Roof Coverings
• Roof Sheathing
• Roof Weatherproofing and Insulation
• Repair of Roof Support Systems (but not construction of new roof support systems)

General Installation Specialties: This includes work in any of the following areas:

Garage Doors and Openers

Pools, Spas and Hot Tubs

Fireplaces and Wood Stoves

Asphalt Paving and Seal Coating

Exterior Plaster and Stucco

Ornamental Guardrail and Prefabricated Stairs

TWO OR MORE SPECIAL SKILLS? YOU NEED A LICENSE: If you are performing work in two or more of the areas above, you need a license. The question then becomes “Which license do I need?”

Builders License: If you are in the business of building new residential real estate, or of contracting or offering to contract with an owner to build new residential real estate by providing two or more of the “special skills” listed above, you need a Builders License.

Remodelers License: If you are in the business of contracting or offering to contract with an owner to improve existing residential real estate by providing two or more of the “special skills” listed above, you need a Remodelers License.

Builders License Covers Both: Note that if you have a Builders License to build new residential real estate, you may also contract with an owner to improve existing residential real estate without also obtaining a Remodelers License. The Builders License covers both new and existing residential real estate.

EXCEPTIONS: The state has created some exceptions to being licensed, even if you are providing two or more “special skills.” The license requirement does not apply to:

Employees of a licensed person, performing work for the licensed person.

Material suppliers, manufacturers or retailers furnishing products, materials or articles or merchandise who do not install or attach the items.

Property owners that build or improve residential real estate and do the work themselves, or jointly with their own employees.

NOTE: this exception does not apply to persons that build or improve real estate for resale. You fall into this category if you construct or improve more than one property within any 24-month period.

In other words, developers cannot get around the licensing requirement just because they own the property upon which the structure is being built.

Architects or Engineers

Less than $15,000.00 Persons having less than $15,000.00 in gross annual receipts from building or improving residential real estate.

NOTE: To qualify for this exception, you must obtain a Certificate of Exemption from the Commissioner of Commerce, and prove that your annual receipts are below $15,000.00. This must be proven and renewed every year.

If you later exceed $15,000.00 in any given year in which you have received a Certificate of Exemption, you must surrender the Certificate and apply for a license.

Mechanical Contractors (heating, ventilating, cooling, process piping, plumbing, fire protection, refrigerator systems, incinerators, and similar items).

Plumbers, Electricians or other persons already subject to other statewide licensing requirements

Specialty Contractors that provide only one special skill defined above.

School Districtsor TechnicalColleges

Habitat for Humanity and Builders Outreach Foundation, and their volunteers.

WHAT HAPPENS IF I NEED A LICENSE AND DO NOT HAVE ONE?

NO MECHANIC’S LIEN RIGHTS: Even if you follow all the rules, you give pre-lien notice, you file your lien on time, etc., Minnesota law says that your lien will be unenforceable if you needed a license and did not have one. Owners commonly use this loophole as a defense to payment after the job is complete.

Lien will be void: Minnesota Statutes section 326.92, subdivision 2 specifically provides that “An unlicensed person who knowingly violates [the licensing requirements] has no right to claim a lien [under the lien laws] and the lien is void.” Click here to view the law.

MAY NOT ACT AS A BUILDER OR REMODELER FOR MONEY: If you are unlicensed in violation of the law, you may not even tell people you can do residential building or remodeling work for payment.

Prohibited: Minnesota Statutes section 326.84, subdivision 1b specifically provides that “No persons required to be licensed may act or hold themselves out as residential building contractors or residential remodelers for compensation without a valid license issued by the [Commissioner of Commerce].” Click here to view the law.

CRIMINAL PENALTIES: The law states that a person required to licensed who performs unlicensed work is guilty of a misdemeanor.

COMMISSIONER OF COMMERCE PENALTIES: If you violate the licensing statute, the Minnesota Commissioner of Commerce may prohibit you from performing residential building or remodeling work, and may levy fines for such violations. These fines can be hundreds or even thousands of dollars. Click here to go to the Department of Commerce web site.

WHAT ABOUT CITY LICENSES?

SOME DO, SOME DON’T: Some cities require additional licenses to work within the city limits, and maintain very strict and comprehensive licensing ordinances of their own. A contractor must be aware of these rules before working in any given city.

MINNEAPOLIS: One major city license is that required by Minneapolis. If you perform work in Minneapolis without a city license, your contract with an owner can become void and you can be fined.

SUMMARY: In addition to the adhering to the lien laws by providing pre-lien notice, serving and filing your lien on time, etc., all contractors must be aware of state and local licensing requirements. In a recent case decided by the Minnesota Court of Appeals, a contractor’s lien was thrown out because he was unlicensed. The contractor testified that he knew about the licensing requirements, but that he thought he could “do a little out of [his] specialty trade and not be required to get a license.” This is not the case, and the Court of Appeals ruled that any work outside the contractor’s specialty required him to obtain a license. If you are performing two or more of the special skills listed above, and do not fall under one of the exceptions, be licensed or beware.