By Paul E. Davis
The practice of general contracting in North Carolina is regulated by the North Carolina Licensing Board for General Contractors. The statutes and regulations governing the licensing of general contractors are periodically revised. Some of the regulatory changes reflect changes in the industry, including, for example, acknowledging different project delivery methods (2010 amendment to the North Carolina Administrative Code clarifying licensing requirements for construction managers) or changes in technology (2011 amendment to the Administrative Code adding Wind Turbine construction as one of the specialty contractor classifications). Other changes are more clerical in nature, but are no less important.
In its 2017 session, the North Carolina General Assembly amended N.C. Gen. Stat. § 87.10 “Application for license; examination; certificate; renewal.” 2017 N.C. Sess. Laws 10 (Senate Bill 131). The amendments apply to license applications issued on or after October 1, 2017.
Project value does not include cost of the land
The most significant changes were made to the language defining the monetary limits of the limited and intermediate licenses. The amended statute (text from the 2017 amendment is italicized) now reads: “the holder of an intermediate license shall be entitled to act as general contractor for any single project with a value of up to $1,000,000, excluding the cost of land and any ancillary costs to improve the land.” The same text was added to the monetary limits of a limited license (projects up to $500,000).
The “value” of a project for license limitation purposes has often been determined differently depending on the nature of the project – for example, new construction versus renovation or remodeling. The amendment to the statute was made to provide consistency in determining value. Excluding the cost of the land is intended to remove a significant variable. However, the statute does not define what is included in the scope of “ancillary costs to improve the land.”
Loss of the qualifier
A second change made in 2017 addresses a contractor’s loss of its qualifier (the qualifier is the person who took the written examination on behalf of the contractor). The statute describes the loss of a qualifier as occurring when the qualifier “shall cease to be connected with” the contractor. The 2017 legislation did not change the effect on the contractor’s license if its qualifier ceases to be connected with the contractor. If the qualifier leaves, the contractor’s license will remain in effect only for 90 days thereafter.
The 2017 amendment clarified the statute. Prior to the amendment, the statute read that if the contactor did not obtain a new qualifier within 90 days the contractor’s license was “canceled.” There was, however, no mechanism in place for the Licensing Board to “cancel” a contractor’s license. The statute’s use of the word “cancel” implied that at the end of the 90-day period there would be an administrative action by the Licensing Board canceling the license.
The 2017 amendment provides that if the contractor does not get a new qualifier within 90 days following the loss of its qualifier the contractor’s license automatically becomes “invalid” at the end of the 90-day period. No action is required by the licensing board for the license to become invalid. The contractor simply is no longer licensed at the end of the 90 days.
An often overlooked effect of the loss of a contractor’s qualifier is that from the first day the contractor losses its qualifier the contractor cannot undertake any new contracts or even bid upon any new work until it has a new qualifier in place. This limitation is often overlooked because while the statute states that the contractor’s license remains “in full force and effect” for 90 days, the statute also somewhat conflictingly prohibits the contractor from taking on any new work until it has a new qualifier. This is not a change in the law.
The loss of a qualifier need not have such a debilitating effect on a contractor. To avoid this situation, contractors are strongly advised to have more than one qualifier for each of the classifications of work for which the contractor is licensed. The loss of a qualifier would, therefore, not prevent the contractor from continuing to work unabated, and its license would truly remain “in full force and effect.”
Paul E. Davis is a partner in the Raleigh office of Conner Gwyn Schenck PLLC. He represents public and private owners, developers, contractors and construction managers. Paul, along with the other lawyers at Conner Gwyn Schenck PLLC, are co-authors of North Carolina Construction Law, a treatise published by Thomson Reuters. Paul’s full biography can be viewed at www.cgspllc.com.