In Epps v 4 Quarters Restoration, LLC et al, No 147727, 2015 WL 5684196 (Mich Sept 28, 2015), the Michigan Supreme Court had occasion to provide additional guidance upon the application of MCL 339.2412(1), which limits an unlicensed builder’s ability to sue to collect compensation for work performed. Our Supreme Court held that the statute does not prohibit an unlicensed residential builder from defending itself against a suit for damages, yet reinforced the statutory prohibition that an unlicensed residential builder cannot sue to collect compensation for such work. Thus, an unlicensed builder may not sue for payment, but can defend itself against allegations of improper performance.

In addition, the statute does not allow a homeowner to the return of funds already paid for work performed by an unlicensed builder. The plain language of the statute does not create such a right, and homeowners may already bring common-law contract and tort actions against builders for harm resulting from a builder’s unsatisfactory work.

The Court also held that a contract between an unlicensed residential builder and a homeowner without knowledge that the builder is unlicensed is not “void,” but “voidable.”

Residential builders should take great pains to confirm the entity or individual contracting for the improvement is properly licensed when performing work on residential projects.