North Carolina law is well established that architects and engineers owe a duty of care to those who reasonably rely on their work. This duty runs in favor of a builder regardless of whether there is a contract with the design professional. North Carolina law is equally well established that an unlicensed contractor is barred from enforcing certain remedies under the “licensure defense.” The licensure defense is a court-created doctrine seeking to incentivize compliance with statutory licensure requirements and to protect the public from incompetent builders. These two maxims of North Carolina construction law collided in a recent North Carolina Court of Appeals case, Wright Constr. Servs., Inc. v. Hard Art Studio, PLLC, No. COA19-1089, 2020 WL 7906704 (N.C. App. Dec. 31, 2020).
In Wright Const., the trial court applied the licensure defense in dismissing the builder’s negligence claims against the design professional defendants. The Court of Appeals reversed, focusing on the purpose of the licensure defense, to protect the public from incompetent work on construction projects, not to shield architects or engineers from failure to exercise due care. Second, the court compared the nature of the claims asserted, negligence, against the contract claims generally barred by the licensure defense, noting that design professionals are not among the class of persons sought to be protected by the legislature through enactment of the licensing statute. Finally, the court refused the designers’ slippery slope argument based on the theoretical risk of an unlicensed contractor making an end run around the licensure defense to pursue what amount to otherwise barred contract claims against the owner, but did note that its holding was limited to claims based on the designers’ alleged failure to use their professional knowledge, leaving open the issue of whether the licensure defense would apply to claims against non-designer third-parties or designers acting in a non-designer role (e.g., owner’s rep or other monitoring or supervisory role).
While the builder’s failure to get properly licensed did not bar its recovery here, it took a trip to the appellate court to overturn an adverse summary judgment ruling on that basis. The decision is a good reminder to contractors that they should carefully monitor their compliance with licensing requirements to ensure the full array of legal remedies is available to them.