Many contractors considering projects in the Commonwealth, particularly those that primarily operate in Maryland and the District of Columbia, are surprised to learn how strict the licensing requirements are here in Virginia and that reciprocity often does not apply. Careful compliance with the licensing statutes and regulations is key to ensuring your contracting firm is entitled to get paid in full and avoids regulatory action or other disputes.

When is a License Required?

The General Assembly has made clear that anyone who engages in (or “offers” to engage in) work as a contractor in Virginia must have the appropriate class of license issued by the Virginia Department of Professional and Occupational Regulation’s (DPOR) Board for Contractors.[1]

For purposes of this licensing requirement, the term “contractor” is defined as “any person [including business entities], that for a fixed price, commission, fee, or percentage undertakes to bid upon, or accepts, or offers to accept, orders or contracts for performing, managing or superintending in whole or in part, the construction, removal, repair or improvement of any building or structure permanently annexed to real property owned, controlled, or leased by him or another person or any other improvements to such real property.”[2]

Notable from this definition are several key components:

• There is a broad range of undertakings that trigger the licensing requirement. Unlike in Maryland and D.C. where subcontractors are often exempt from licensing requirements, here in Virginia any person or firm performing or overseeing work (whether as a prime/GC or sub) must be licensed. Even merely bidding for work, accepting a proposal, or signing a contract triggers the requirement to be licensed.
• Compensation can take many forms. While gratuitous work arguably does not require a license, work offered or performed for any sort of monetary consideration qualifies as contracting, whether on a fixed price, time and materials, or commission basis.
• Any activities which involve “construction, removal, repair or improvement” to structures on virtually any real property constitute contracting. To the surprise of many, this includes work of professionals not regulated in many other states, such as painting, tiling, window replacement, drywall, roofing, asphalt paving, etc.

Various exemptions apply to this broad rule, such as for work performed on military bases or other Federal Government property, advice rendered by material suppliers, supervision by an “owner-developer,” design-build contracts signed by licensed architects or engineers, skilled apprentice work under the supervision of a licensed contractor, etc.[3] These exemptions have limitations and apply on a case-by-case basis, and must be carefully evaluated under the particular circumstances of any bid, contract or project.

What Type of License Do We Need?

Virginia contractor’s licenses come in three classes (A, B and C), depending on the scope of the contractor’s biggest project and the sum of all projects in any given 12-month period:[4]

Class A:                Single project of $120,000 or more, or $750,000 aggregate

Class B:                Single project of $10,000 or more, or from $150,000 to $750,000 aggregate

Class C:                Single project of $1,000 or more, and less than $150,000 aggregate

Each Class carries different experience, education and bonding/financial responsibility requirements. Regardless of license Class, each contractor must also ensure that its license carries the appropriate specialty designation(s) for the type of work performed or bid upon.

For instance, there are general residential building (RBC) and commercial construction (CBC and CIC) designations often utilized by general contractors, skilled trade designations for electricians, plumbers, HVAC technicians and gas fitters which require affiliation with a master tradesman, and various other specialty designations such as highway/heavy (H/H), drywall (DRY), concrete (CEM), finish carpentry (FIN), flooring and floor covering (FLR), home improvement (HIC), landscape service (LSC), and roofing (ROC), just to name a few.

Given that projects of varying scopes and sizes may arise sporadically from time to time in a contractor’s business, it is important for contractors to consistently review these requirements to ensure they are maintaining the appropriate class of license with all required specialty designations.

Why Deal with the Hassle?

Jumping through the various hoops to get your contracting firm licensed can be a tedious process and may not seem worth the cost or effort, particularly for “one-off” jobs a firm might be targeting in Virginia. However, failure to comply with the licensing regulations can carry stiff penalties and other repercussions, including but not limited to:

Civil Penalties:                  DPOR is authorized to levy fines of up to $500 per day of the violation if any contractor undertakes work without any valid Virginia contractor’s license or with the improper class of license. Additional penalties of up to $10,000 per violation can be levied for violations involving fraudulent, improper, or dishonest conduct during a declared state of emergency (such as the COVID-19 pandemic).[5]

Criminal Penalties:          Violations constitute a Class 1 Misdemeanor.[6]

Inability to Collect:          Your contract may be rendered unenforceable if you did not have a valid license to perform the work, even if you completed the work in good faith.[7]

Consumer Damages:     Failure to be appropriately licensed for residential work or other projects benefiting a consumer may constitute a violation of the Consumer Protection Act, entitling plaintiffs to triple damages, punitive damages, attorneys’ fees, etc. Violations of this statute carry additional civil penalties as well.[8]

Remedial Actions:           DPOR may suspend, revoke, or refuse to grant a new license to those who violate the requirements (including those affiliated with prior violators).[9]

In addition to these possible adverse ramifications, contractors looking to sell their businesses who may have undertaken work in Virginia without a license may also be met with opposition from potential buyers adverse to the potential risk of future remedial action. Avoid these risks and the disruption of your business or M&A transaction that may result by having your contracting business properly licensed prior to bidding, contracting for, or performing any contracting work in Virginia.

If you have questions regarding a project you are considering or need assistance navigating the license application process, please contact Zack Andrews at (703) 284-7283 or zandrews@beankinney.com.

This article is for informational purposes only and does not contain or convey legal advice. Consult an attorney. Any views or opinions expressed herein are those of the author and are not necessarily the views of the firm or any client of the firm.

[1] Va. Code § 54.1-1103(A).

[2] Va. Code § 54.1-1100.

[3] Va. Code § 54.1-1101.

[4] Va. Code §§ 54.1-1100, -1103.

[5] Va. Code §§ 54.1-1106.2, 1115(B).

[6] Va. Code § 1115(A).

[7] Va. Code § 54.1-1115(C).

[8] Va. Code §§ 59.1-200(A)(46), -204, -206.

[9] Va. Code § 54.1-1110.