Contracting in Tennessee – 5 Simple Tips

It never ceases to amaze how contractors, particularly those based out of state, run afoul of Tennessee laws. As 2017 progresses, here are few laws that should be kept in mind.

 

 

1. Are You Licensed? – A Contractor’s license is required prior to contracting. In Tennessee, “contracting” includes bidding, offering to engage, or negotiating a price for projects of $25,000 or more (includes all labor, materials, and equipment). Electrical, Mechanical, Plumbing, HVAC, and Roofing subcontractors must be licensed when contracting directly with any contractor (not to the owner) to perform projects when the total cost of that portion on the project is $25,000 or more. Masonry contractors must be licensed when that portion of the project is $100,000 or more. Beware that an unlicensed contractor is only entitled to recover “actual documented expenses that can be shown by clear and convincing proof.” T.C.A. § 62-6-103(b).

2. Consumer Protection Act Claims – Under the Contractors Licensing Act, a violation of the Act is also deemed an unfair or deceptive act under the Tennessee Consumer Protection Act, thus subjecting the unlicensed contractor to potential civil remedies available under the TCPA, including claims for attorneys’ fees and treble damages.

3. Retainage Capped at 5% – Tennessee law caps retainage on both public and private projects at 5% of the amount of the contract. T.C.A. § 66-34-103. The cap on the allowable amount of retainage cannot be waived by contract. On projects of over $500,000, retainage must be deposited in an interest bearing account with a third-party.

4. No Foreign Venue of Disputes Involving Tennessee Projects – A provision in any contract, subcontract or purchase order for the improvement of real property located in Tennessee is void and against public policy if it makes the contract, subcontract or purchase order subject to the substantive laws of another state or mandates that the exclusive forum for any litigation, arbitration or other dispute resolution process is located in another state.   T.C.A. § 66-11-208.

5. No Suit for Defects Without Prior Written Notice – Tennessee has enacted a “Notice and Right to Cure” statute in relation to commercial projects (anything other than a single family home). T.C.A. § 66-34-103. Under the law, no contractor, subcontractor, supplier or designer can be sued for alleged construction defects unless they are first served a written notice of the claim. The statute imposes a time line for the giving of notice, an opportunity to inspect the alleged defects, and time line for conducting repairs or disputing the claim.

Photo: Sean MacEntee

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