Disgorgement of Funds by Unlicensed Parties

Florida law requires certain types of persons to be licensed in order to do business.  Lawyers, realtors, and even construction contractors are among those professions regulated by specific licensing requirements.  So, what happens when a party unknowingly contracts with a person who is required to be licensed but is not?  The penalties for doing business without the proper licensing are harsh, and can even result in criminal charges and the return of all monies paid (known as disgorgement).  This post explores certain remedies for engaging an unlicensed person or entity.

In the construction contractor example, Florida Statute section 489.128 prevents an unlicensed contractor from enforcing its contract and any lien or bond rights.  Additionally, if the unlicensed contractor causes any damage while performing work, that contractor will be liable for treble damages due to his/her negligence.  See 768.0425 of the Florida Statutes. Florida law also provides for criminal penalties for unlicensed construction contracting.  See 489.127(2) of the Florida Statutes.  There are similar statutory provisions for unlicensed real estate agents (Florida Statute Section 475.42) and for unlicensed attorneys (Florida Statute Section 454.23).

Oftentimes, however, a party does not know it has contracted with an unlicensed person until the work has already started and monies have been paid to the unlicensed person.  In some instances, a party can recover the monies it has paid the unlicensed person.  This concept is called disgorgement, and is essentially reimbursing a victim for all monies taken due to a contract that is against public policy and/or prohibited by statute.

Florida courts have allowed the disgorgement remedy in various settings.  For example, in Vista Designs, Inc. v. Silverman, 774 So. 2d 884 (Fla. 4th DCA 2001), an unlicensed attorney was required to reimburse his client for monies paid by the client.  The court found the contract between the unlicensed attorney and his client void and unenforceable, and that public policy favored disgorgement of the funds paid.  Similarly, Florida courts have ordered disgorgement of commission funds paid to an unlicensed real estate broker, Cooper v. Paris 413_So__2d_772 (Fla.1st DCA 1982), as well as restitution of funds paid to an unlicensed construction contractor, State v. Ledy, 16 Fla. L. Weekly Supp. 903a.

If you determine the party with whom you contracted is unlicensed, Florida law provides you with a panoply of rights and the unlicensed party with few.  If you have paid monies to the unlicensed person, consider taking action to require the unlicensed person to return all of you monies.