TN Contractor Laws: Licensing, Contracts, and Liens

Tennessee contractor laws require a state-issued license for any construction project where labor and materials total $25,000 or more, and a separate Home Improvement License covers smaller residential jobs in nine designated counties. The Tennessee Board for Licensing Contractors administers the rules, and separate statutes govern written contracts, deposits, insurance, mechanic’s liens, and building permits.¹ Working outside these rules is a criminal offense, and homeowners who hire outside them lose most of the state’s protections.

When a Contractor License Is Required

Any prime contractor, meaning someone who bids directly to the property owner, must hold a Tennessee contractor license before bidding on or performing a project worth $25,000 or more in combined labor and materials. Subcontractors in electrical, mechanical, plumbing, HVAC, and roofing must also be licensed when their portion of the project hits $25,000. Masonry subcontractors face a higher trigger of $100,000. Other subcontractor trades, including flooring, fencing, and landscaping, only need a license if they bid directly to the property owner, which reclassifies them as prime contractors.²

The $25,000 figure applies to the whole scope of work. Contractors cannot split one project into smaller invoices to slip beneath it. Every licensed contractor also receives a classification specifying the type of work they can perform, whether residential, commercial, industrial, or a specialty trade. Performing work outside that classification violates state law just as working without any license does.

The Home Improvement License

Residential remodeling jobs that fall below the $25,000 general threshold still require a Home Improvement License when the project costs between $3,000 and $24,999. This requirement applies only in the nine counties that have adopted the law: Bradley, Davidson, Hamilton, Haywood, Knox, Marion, Robertson, Rutherford, and Shelby.³ In every other county, residential work under $25,000 is unregulated at the state level.

If you live in one of those nine counties, check both the license type and its monetary limits before hiring. A Home Improvement License cannot legally cover a job over $24,999, and a general contractor license does not automatically cover home improvement work in the regulated range. The Board maintains a free online license lookup you can use to confirm status before you sign anything.¹

Penalties for Unlicensed Contracting

Working without the required license is a Class A misdemeanor in Tennessee, carrying a potential jail sentence of up to eleven months and twenty-nine days and criminal fines up to $2,500 under the state’s general sentencing framework. The Board for Licensing Contractors can also impose a separate civil penalty of up to $5,000 per offense, and individual citations can range from $50 to $1,000 each.⁴

One boundary worth knowing: the criminal penalty does not apply to a homeowner who hires an unlicensed contractor to build the homeowner’s own residence.⁴ That exemption keeps the homeowner from being prosecuted, but it does not make the contractor’s lack of license legal, and it does nothing to shield the homeowner from bad work or lost money. An unlicensed contractor who abandons a job has no license for the Board to suspend, which removes the state’s primary enforcement tool. The homeowner is left with a civil suit, and homeowners’ insurance may deny claims tied to unlicensed work, especially where code violations are involved.

What a Residential Contract Must Include

Every home improvement contract in Tennessee must be in writing and signed by both the homeowner and the contractor. Verbal agreements do not satisfy the law.⁵ The written agreement must include:

Full names and addresses of both parties, plus the contractor’s license number.
A description of the work to be done and the materials to be used.
Approximate start and completion dates.
No blank spaces. The contract must be filled out completely before the homeowner signs.

A contract missing one of these terms is not automatically void.⁵ You cannot walk away from the deal just because a term was left out. The contractor’s noncompliance can, however, support a complaint to the Board or a civil claim.

The Three-Day Cancellation Right

A three-business-day right to cancel exists in Tennessee, but it comes from the Home Solicitations Act, not the Home Improvement Contractor Act. It applies when a contractor initiates contact at your door and you sign a contract on the spot. In that case, you have until midnight of the third business day to cancel without penalty. If you contacted the contractor, visited their office, or otherwise initiated the transaction, this cancellation right does not apply.

Limits on Deposits

A contractor holding a Home Improvement License cannot accept a deposit of more than one-third of the total contract price at or before the time the contract is signed. Two exceptions allow more. First, the contractor can furnish a performance and payment bond covering the full contract. Second, after the contractor advises the homeowner in writing of the right to withhold payment until completion, the homeowner can voluntarily agree to a different schedule.⁶ A contractor who simply asks for more without that written disclosure is in violation.

Collecting any payment before the contract is signed is a prohibited act by itself.⁶ General contractors working on projects above $25,000 are not subject to the one-third cap; their payment terms are governed by the contract itself. Regardless of license type, diverting collected funds to a different project or personal use can lead to criminal prosecution for theft or fraud.

Insurance and Workers’ Compensation

Every licensed contractor must carry general liability insurance and workers’ compensation insurance. The Board requires proof of both at initial application and at every renewal.⁷ As a homeowner, you can ask for a current certificate of insurance before work begins.

Workers’ compensation rules are stricter in construction than in most industries. All construction services providers must carry workers’ compensation insurance regardless of how few people they employ. The five-employee minimum that applies elsewhere does not apply here.⁸ Coverage extends to seasonal workers, part-time employees, and family members of the business owner.⁹

Business owners in construction must even carry coverage on themselves, though they can apply for an exemption if they qualify and are listed on the state’s Construction Services Provider exemption registry.⁸ The exemption applies only to the owner personally and is limited to non-commercial projects unless additional conditions are met. Subcontractor coverage and exemption status can be checked through the Department of Labor and Workforce Development’s online tools.⁹

Mechanic’s Lien Rights and Deadlines

When a contractor or supplier is not paid, Tennessee law lets them place a lien on the property where the work was performed. The lien attaches to the real estate itself, which makes it a powerful collection tool. The deadlines differ significantly depending on whether the claimant is a prime contractor or a remote contractor, meaning a subcontractor or supplier further down the chain.

Prime Contractor Liens

A prime contractor’s lien lasts one year after the improvement is completed or abandoned.¹⁰ Within that year the contractor must file a lawsuit seeking an attachment to enforce the lien. If the year passes without a suit, the lien expires permanently. The suit can be brought in circuit, chancery, or general sessions court depending on the amount claimed.

Before starting work on a one-to-four-unit residence where the owner will live, contractors must deliver a written notice informing the owner that improvements are about to begin and that a lien may secure payment. The notice is required only for owner-occupied residential work; it does not apply to commercial projects.

Remote Contractor Liens

Remote contractors have lien rights, but the process is more demanding. A remote contractor must first serve a notice of nonpayment on the property owner and the prime contractor within 90 days of the last day of the month in which the unpaid work was performed. That notice applies to commercial and larger multi-family projects; it is not required for one-to-four-unit residential work.¹¹

The remote contractor then serves a written notice of lien on the property owner. Once served, the lien lasts 90 days, during which the remote contractor must file suit to enforce it or lose the right entirely.¹² These deadlines are hard. Missing any of them by a day permanently extinguishes the lien.

Notice of Completion

Property owners can compress those timelines. When a project finishes, the owner can record a notice of completion with the county register of deeds. Once recorded, anyone claiming a lien on residential property with one to four units has 10 days to serve written notice of their claim. For commercial projects the window is 30 days. Failing to respond within those windows extinguishes the lien.¹³ Recording a notice of completion is one of the most effective ways to head off surprise liens from subcontractors you never hired.

Building Permits Are Separate From Licensing

A contractor license and a building permit are different requirements, and having one does not satisfy the other. New buildings, additions, structural modifications, and major system replacements like electrical or plumbing all trigger permit requirements in most jurisdictions.

Tennessee’s code enforcement is layered. Many cities and counties run their own building departments with local inspectors. Where no local building department exists, the State Fire Marshal’s Office enforces statewide fire and building construction safety codes.¹⁴ Some local governments have “exempt jurisdiction” status and enforce their own adopted codes.

Permit fees and procedures vary by municipality, so check with your local building department or county office for exact costs. Skipping permits can produce stop-work orders, fines, mandatory demolition, and serious complications at sale. Insurance claims tied to unpermitted work are also routinely denied. For any project involving structural changes, new electrical or plumbing runs, or changes to the building’s footprint, pulling the permit is not optional.

1
Tennessee Department of Commerce & Insurance. Tennessee Board for Licensing Contractors
2
Tennessee Department of Commerce and Insurance. Subcontractors – Who is Required to be Licensed
3
Tennessee Department of Commerce & Insurance. Home Improvement Contractor
4
Justia Law. Tennessee Code 62-6-120 – Penalties
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Justia Law. Tennessee Code 62-6-508 – Requirements of Home Improvement Contracts
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Justia Law. Tennessee Code 62-6-510 – Prohibited Acts
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Justia Law. Tennessee Code 62-6-111 – License and Examination – Transfer of License
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Justia Law. Tennessee Code 50-6-902 – Requirement That Construction Services Providers Carry Workers Compensation Insurance
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Tennessee Department of Labor & Workforce Development. Workers Compensation Insurance Coverage Requirements
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Justia Law. Tennessee Code 66-11-106 – Duration of Lien
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Justia Law. Tennessee Code 66-11-145 – Notice of Nonpayment – Form of Notice
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Justia Law. Tennessee Code 66-11-115 – Liens by Remote Contractors
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FindLaw. Tennessee Code Title 66 Property 66-11-143
14
Tennessee Department of Commerce & Insurance. Codes Enforcement