Are Unlicensed Builders Becoming an Epidemic?
Under current NC law, a contractor can perform improvements on a home
without a license as long as the project does not exceed $30,000. Under
the “Owners Exemption”, an individual who owns a property, can act as a
general contractor in the construction or renovation of their own home
without a license.
So, What’s the problem?
The problem is two-fold: (1) Unlicensed builders are using the “Owners Exemption” in an effort to perform work which requires a license by law, and (2) owners (or investors), sometimes abuse this exemption in the risky business of “flipping” homes to make a profit. Owners/investors, very often also end up hiring unlicensed builders to perform the work.
Experience
Q. Would you consider hiring a surgeon who wasn’t licensed and whose credentials could not be verified? A. Of course not, your health and safety is at stake! Well, how much different is it with your home? Besides just aesthetics, the structural integrity and indoor air quality of your home should be a major concern for you and your family. So how much then is experience worth? Most people assume that because there is a building code, they are safe in any home they purchase or contract to build. The building code is just a minimum standard and although our building inspectors do an outstanding job protecting the public, they cannot catch everything. Here’s one scenario: An unlicensed builder builds a home for an owner (under the Owners Exemption), who works a 9 to 5 job somewhere else. Then the owner moves into the home upon completion and lives there a short time. As problems soon develop, he sells the home ridding himself of the problems and at the same time making a tidy profit. Now the unsuspecting buyer inherits the problems with little to no recourse. Sounds good right? Of course not!
I recommend doing as much research as possible on the builder(s) you are considering starting with their license status, classification, limitations and any earned accreditations to make sure that they are the best builder for your project. You can verify this information at the NC Licensing Board website at www.nclbgc.org.
Liability
Who now becomes liable for the problems with this home? Builders are required to carry general liability, workman’s compensation, and other insurances. They are also required to warrant minor structural work for six years and major structural defects for up to ten years after completion. Licensed builders are responsible for any defective work performed by their employees and subcontractors. But if an unlicensed builder constructs the house, who is liable? The answer is...probably the owner who has assumed all risk by hiring an unlicensed builder.
Cost
One of my favorite myths is that the owner saves money by building the house himself. The thought is that you can build cheaper by not paying a builder for his profit margin. While I acknowledge that not all builders are equal, let me explain what really happens. A builder gets rated by his vendors (and subcontractors) by his purchasing relationship (volume and credit standing). He/she then receives a discount from retail pricing. The discounts usually compensate for the margin that the builder charges (the greater the volume and credit standing, the greater the discount). Therefore, the discount available to reputable and licensed builders makes up for their profit margin.
Next question – how much time did you take off from work to build this project? Most people don’t truly understand how much supervision time is really required to build a home correctly. I see this all the time in people trying to save a few bucks by not having a superintendent. If you are going to build the house yourself, do you have the time it will truly require to dedicate to this project? In other words, you have to pay someone to do the job, if its you, what’s your lost income worth?
What's the Solution?
These issues are just the tip of the iceberg, however the solution should be simple – require all projects (in excess of $30,000) to be performed by a licensed builder. Hire a builder who has experience, good credit, excellent references and who excels in quality, communication, and energy conservation. Owners who want to legitimately build their own house should not object to meeting the same criteria as a professional. If we are going to save the public from building on those dangerous slopes, shouldn’t we also save them from unlicensed builders? After all, it’s for the safety of the public at large.
Sean Sullivan is an Accredited Builder and past president of the Asheville HBA. His firm, Living Stone Construction, is a first-tier builder of fine custom homes in Western North Carolina. Their mission is to provide their clients with a new or renovated home that exceeds their expectations. They do that with an attention to detail and adherence to their five core values: quality, integrity, value, timeliness and communication.
So, What’s the problem?
The problem is two-fold: (1) Unlicensed builders are using the “Owners Exemption” in an effort to perform work which requires a license by law, and (2) owners (or investors), sometimes abuse this exemption in the risky business of “flipping” homes to make a profit. Owners/investors, very often also end up hiring unlicensed builders to perform the work.
Experience
Q. Would you consider hiring a surgeon who wasn’t licensed and whose credentials could not be verified? A. Of course not, your health and safety is at stake! Well, how much different is it with your home? Besides just aesthetics, the structural integrity and indoor air quality of your home should be a major concern for you and your family. So how much then is experience worth? Most people assume that because there is a building code, they are safe in any home they purchase or contract to build. The building code is just a minimum standard and although our building inspectors do an outstanding job protecting the public, they cannot catch everything. Here’s one scenario: An unlicensed builder builds a home for an owner (under the Owners Exemption), who works a 9 to 5 job somewhere else. Then the owner moves into the home upon completion and lives there a short time. As problems soon develop, he sells the home ridding himself of the problems and at the same time making a tidy profit. Now the unsuspecting buyer inherits the problems with little to no recourse. Sounds good right? Of course not!
I recommend doing as much research as possible on the builder(s) you are considering starting with their license status, classification, limitations and any earned accreditations to make sure that they are the best builder for your project. You can verify this information at the NC Licensing Board website at www.nclbgc.org.
Liability
Who now becomes liable for the problems with this home? Builders are required to carry general liability, workman’s compensation, and other insurances. They are also required to warrant minor structural work for six years and major structural defects for up to ten years after completion. Licensed builders are responsible for any defective work performed by their employees and subcontractors. But if an unlicensed builder constructs the house, who is liable? The answer is...probably the owner who has assumed all risk by hiring an unlicensed builder.
Cost
One of my favorite myths is that the owner saves money by building the house himself. The thought is that you can build cheaper by not paying a builder for his profit margin. While I acknowledge that not all builders are equal, let me explain what really happens. A builder gets rated by his vendors (and subcontractors) by his purchasing relationship (volume and credit standing). He/she then receives a discount from retail pricing. The discounts usually compensate for the margin that the builder charges (the greater the volume and credit standing, the greater the discount). Therefore, the discount available to reputable and licensed builders makes up for their profit margin.
Next question – how much time did you take off from work to build this project? Most people don’t truly understand how much supervision time is really required to build a home correctly. I see this all the time in people trying to save a few bucks by not having a superintendent. If you are going to build the house yourself, do you have the time it will truly require to dedicate to this project? In other words, you have to pay someone to do the job, if its you, what’s your lost income worth?
What's the Solution?
These issues are just the tip of the iceberg, however the solution should be simple – require all projects (in excess of $30,000) to be performed by a licensed builder. Hire a builder who has experience, good credit, excellent references and who excels in quality, communication, and energy conservation. Owners who want to legitimately build their own house should not object to meeting the same criteria as a professional. If we are going to save the public from building on those dangerous slopes, shouldn’t we also save them from unlicensed builders? After all, it’s for the safety of the public at large.
Sean Sullivan is an Accredited Builder and past president of the Asheville HBA. His firm, Living Stone Construction, is a first-tier builder of fine custom homes in Western North Carolina. Their mission is to provide their clients with a new or renovated home that exceeds their expectations. They do that with an attention to detail and adherence to their five core values: quality, integrity, value, timeliness and communication.
