What is an Owner Builder?

Mar 13, 2020

The following questions should help you understand what an owner builder is.

Does an owner builder need to be licensed?

An owner-builder is is typically exempt from licensure, but there are limitations.

A license is typically not required if:

·     The owner-builder does the work himself or herself or through his or her own employees with wages as their sole compensation and the structure(s) is/are not intended for sale. In some states this be up to two years, other states it is one year.

·     The owner-builder contracts with properly licensed subcontractor(s). This exemption typically applies to the construction of a single-family residential structure and limits the number of structures intended or offered for sale to four or fewer in a calendar year. In other words, an owner builder is limited on how may structures they can build in a calendar year.

·     The owner-builder contracts with a General Building ("B") contractor. (The number of structures is then unlimited.) In this case the owner builder is more like a developer and not an actually owner builder, however in some locations they can per permits as an owner builder under this approach.

Is a homeowner required to obtain a license if he/she wants to improve his/her home?

A homeowner improving his or her principal place of residence is typically exempt from licensure if all of the following exist:

·     The work is performed prior to sale;

·     The homeowner resides in the residence for at least the 12 months in most states prior to completion of the work;

·     And, for many states the homeowner has not taken advantage of this exemption on more than two structures during any three-year period. Again, this can vary from state to state.

Are there any trades that property owners are prohibited from performing themselves?

Typically no, however, we have found that property owners are often prohibited from performing well-drilling , engineering, soil testing, septic design and other like tasks.

Does the owner-builder exemption apply to an individual who builds homes for resale (spec homes) and are there any limitations?

Typically yes, in most states.

The owner-builder exemption often applies to an individual who builds homes for resale under any of the following conditions, but please confirm with your state laws to be sure:

·     Licensed tradesmen are hired to perform all work on the project (provided no more than two- four structures in most states per calendar year are intended for resale).

·     A licensed general contractor is hired to perform and/or subcontract the completion of all work on the project. (Here there is no restriction on the number of structures completed per calendar year.)

·     The owner-builder performs the work, all or in part, and resides in the completed structure for one or more years prior to resale, depending on state requirements. (This limits owner to the number of structures in a given period.)

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