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Beware of the unlicensed builder

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This is the time of year when homeowners are more likely to be victimized as a result of using unlicensed builders on their residential construction projects. Not only is using an unlicensed builder illegal, it can be a costly mistake that can turn a dream residential construction project into a nightmare.

Under Michigan law, all contractors offering to do work which totals $600 or more in labor and materials must be licensed by the Department of Energy, Labor & Economic Growth (DELEG).  A Residential Builders license allows a contractor to build a complete structure and do maintenance or alteration (remodeling) work.  A Maintenance & Alteration license indicates that the holder has met requirements for one or more of 14 different trades.  The trades in which a contractor is qualified to practice are listed on the license.

“Unlicensed scam artists will try to con you in several different ways,” said HBAM CEO Robert Filka. “They will tell you it’s cheaper to do the job if the consumer pulls the building permit or that no permit is needed.  They do this because without a builders license, they can’t pull a building permit. If no permit is pulled, there will be no inspections done to assure the quality of work or that it meets the requirements of the Michigan Residential Code (MRC).”

Hiring unlicensed builders also exposes the consumer to potential liability issues that could be very costly.  Consumers that contract with an unlicensed contractor can be held liable for on-the-job injuries sustained by that unlicensed person and their employees.  This exposes the consumer to liability, including having to pay medical bills and lost wages.  Licensed contractors must carry workers compensation insurance to cover injuries to their employees.  Unlicensed builders do not.

If an unlicensed contractor does residential work where the costs of labor and materials exceed $600.00, the homeowner is not obligated to pay the unlicensed contractor for labor and materials rendered.  The unlicensed contractor cannot file a lawsuit for payment.  In fact,
if an unlicensed contractor does defective work, the homeowner can hire a licensed contractor to fix the defective work and sue the unlicensed contractor for the cost of the work that exceeded the amount of the agreed payment with the unlicensed contractor. 

HBAM Executive Vice President for Government Relations Lee Schwartz talks about the pitfalls of using unlicensed builders for residential construction projects.

Listen to Lee Schwartz: