License to Build: The Dangers of Hiring an Unlicensed Contractor

Unlicensed Builders

With spring right around the corner, it’s the time of year homeowners begin to spruce up their homes or replace a frozen pipe that cracked during the winter months. While a fresh coat of paint or installing new light fixtures are often easy DIY projects, you might not always want to tackle the bigger projects yourself. Hiring a professional residential builder or contractor is common, but with everyone claiming to be a professional these days, it’s hard to know who to trust. Certain types of residential builders or maintenance contractors are required to be licensed by the state of Michigan. As a homeowner, it’s important to educate yourself on the various license requirements as well as the rights and responsibilities for both you and the builder.

When a License is Required

Article 24 of the Occupational Code was created to license and regulate residential builders and contractors. In general, a person who contracts with a property owner to do residential construction or remodeling on a project totaling $600 or more, including material and labor is required to be licensed as either a Residential Builder or a Maintenance and Alteration Contractor. MCL 339.2403(f). A Residential Builder may build a new home or may do any kind of repairs, except plumbing, electrical, and mechanical, which require a separate license. A Residential Maintenance and Alteration Contractor is licensed to perform only specific trades listed on their license.

Complaints Under Section 24 of the Occupational Code

If it is determined that the residential builder was required to have a license and performed work on your home without one, you may file a complaint with the attorney general and prosecuting attorney. The unlicensed builder can be fined and charged with a misdemeanor under MCL 339.2412(4) but the complaint does not create a private cause of action for you. In other words, the statute does not allow a homeowner to maintain a separate action against a builder for the return of compensation based only on the fact that the builder was unlicensed, since the statute expressly confers enforcement authority only on prosecutors and the attorney general.

Instead, MCL 339.2412 prevents an unlicensed builder from suing a homeowner for the collection of compensation of the work he performed without a license. The statute was written to protect homeowners by imposing a burden on builders who would endanger the public safety by performing construction work without a license.

MCL 339.2412(1) provides:

(1) A person or qualifying officer for a corporation or member of a residential builder or residential maintenance and alteration contractor shall not bring or maintain an action in a court of this state for the collection of compensation for the performance of an act or contract for which a license is required by this article without alleging and proving that the person was licensed under this article during the performance of the act or contract.

Although the law bars an unlicensed builder from suing a homeowner for payments, it does not remove the builder’s power to defend himself if he is sued by the homeowner. Epps v 4 Quarters Restoration, LLC, 498 Mich 518 (Mich 2015). As such, if it is the homeowner who seeks compensation or performance from the unlicensed builder, the homeowner has brought the “action” and the builder is allowed to defend himself on the merits of the claim.

To sum up, if you plan to have work done on your home, it’s important to evaluate Michigan’s licensing requirements to avoid these potential issues. Knowing the law and ensuring the builders working on your home are properly licensed can potentially save you thousands of dollars down the line.