Owner/builder Exemption (B&P 7044)


Who is considered an owner/builder


Any individual, or group of individuals, who own the property on which they plan to construct, alter, repair, improve, or

remodel a building or structure. Also, a tenant may be considered an owner/builder (case-by-case).


Is an owner/builder required to have a license?


An owner/builder is exempt from licensure, but there are limitations. A license is not required if:


a. 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
b. The owner/builder contracts with properly licensed subcontractor (s). This exemption 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
c. Number of structures is unlimited if the owner/builder contracts with a general building (B) contractor


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 exempt from licensure if all of the following exist:


a. The work is performed prior to sale;
b. The homeowner resides in the residence for the 12 months prior to completion of the work;
c. The homeowner has not taken advantage of this exemption on more than two structures during any three-year period.
 

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


Property owners are prohibited from performing well-drilling work covered under the C-57 Well Drilling classification.


Does the owner/builder exemption apply to an individual who builds homes for resale (spec homes)

and are there any limitations?


Yes. The owner/builder exemption would apply to an individual who builds homes for resale under any of the following conditions:


a. Licensed tradesmen are hired to perform all work on the project (provided no more than four structures per calendar year are intended for resale)
b. A licensed general contractor is hired to perform and/or subcontract the completion of all work on the project. (No restriction on the number of
structures completed per calendar year.)
c. The owner/builder performs the work, all or in part, and resides in the completed structure for one year prior to resale. (Applies to not more than
two structures in a three-year period.)


A word of caution from the Contractors State License Board

 

Anyone who talks you into being your own general contractor, or "owner/builder" may be doing you no favor.

"Owner/builder" describes a situation in which the homeowner becomes the general contractor.

As an owner/builder, you (not the person you hire) assume responsibility for the overall job.

 

Your responsibilities may include such things as state and federal taxes, workers' compensation insurance, and other legal liabilities.

You may be required to hire various subcontractors for your project, scheduling their work and supervising the job.

If a worker is injured while working on your property, you could be asked to pay for injuries and rehabilitation through your homeowner's insurance policy.

 

By signing a building permit application as an owner/builder, you assume full responsibility for all phases of your project and its integrity.

Hiring an unlicensed "consultant" to manage the project does not save you money in the long run.

 

By hiring a licensed experienced contractor for your project to hire licensed knowledgeable tradespersons, the contractor becomes responsible

for all phases of construction. Unless you are very experienced in construction. It is best to leave these matters to your licensed contractor

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A frequent practice of non-licensed persons professing to be contractors is to have the property owner obtain the building permit as "owner/builder",

erroneously implying that the property owner is providing his or her own labor and material personally.

 

A contractor's license issued by the State of California Contractors State License Board is required when the work is to be performed by someone

other than the property owner and is valued over $500.00 including labor and material. The licensed contractor should obtain the permit.

Building permits are not required to be signed by property owners unless they are performing their own work personally.

Contractors are required by law to be licensed and bonded by the State of California and to have a business license from the city or county

in which they are performing work. They are required by law to provide for workers' compensation if they employ or otherwise engage any person to work.

They are also required by law to put their license number on all forms of advertisement, proposals, estimates, and contracts.

If you plan to do your own work as an
owner/builder, with the exception of the various trades that you plan to subcontract to licensed contractors,

you should be aware of the following information for your benefit and protection:


If you employ or otherwise engage any persons other than your immediate family, and the work (including materials and other costs) is

$500 or more for the entire project, and such persons are not licensed as contractors or subcontractors, then you may be an employer.

If you are an employer, you must register with the state and federal governments as an employer, and you are subject to several obligations

including state and federal income tax withholding, federal social security taxes, workers' compensation insurance, disability insurance costs,

and unemployment compensation contributions.

There may be financial risks for you if you do not carry out these obligations, and these risks are especially serious with respect to workers'

compensation insurance.


For more specific information about your obligations under federal law, contact the Internal Revenue Service at (800) 829-1040 [and, if you wish,

the U.S. Small Business Administration at (800) 359-1833].

 

For more specific information about your obligations under state law, contact the Employment Development Department at (916) 653-0707,

the Department of Industrial Relations at (415) 703-4580, and the Franchise Tax Board at (800) 852-5711.

Business and Professions Code, Section 7044 provides for an exemption from the contractor's license requirements for "owner/ builders".

Section 7044 reads, in part, as follows:

7044: This chapter does not apply to any of the following:

(a) An owner of property, building or improving structures thereon, or appurtenances thereto, who does the work himself or herself or

through his or her own employees with wages as their sole compensation, provided none of the structures, with or without the

appurtenances thereto, are intended or offered for sale.

(b) An owner of property, building or improving structures thereon or appurtenances thereto, who contracts for such a project

with a subcontractor or subcontractors licensed pursuant to this chapter.

However, this exemption shall apply to the construction of single-family residential structures only if four or fewer of these structures are intended or

offered for sale in a calendar year. This limitation shall not apply if the owner of property contracts with a general contractor for the construction.

(c) A homeowner improving his or her principal place of residence or appurtenances thereto, provided that all of the following conditions exist:


(1) The work is performed prior to sale
(2) The homeowner has actually resided in the residence for the 12 months prior to completion of the work
(3) The homeowner has not availed himself or herself of the exemption in this subdivision on more than two structures

more than once during any three-year period

Information about licensed contractors may be obtained by calling the Contractors State License Board at 1-800-321-CSLB

 

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Contractor State License Board  

P.0. BOX 26000, Sacramento, CA 95826

Phone: 800-321-2752

Fax: 916-255-1395