Download the brochure, "Owner-Builders Beware! Your responsibilities as an owner-builder" (PDF) from the Contractors State License Board.
Hiring a California Licensed Contractormeans you do not personally perform any of the construction work, the permit is not taken out in your name, you are not personally responsible for the construction, and you are not an Owner-Builder. Instead, you become a “Customer” and California law provides you the benefit of protection from poor workmanship, failure to finish the job and financial risk due to worker injury. In terms of benefits and risks, hiring a licensed contractor provides the highest benefits and the least amount of risk.
Additional information to consider:
Over 20,000 consumer complaints are filed each year. Many complaints relate to owner/builder projects and include workmanship and workers’ compensation issues. If not careful, homeowners can suffer financial harm due to defective workmanship and injured employees.
The following are a some of examples of what has occurred with Owner-Builder permits:
Example 1: Homeowner received insurance money to rebuild burned-down home.
Owner/Builder permit pulled to rebuild structure.
Unlicensed contractor built substandard structure – must be torn down and replaced.
Estimated financial injury is $225,000.
Additional financial injury - IRS threatened to tax insurance payout if house not completed by the end of the year.
Example 2: Brother-in-law had active license but filed an exemption from Workers Comp.
Owner-Builder hires brother-in-law to install a new roof.
Employee falls and sustains multiple spinal and extremity fractures as well as a head injury and remains in a coma to this day.
The Owner-Builder, who has sold the home, is now a defendant in a lawsuit for reimbursement for benefits paid to the injured worker.
Example 3: Employee of contractor without Workers Comp is hired by Owner-Builder to install septic system and suffers injury that results in permanent disability.
The Owner-Builder did not have a homeowner’s insurance policy on the house against which to submit a claim.
The Owner-Builder is now a defendant in a lawsuit for reimbursement for benefits paid to the injured worker.
An owner-builder is what the term indicates: the person owns the property and acts as the general contractor on the job, and either does the work or has employees (or licensed subcontractors) work on the project.
Unlicensed persons frequently have the property owner obtain an “Owner-Builder” building permit which erroneously implies that the property owner is providing his or her own labor and material personally?
Your homeowner’s insurance may not provide coverage for injuries sustained on your property by an unlicensed contractor and his/her employees?
Children, sisters, brothers, aunts, uncles, other relatives, and friends are considered your “employees” when working for you and are subject to workers compensation insurance coverage regardless of whether you are paying them wages or not?
If you are considered an “employer” under state and federal law, you must register with the state and federal government, withhold payroll taxes, provide workers compensation and disability insurance and contribute to unemployment insurance for each “employee”?
If you fail to abide by these laws you may be subjected to serious financial risk and legal prosecution?
The term “Owner-Builder” can mean three different things with each having its own benefits and risks: “Owner as Worker”, “Owner as Contractor” , and “Owner as Employer”:
This is type of Owner-Builder where you personally perform the construction work, the permit is taken out in your name and you are personally responsible for the construction management, knowledge, workmanship, and completion of the job. You benefit by not paying others to perform this work for you and your risk depends on your own ability to complete the job successfully. The person or persons who are listed as the owners of the property are the only ones who can actually perform the work without being considered employees subject to workers compensation coverage. Benefit/Risk: Possible Benefit with Low Financial Risk
This is a type of Owner-Builder where you personally act as your own General Contractor, the permit is taken out in your name and you hire California licensed sub-contractors to perform portions of the construction work. WARNING: The benefit of protection provided by law when you hire only California licensed sub-contractors can turn to serious financial risk if you hire unlicensed contractors to perform any of the work. Benefit/Risk: Possible Benefit and Significant Financial Risk
Resources for Owner-Builders
Please also consult other publications from the Contractors State License Board, www.cslb.ca.gov.
If you decide to proceed with obtaining an Owner-Builder permit, the State of California requires that you fill out, initial indicated paragraphs, and sign an “Owner-Builder Declaration” form prior to permit issuance.
Download the Property Owner Packet with Declaration (PDF)