It should come as no surprise that there are legal implications of being a DIYer! After all, aren’t there rules and regulations for everything these days? This issue is discussed below from the perspective of a California resident and the facts may be somewhat different in other states.
California has an organization committed to protecting consumers from shady “home improvement” salespersons and “Contractors”. The Contractors State Licensing Board oversees issuance of state licenses for the various trades involved in residential and commercial construction. The Board provides assistance in dispute resolution between consumers and contractors and conducts “sting” operations to find un-licensed individuals who are performing construction activities. Visit www.cslb.ca.gov for more information.
The CSLB oversight pertains to all construction activities that exceed $500 in combined labor and material costs.
It is recognized that the pioneer spirit of building your own contemporary version of a homestead log cabin or sod house is still an American right and this is provided for in the codes and regulations through the “Owner/Builder” classification.
An owner/builder is defined as a person who owns the property and acts as their own general contractor and does the work themselves, and/or uses relatives, employees, licensed subcontractors on the project. There are also limitations on selling the property upon completion of the work. Use of a consultant to obtain bids, arrange for subcontractor work and schedules and/or project oversight is prohibited unless the consultant is state licensed as a contractor. Owner/builders must obtain required building permits as would a general contractor.
Owner/builders must be registered as an employer with the State Employment Development Department if they intend to have employees. A relative may work on the project with the owner/builder without being considered an employee. Licensed subcontractors are not considered to be employees. The owner/builder must file withholding statements for all employees and have workers compensation insurance for them. Note: Some home owner insurance policies can provide coverage.
There are financial penalties, interest and other fees, if proper tax withholding and social security deposits are not made for employees. In addition, there is potential for serious lawsuits and penalties if someone working on the job is injured and hasn’t been covered with workers compensation insurance.
As an aside, lenders often require use of a licensed general contractor, as they have more leverage on a contractor to perform the subject work to specification. They can go to the CSLB with a complaint and possibly have the contractors license suspended. If the work is done by the home owner, it can be more difficult for the lender to accomplish resolution of problems.