Owner-builder general information
Owners beware and consider the risk before accepting full responsibility for your construction permit
Are you considering becoming an owner-builder? This section includes important information that you need to know before pulling your permit. You encouraged to read the following thoroughly; it is provided for your benefit and protection. A tenant of a building cannot pull a permit unless they are an agent for either the property owner or contractor. Agents shall provide a signed letter to the City verifying their name and the authority granted to them as an agent acting on behalf of the property owner or contractor.
Download Owner-builder disclosures and forms(PDF, 34KB)
Hiring a California licensed contractor
Hiring a California licensed contractor means 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.
The term “owner-builder” can mean three different things:
- Owner as worker
- Owner as contractor
- Owner as employer
Understand that each has benefits and risks, and it is possible to combine them.
| Owner's function in project |
Benefits |
Financial risks |
|
Owner-as-worker
A 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.
|
Highest |
Least |
|
Owner-as-contractor
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.
|
Some possible |
Low |
|
Owner-as-employer
A type of owner-builder where you pay any unlicensed individual to perform any construction work valued at more than $500.00. The permit is taken out in your name and you are personally responsible for their employment requirements, supervision, performance, safety and welfare while on your property.
Warning: Cost savings from this benefit can turn to serious financial risk if you fail to deduct payroll taxes or provide workers' compensation insurance for each worker.
|
Some possible |
Significant |
More risk considerations for an “owner-builder” (Health and Safety Code Section 19827)
The California Legislature declares an “urgent and statewide public interest in assuring” that contractors comply with contractors’ license law, Business and Professions Code and workers’ compensation insurance requirements to ensure property owners are informed about, and protected from the following when improving their property as an “owner-builder”:
- Fraudulent representations
- Liability for worker’s injuries
- Liability for material and labor costs unpaid by contractors
- Licensing requirements
- Employers tax liabilities
Over 20,000 consumer complaints are filed each year
Many complaints relate to owner/builder projects and include workmanship and workers’ compensation issues Homeowners suffer financial harm due to defective workmanship and injured employees.
Alarming examples of some “owner-builder” permits
Example 1
Homeowner received insurance money to rebuild burned-down home.
- “Owner-builder” permit pulled to rebuild structure
- Unlicensed contractor built a substandard structure – it must now 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 for an exemption from workers' compensation insurance.
- “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' compensation insurance 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.
Did you know?
- 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.
- 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 compensation for each “employee.”
- If you fail to abide by these laws, you may be subjected to serious financial risk.
Owners beware and consider the risk before accepting full responsibility for your construction permit.