In California, there is a way for property owners to act as their own contractors for construction projects that would otherwise need a contractor’s license – without having to go through the arduous process of obtaining a California State Licensing Board (CSLB) contractor license.

This exemption is called the Owner-Builder Exemption, and according to the CSLB, this exemption allows one to do work on residential construction projects on the owner’s property, provided that they are not intended for sale.

What’s an Owner-Builder?

According to the CSLB, an Owner-Builder is “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 is considered an owner-builder.”

It’s exactly what it sounds like – someone who wishes to build, maintain, amend or otherwise do construction work on a property they themselves own.

The Owner-Builder’s Role

As an owner-builder, you are responsible for everything a regular Class “B” General Contractor would do. That includes managing your construction project, obtaining permits, and ensuring that your project complies with local building codes and regulations. Basically, you have all the same legal and financial responsibilities you would have if you hired a contractor to do the work for you.

Also, if you hire subcontractors or other workers to do jobs you can’t do (like HVAC or plumbing, for example), you will need to both verify their licenses and provide workers’ compensation insurance for every employee. It’s actually a lot of stuff!

Obtaining Permits and Following Regulations

Securing the necessary permits is necessary for Owner-Builders, and it’s up to YOU to understand and comply with your local regulations.

Failure to obtain proper permits, or building in ways that violate local building codes and bylaws can result in serious financial and legal penalties. Do your diligence before starting your work!

Unless you’re a contractor yourself, it makes sense to hire a contractor to do this work for you as building codes and regulations can be extremely difficult to navigate for people not in the industry.

Hiring Subcontractors

If you need to hire subcontractors to get the job done, you absolutely have to check their licenses to ensure that you are not liable for legal damages. 

Also, secure written contracts that outline the scope of work, payment terms, and project timeline. By doing so, you can protect yourself from potential legal disputes and ensure the project’s success.

Workers’ Compensation Insurance

As we said earlier, you have all the same legal requirements as a licensed contractor when working on your home. Amongst these requirements is Workers’ Compensation insurance for any workers.

When hiring workers, owner-builders must provide workers’ compensation insurance to cover any potential injuries or illnesses that may occur on the job site. This insurance is essential to protect both you and your workers in case of accidents or work-related health issues.

Sales Restrictions

While the owner-builder exemption makes it so property owners can handle construction projects without a contractor’s license, it does come with specific restrictions when selling the property, to prevent people from simply obfuscating the strict contractor license requirements.

California law stipulates that properties built under the owner-builder exemption cannot be sold within one year of obtaining the final inspection or certificate of occupancy. So if you’re looking to sell your home within a year, you CANNOT do work on it without a license. You must wait a full year before legally being able to sell.

Frequently Asked Questions (FAQs)

Q: What is an owner-builder?

A: An owner-builder is a property owner who opts to manage their residential construction project without hiring a licensed contractor. They are responsible for obtaining permits, following building codes, and providing workers’ compensation insurance.

Q: Do owner-builders need a contractor’s license?

A: It depends. Generally, owner-builders do not need a contractor’s license – but there are limitations. You don’t need a license as an owner-builder if you meet these CSLB-mandated requirements:

• 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.
• The owner-builder contracts with properly licensed subcontractor(s).
• The owner-builder contracts with a General Building (“B”) contractor. 

Q: Do I need a contractor’s license to work on my home?

A: According to the CSLB, you do NOT need a contractor’s license to perform work on your home, so long as you fulfill the following requirements:

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

Q: Can an owner-builder hire subcontractors?

A: Yes, an owner-builder can hire subcontractors, but they must verify the subcontractors’ licenses and establish written contracts outlining the scope of work, payment terms, and project timeline. They must also hold proof or workers’ compensation insurance for every subcontractor.

Q: Is workers’ compensation insurance required for owner-builders?

A: Yes, owner-builders must provide workers’ compensation insurance when hiring workers to cover potential injuries or illnesses that may occur on the job site.

Q: Can I sell a property built under the owner-builder exemption?

A: Yes, you can sell a property built under the owner-builder exemption, but California law requires that you wait at least one year after obtaining the final inspection or certificate of occupancy before selling.