Overview
This lecture provides an introduction to Michigan's Residential Builder education and licensing process, covering statutory requirements, business practices, contracts, project management, marketing, and exam procedures.
Course Structure & Licensing Process
- Builder 1 and 2 are each 30 hours, with 5 chapters per course.
- You must complete 60 hours (1800 minutes per course) before applying for the state exam.
- After both courses, register at michigan.gov/builders to create an Accela account and apply for the license and exam.
Michigan Builder License Types & Requirements
- Residential builders must be licensed through the Department of Licensing and Regulatory Affairs (LARA).
- Maintenance & Alteration (M&A) contractors can only do one specialty at a time (e.g., just roofing, just siding).
- Salespersons need a separate license and can only work for one builder at a time.
- Certain entities and individuals (e.g. owners of own homes, government agents, certain labor-only jobs under $600) are exempt from licensing.
- License applications include credit checks; poor credit or bankruptcy may impact eligibility.
Licensing Board & Enforcement
- The Board of Residential Builders (9 members) interprets rules, investigates, and imposes penalties.
- Licenses can be restricted, suspended, denied, or revoked for violations (e.g., abandonment, fraud, misuse of funds, poor workmanship).
Business Records, Advertising & Contracts
- Maintain an actual office in Michigan; home office is allowed but not just P.O. box or website.
- Accurate books/records must be kept and shown upon audit.
- Advertisements must include licensed name, number, and physical address.
- All purchase/sales agreements must be in writing and parties must get immediate copies.
- Use change orders for any changes to contract; amendments must be signed.
Construction Liens & Documentation
- Notice of Commencement must be posted before work starts on unoccupied sites.
- Notice of Furnishing introduces subs/suppliers/laborers to owner (required within 20-30 days).
- Sworn Statement lists all parties paid/owed on the job.
- Waivers (conditional/unconditional, partial/full) are proof of payment.
- Claims of lien must be filed within 90 days; foreclosures must begin within 1 year.
Property & Legal Aspects
- Land must pass percolation test before septic installation.
- Understand easements (right-of-way), legal descriptions (lot/subdivision method), zoning, and deed restrictions.
- Non-conforming uses: "grandfather clause" or variance may allow a use not matching zoning.
Fair Housing & Anti-Discrimination
- Federal and state laws prohibit discrimination based on race, color, religion, national origin, sex, disability, familial status, age, marital status, height, and weight.
Business Entities & Liability
- Partnerships, corporations (C, S), and LLCs offer varying liability protections; S-corps and LLCs allow profit/loss pass-through; C-corps face double taxation.
- Operating as an entity protects personal assets if acting in good faith.
Bonds, Insurance, & Environmental Laws
- Bonds (bid, performance, payment, maintenance) ensure job completion and payment.
- General liability, workers comp, builder’s risk, and professional (E&O) insurance protect builders.
- Compliance required with asbestos, lead paint (pre-1978 homes), wetlands, and radon regulations.
Estimating & Project Management
- Estimating involves conceptual, preliminary, and detailed estimates; include all costs and mark-up.
- Direct costs are attributable to a job; indirect costs are shared (e.g., office staff).
- Calculate quantities by area, volume, and units (doors, windows).
- Plans/specs define work; contracts must be in writing to be enforceable.
- Use bar charts for scheduling; monitor cost, time, quality, and safety.
- Understand types of contracts: lump sum, cost-plus, fixed/variable fee, unit price, GMP.
Marketing & Sales
- Find your niche and analyze competitors for strengths/weaknesses.
- Use referrals, word of mouth, websites, yard signs, and advertising strategically.
- Salespersons must be trained, knowledgeable, and licensed; communication and follow-up are crucial.
- Private sector clients value reliability and quality; public sector requires bonding and adherence to specs.
Key Terms & Definitions
- Department/LARA — Michigan Department of Licensing and Regulatory Affairs, responsible for licensing builders.
- Notice of Commencement — Document posted before construction, listing project and owner info.
- Notice of Furnishing — Document used by subs/suppliers to notify owners of involvement.
- Sworn Statement — List of all paid/owing parties on a project.
- Lien — Legal claim against property for unpaid labor/materials.
- Waiver — Document waiving right to file lien upon payment.
- Variance — Government permission to deviate from zoning.
- Indemnification — Contractual obligation to compensate for loss/damage.
- Bid/Performance/Maintenance Bond — Insurance guaranteeing job performance/payment.
- GMP (Guaranteed Maximum Price) — Contract limiting owner's cost.
- Direct/Indirect Cost — Costs attributed specifically to a project or shared among projects.
Action Items / Next Steps
- Study the provided PDF book and review questions.
- Complete all five Builder 1 chapters, quizzes, and ensure 1800 minutes in the system.
- After finishing Builder 2, register for the license exam at michigan.gov/builders.
- Prepare for the final Builder 1 quiz with at least 70% to pass.
- Review material on contracts, estimates, liens, insurance, and project management for state exam.