Qualified? Residential Building Businesses Require a Qualifying Officer

Residential builders who do not comply with licensing requirements face high stakes. Michigan courts have denied unlicensed builders the ability to collect on contracts with homeowners. Contractors can avoid this unfortunate situation through proper compliance with state licensing requirements.

Most contractors who perform residential construction projects in Michigan are aware that they must be a state-licensed residential builder. Mixed use projects, where both housing and commercial space exists in the same building, are easily overlooked. These projects, especially popular in downtown areas, also require a residential builder’s license.

When residential construction projects are completed by a company, the company must designate a qualifying officer who holds a residential builder’s license. Licensing the qualifying officer for the business is completed with a simple form and payment of a fee. The qualifying officer must be an officer, partner, member, or managing agent of the business.

Construction businesses that perform residential work are typically aware of the qualifying officer requirement. At least initially, the residential construction business complies with the state requirements. But business owners and managers may forget to update this information in the event of a personnel change. The savvy business owner can avoid this pitfall by routine review of the qualifying officer designation. Annual meetings or any time the company records are updated are good times to reevaluate the business’s qualifying officer. It is important to ensure that the qualifying officer is still involved with the business in an eligible capacity.

Although the Michigan Occupational Code allows for a “reasonable time” to designate a new qualifying officer, succession planning is critical. What will happen if the qualifying officer moves to a different organization or retires? Decision makers should identify which individuals are eligible, willing, and appropriate to fill the qualifying officer role if necessary. If the successor does not currently hold a residential builder’s license, it is wise to begin that process in advance of a vacancy to facilitate a smooth transition.

Suzanne Sutherland practices in the areas of construction law and commercial litigation, including the representation of contractors, construction managers and major trade contractors.