Builder Licensing Requirements

With all the uncertainty in the Homebuilding industry today it is especially important for anyone considering hiring a contractor to make sure he is financially stable. Since that is a difficult thing to measure I suggest to people that they ask potential contractors for their licensing level.

A contractor with a “Limited” license need only have $17,000 in working capital to his name. He is limited to working on projects not to exceed $500,000 in total cost. While this restriction does not include the price of the lot, it does include all change orders and allowances. Personally, I would be a little hesitate to hire a contractor with a limited license to undertake a project close to $500,000, given the limited resources required for such a license.

The “Intermediate” level license requires a contractor to have $75,000 in working capital and it enables him to engage in projects up to $1,000,0000 in value. An “Unlimited” license requires $150,000 in working capital and does not limit the contractor to any maximum project value.¬†These criteria are helpful from both a legal perspective and as a financial yardstick in helping customers know more about the contractors they are interviewing as potential bidders.

I have seen numerous disciplinary actions taken by the NC Licensing Board for General Contractors against contractors who have signed contracts for projects in excess of their legal limits. Often times these contractors attempt to structure the contracts in such a way that they can by-pass the rules by signing more than one contract with the client. In almost all these cases, the cumulative value of the agreements is determined to be the total contract amount as it pertains to the licensing limitation.

If you, or someone you know, are considering building, please make sure the contractor is appropriately licensed for the job.