What happens when a foundation contractor has no Michigan license

The license that foundation work falls under

Michigan has no foundation repair license, and it has no underpinning, waterproofing-company or crawl space license either. What the state does license is residential building and residential maintenance and alteration, under Article 24 of the occupational code. A residential builder, under MCL 339.2401, takes money for the erection, construction, replacement, repair, alteration or addition to a residential structure. A maintenance and alteration contractor, in the same section, takes money for repair, alteration, addition, improvement or wrecking of a residential structure, and the definition includes laying concrete on residential property. A residential structure means a detached one- or two-family dwelling and its attached or appurtenant structures, or a townhouse of not more than three stories.

A maintenance and alteration license lists the crafts the holder is qualified for: carpentry, concrete, swimming pool installation, waterproofing a basement, excavation, insulation work, masonry, roofing, siding and gutters, screen or storm sash installation, tile and marble work, and house wrecking. Nothing in the statute says which craft a crack injection, a pier or a drain tile job belongs to. Our interpretation is that concrete, masonry, excavation and basement waterproofing are the likely fits, and a residential builder license covers it all. That reading is ours, so ask the contractor which license and which craft they hold and why it covers your job.

The $600 line and the people who are exempt

LARA’s guidance to homeowners is that all contractors offering work that totals $600 or more in labor and materials must be licensed. The statute behind it, MCL 339.2403, exempts one project with an aggregate contract price under $600, but not if the work is split into smaller contracts to avoid the act. A foundation job can reach $600 quickly, so a contractor who offers to write several small invoices is describing exactly what the statute says does not count.

The other exemptions are narrow. An owner doing work on their own occupied property needs no license, an owner of rental property may do maintenance and alteration on that rental, and people working under a licensed builder or maintenance and alteration contractor on a contract are covered by that licensee. Licensed electrical, plumbing and mechanical contractors may do their own trade work. A crew member is therefore not automatically unlicensed, but the company whose name is on your contract must be.

What the penalties are

The criminal penalty for unlicensed residential building is in MCL 339.601. A first offense is a misdemeanor punishable by a fine of not less than $5,000 nor more than $25,000, or up to one year in jail, or both. A second or later offense carries up to two years, and an offense that causes death or serious injury is a felony with a maximum of four years. This is the residential tier. The lower tier of $500 and 90 days applies to other occupations, which is why a page that quotes it for a foundation contractor has the wrong statute.

Two other consequences matter more to you than the jail term. Under MCL 339.2412, a person who needed a license may not sue to collect compensation or impose a lien on the property, and a prosecutor may seek a civil fine of $5,000 to $25,000 against them. For licensed contractors, MCL 339.602 lets LARA limit, suspend, deny or revoke a license, order restitution and impose an administrative fine of up to $10,000.

What this means for you as the homeowner

The penalties punish the contractor. They do not pay you back. LARA’s list of residential builder resources shows the Homeowner Construction Lien Recovery Fund as abolished in August 2010, so there is no state fund that reimburses a homeowner for an unlicensed or runaway contractor. Competitor pages that send you to that fund are out of date.

That leaves the contract. Under MCL 570.1114, a contractor has no construction lien right on a residential structure unless the work was under a written contract, with changes in writing, and the contract must state that a residential builder or maintenance and alteration contractor must be licensed and, where required, that the contractor is licensed, with the license number. A contract that omits the number is a warning. A contractor who cannot supply the number has already given you an answer, and you have not paid yet.

Do not take the bar on lien and suit as permission to hire cheaply. If the work goes wrong, an unlicensed contractor has no license to lose, and the practical chance of recovering money from them is small. If you do hire an unlicensed person, pay in stages that follow the work, and pull the permit yourself if your city allows an owner to do so.

Permits and the building department

A license does not replace a permit. The base residential code requires a permit to construct, enlarge, alter or repair a building or structure, and Michigan’s exemption list does not name foundation repair, underpinning, waterproofing or crawl space work. Whether a particular repair counts is for your city’s building official. Several cities print a line for it, and our permit guide lists them. LARA’s contract checklist says the contract should state that the contractor will obtain all required building permits; if yours is silent, ask.

The complaint route

LARA says to try to resolve problems with the contractor first. You may then contact the local building inspector about workmanship and code violations, and if that fails or you suspect fraud, file a complaint with the Residential Builders section of the Bureau of Construction Codes. The window is 18 months under MCL 339.2411, counted from the latest of completion, occupancy or purchase for a maintenance and alteration contract, or from the certificate of occupancy or closing where the project needed one. The grounds are abandonment, diversion of funds, a willful violation of building laws, and workmanship that falls short of the Michigan residential code. For a workmanship complaint, a verified building inspection report by a state or local building official is part of the owner’s procedure.

Keep the contract, the invoices, photographs dated as the work went on, and every permit and inspection record. Write down the date the contractor finished or left, because the 18 months run from it.

The thesis: diagnose before you contract

Licensing tells you who may sell the work. It does not tell you whether the work is needed. The company that diagnoses a foundation problem often sells the repair, and the license database cannot show you a conflict of interest. Before you sign anything structural, get a written report from a professional engineer or a second opinion from someone with no repair to sell; our engineer guide says how. We are a referral service and foundation companies pay us, so weigh this advice with that in mind. Then check the license with the steps in how to check a Michigan builder license, and compare quotes with the cost guide. The foundation repair page covers the work itself.