The Ins and Outs of Home Builder Legal Liabilities

For many people, the thought of becoming a home builder brings to mind the excitement of building a dream home with their own two hands. The freedom of moving into a home that you designed and built from scratch is nothing short of exhilarating. However, the home builder legal liabilities that come with building your own home can also be a scary thought. If you’re considering a career as a home builder, you’ve undoubtedly noticed that there are many different types of home builders. There are independent home builders, and there are large home builders. In this article, we’ll help you understand the differences between the two and what you need to know about the home builder legal liabilities associated with being a large home builder.

What is a large home builder?

Large home builders are defined by the state and federal governments as those that build more than 20 homes per year. To become a large home builder, you must first apply for and receive a home builder license from your state’s department of building code enforcement. In order to operate as a large home builder, you will also need to register your business in your state of residence with the federal government through their Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and on the National Association of Home Builders website. Once you’ve registered your business, you must also comply with state and local building code and zoning regulations.

What are the home builder legal liabilities of being a large home builder?

Even if you are operating in a state that clearly states that home builders are exempt from certain regulations and requirements, there are still certain home builder legal liabilities associated with being a large home builder. Let’s take a look at some of the home builder legal liabilities of being a large home builder.

General Liability:

Home builders are required by state and local building codes to carry general liability insurance. This is important because even if you are operating in a no-code state, general liability insurance protects your business from personal injury or property damage claims that are not caused by the negligence or malpractice of your employees. For example, if a customer falls on your sidewalk and sues you for negligence, general liability insurance may help you avoid paying a large sum of money out of pocket to settle a lawsuit. While general liability insurance is an inexpensive addition to your business insurance package, one claim can often lead to another and potentially cause you to incur a large amount of additional expenses if you do not have sufficient coverage.

Workers’ Compensation Insurance:

In addition to general liability insurance, large home builders are required to also carry workers’ compensation insurance. This insurance protects your business from workers’ compensation claims that arise from the injuries or illnesses of your employees. When you hire a contractor to build your home, he may be required to be covered by workers’ compensation insurance. Typically, the contractor you hire will be required to self-insure workers’ compensation insurance coverage until they can qualify for a workers’ compensation business insurance policy through the state’s department of insurance.

Property Insurance:

Property insurance protects your business’s assets from damage or loss caused by fire, explosions, tornadoes, or other acts of God. However, this type of insurance is not required by the federal government, and no state requires it either. However, many home and apartment builders choose to purchase property insurance to cover potential losses related to items such as vehicles parked on their property, tools and equipment, and damage caused by wind. Depending on your business, your local government may require you to also carry liability insurance.

Health Insurance:

Home builders are required by the Affordable Care Act to provide health insurance to full-time employees who work at least 30 hours per week. Although many home builders will self-insure health insurance coverage, it is always recommended to purchase supplemental health insurance in the event that your primary insurance provider does not provide you with the coverage you need.

Business Property Insurance:

Business property insurance protects your business’s assets from damage or loss caused by fire, explosion, or other acts of God. However, this type of insurance is not required by the federal government, and no state requires it either. However, many home and apartment builders choose to purchase business property insurance to cover potential losses related to items such as vehicles parked on their property, tools and equipment, and damage caused by wind. Depending on your business, your local government may require you to also carry liability insurance.

Legal Malpractice Insurance:

Legal malpractice insurance may be required by some large home builders to cover legal fees associated with defending themselves against lawsuits. However, many large home builders will self-insure legal malpractice insurance coverage.

Employee Benefits:

Large home builders are also required to provide employees with certain benefits, including health insurance, retirement plans, paid vacation time, and paid sick time. However, most large home builders will self-insure these benefits.

Recordkeeping:

It is essential that home builders maintain accurate records of all the homes built in their firm to comply with the state building code and local zoning regulations. In order to do so, many large home builders maintain electronic records, including digital photos, building inspections and plans, and GIS data. However, many home and apartment builders choose to keep accurate records in paper format to comply with industry best practices.

Why are home builders required to register their businesses with the state and federal government?

The state and federal governments have identified home builders as a potentially dangerous profession due to the risks associated with being a home builder. Home builders are required to register their businesses with the state and federal governments in order to meet the requirements of certain home builder legal liabilities. It is important to understand that these legal liabilities are not the result of malicious intent by the home builders, but rather result from the home builder law abiding nature of the home building industry.

In order to comply with these legal liabilities, home builders are required to meet a certain set of requirements that are established by state and local governments. Registration with the state and federal governments is only one of a number of requirements home builders must meet in order to comply with the law. However, registering with the government is a key step in establishing a record of safe construction practices. By registering with the government and confirming that you are in compliance with their requirements, you will help to ensure that all future home builders are aware of the home builder legal liabilities associated with being a home builder.

What are the home builder legal liabilities of operating as a sole proprietor?

As an independent home builder, you are not required to register your business with the state or federal government. However, being an independent home builder does come with certain home builder legal liabilities. As an independent home builder, you are solely responsible for maintaining the proper insurance coverage for your business. Depending on your state’s laws and your local building codes, you may also be required to carry general liability insurance and property insurance.

What does it mean to be an employee of a large home builder?

Large home builders are required by law to comply with the same employment laws as other employers in your state. For example, in order to comply with the federal Fair Labor Standards Act (FLSA), home builders must follow the same federal minimum wage and overtime rules as other employers. They may also be required to comply with state minimum wage and overtime laws.

Conclusion

Home builders face many different challenges, but one of the most important is understanding their legal liabilities. The information provided in this article should help to determine which type of home builder is right for you.