2025 is the 100th anniversary of the General Assembly's establishment of the North Carolina Licensing Board for General Contractors ("NCLBGC"). Due to the shortcomings of unscrupulous or underqualified contractors, the legislature sought to prescribe minimum standards for those performing construction work. The rules and regulations have changed over the years, with some changes coming as recently as 2023.
This article will explore some of the NCLBGC's recent enforcement priorities relating to unlicensed practice of general contracting. It will specifically focus on the minimum threshold and certain licensing exceptions. The goal of this article is to help those performing construction work to stay in compliance with the licensing statutes and avoid running afoul of the NCLBGC's recent enforcement priorities.
The Minimum Threshold and the Owner Exception
One of the NCLBGC's most important enforcement priorities is against those engaged in the unlicensed practice of general contracting. North Carolina General Statute § 87-1 provides in relevant part that anyone who "undertakes to bid upon or to construct or who undertakes to superintend or manage … the construction of any building, highway, public utilities, grading or any improvement or structure where the cost of the undertaking is forty thousand dollars ($40,000) or more" is required to be a licensed general contractor. Performing in excess of $40,000 worth of work without a license is known as the unlicensed practice of general contracting.
There are some exceptions to the licensing requirements, one of which involves a property owner serving as his own general contractor for work he is performing on his own property. An individual who constructs or alters a building on land that is owned by that individual is not required to have a general contractor's license, even if the work will cost over $40,000, if
- the building is intended solely for occupancy by that person and his family, firm, or corporation after completion; and
- the individual complies with the permitting requirements found in N.C. General Statute § 87-14.
Notably, if the building is not occupied solely by the person and his family, firm, or corporation for at least 12 months following completion, it shall be presumed that the person did not intend the building solely for occupancy by that person and his family, firm, or corporation in violation of the licensing statute.
The Owner Exception in Practice—Signing the Owner Affidavit
Many property owners who do not work in the construction industry but are preparing to undertake work on their property do not even know there is a minimum licensing threshold, much less an owner exception, until they are attempting to get their first permit. Before a building department will issue a permit for work costing $40,000 or more, the building department will require the permit seeker to furnish satisfactory proof that the permit seeker either (1) has hired or is a licensed general contractor or (2) falls under one of the licensing exceptions, like the owner exception.
If an owner intends to act as his own general contractor under the owner exception, the local permitting department will present him with an affidavit, often called an "Owner Exemption Affidavit." Different counties and municipalities have their own owner affidavit forms, but they tend to follow a similar format. At minimum, they will commonly require the owner to certify that he will:
- Personally superintend and manage all aspects of construction;
- Be personally present for all inspections; and
- Not sell or lease the property for 12 months following completion of the project.
By way of example, you can find the Owner's Exemption Affidavits for some of North Carolina's most populous counties here:
An owner who is not familiar with the licensing statute or does not read the owner affidavit closely may not realize that, by signing the owner affidavit and acting as his own general contractor, he is not permitted to sell or rent his property for 12 months following completion of the project.
The Board's Crackdown on Owners who Sell or Rent Within 12 Months
We have seen an uptick in the Board enforcing the licensing statute against owners who utilize the owner exception but list their property for sale or rent within 12 months of obtaining a certificate of occupancy. This specifically includes short-term rentals such as those listed on Airbnb and VRBO. You may be thinking, "As long as I otherwise do what I'm supposed to, pass my inspections, sell or rent my property to a happy buyer/renter, and keep happy neighbors, nobody will even notice if I sell or rent this property before the 12-month period has run." Wrong. The NCLBGC can, and often will, find out this licensing exception has been violated even if nobody turns the owner into the NCLBGC.
Many counties and municipalities transmit all executed owner affidavits to the NCLBGC as a standard practice. The NCLBGC's investigators, in turn, may periodically check in on projects for which they have received owner affidavits. For example, they may monitor sites like Realtor.com, Zillow, Airbnb, and VRBO to see if the property is listed for sale or rent while the permit is still open or in the 12 months immediately following the issuance of a certificate of occupancy. Inspectors may even drive by construction sites looking for "For Sale" or "For Rent" signs, which may trigger the NCLBGC to investigate whether the owner is acting as his own general contractor under the owner exception.
The bottom line is that the NCLBGC can, and often will, find out an owner has breached his owner affidavit and violated the licensing statute even if he passed all of his inspections, has happy neighbors, has happy buyers/tenants, and otherwise generally flew under the radar during construction.
Consequences of Engaging in the Unlicensed Practice of General Contracting
An owner who violates the licensing statute or breaches the certifications he made in the owner affidavit may face various consequences. First and foremost, someone who signs an owner affidavit knowing that he does not intend to uphold its requirements may be guilty of perjury, which is a Class F felony.
Second, the NCLBGC may open an investigation to determine if the licensing statute has been violated. If the NCLBGC determines that it has, the NCLBGC is permitted to seek an injunction or restraining order, which it will do by initiating a lawsuit against the violator. N.C. Gen. Stat. § 87-13.1. The NCLBGC is also permitted to recover from the contractor its attorneys' fees up to $5,000 plus costs associated with bringing the complaint against the contractor. Perhaps more severe than the financial punishment, the law also provides that one who has engaged in the unlicensed practice of general contracting shall be deemed guilty of a Class 2 misdemeanor.
Conclusion
For many owners utilizing the exception, the moment they realize they have violated the licensing statute is when they receive a complaint from the NCLBGC in the mail. The complaint will typically require a response within a certain number of days. The NCLBGC investigators may also contact the owner directly to obtain a statement, which the NCLBGC can then use against the owner in its future enforcement action.
Owners who have found themselves in this situation are encouraged to reach out to legal counsel as soon as possible, but certainly before responding to an NCLBGC complaint or giving any statement to the NCLBGC. Failing to do so could lead to the financial and criminal consequences outlined above. The Ward and Smith Professional Licensing Attorneys are available to assist with responding to NCLBGC complaints and defending enforcement actions.
