Michigan Residential Builder Exam — All Questions

Which agency licenses residential builders and maintenance & alteration contractors in Michigan?

• a.The Michigan Department of Transportation, through its construction field services offices
• b.The Department of Licensing and Regulatory Affairs (LARA), Bureau of Construction Codes✓
• c.The Michigan Department of Treasury, through the office that registers new businesses
• d.Each city's building department, with no state agency involved in builder licensing

Residential builders and M&A contractors are licensed by LARA through its Bureau of Construction Codes under Article 24 of the Occupational Code (MCL 339.2401 et seq.). Article 24 also creates the Residential Builders' and Maintenance and Alteration Contractors' Board.MCL 339.2401 et seq. (Occupational Code, Article 24)

In Michigan, the small-job exemption from residential builder licensing applies only when the total contract price for labor, materials, and other items is less than what amount?

• a.$600✓
• b.$10,000
• c.$2,500
• d.$50,000

Under MCL 339.2403(f), the exemption applies only when the total contract price for labor, materials, and other items is less than $600. A job priced at exactly $600 needs a license, and dividing a larger job into smaller contracts does not qualify. Because the trigger is so low, virtually all paid residential construction work in Michigan requires a license.MCL 339.2403(f)

How many hours of approved prelicensure courses must an applicant complete to receive an initial Michigan residential builder license?

• a.No prelicensure education is required
• b.60 hours✓
• c.16 hours
• d.8 hours

MCL 339.2404b requires 60 hours of approved prelicensure courses for an initial license. At least 6 hours must fall in each of seven areas, which include business management and estimating, contracts and risk management, the Michigan residential code, and MIOSHA construction safety.MCL 339.2404b

Which best describes the examination PSI gives for the Michigan Residential Builder license?

• a.An open-book combination exam of 160 questions in 240 minutes
• b.Two separate closed-book exams, each with its own passing score
• c.A closed-book exam of 50 Business and Law questions and nothing more
• d.A closed-book combination exam of 160 questions in 240 minutes✓

PSI gives one closed-book combination exam for the Residential Builder license. It has 160 multiple-choice questions, 50 on Business and Law and 110 on Practice/Trade, with 240 minutes allowed and a passing raw score of 116. The two sections have not been offered separately since November 14, 2019.PSI Residential Builder, M&A Contractor, and Salesperson Handbook (examination specifications)

How does a Michigan Residential Builder candidate take the 50 Business and Law questions?

• a.As a separate open-book exam that is scheduled before the trade exam
• b.As a separate closed-book exam that has its own passing score
• c.Inside the closed-book combination exam, with one passing score✓
• d.As a take-home section that is returned to the department by mail

The 50 Business and Law questions are part of the 160-question closed-book combination exam. PSI publishes one passing raw score, 116, for the whole exam. Since November 14, 2019 candidates cannot take the Business and Law or Practice/Trade sections separately, and a repeat candidate retakes the whole exam.PSI Residential Builder, M&A Contractor, and Salesperson Handbook (examination parts)

A licensed Michigan maintenance & alteration contractor applies for a Residential Builder license. What does MCL 339.2410 require?

• a.The M&A license converts to a builder license on written request
• b.The M&A examination result replaces the builder examination
• c.The applicant only needs to complete a new prelicensure course
• d.The applicant must pass the Residential Builder examination✓

Under MCL 339.2410, a qualifying officer, partner, or member who already holds a license and applies for an additional one does not have to be tested again. The exception is a maintenance & alteration contractor who applies for a Residential Builder license, who must pass the examination for that license.MCL 339.2410

Once issued, a Michigan residential builder license is generally valid for what term before renewal?

• a.Ten years
• b.Three years✓
• c.It never expires
• d.Six months

A Michigan residential builder license is issued for three years (MCL 339.2404) and must be renewed, with continuing-competency requirements, to remain active.MCL 339.2404 (three-year license term)

How does a Michigan Maintenance & Alteration (M&A) Contractor license differ from a full Residential Builder license?

• a.The M&A license is valid statewide for any residential work, while the Residential Builder license is limited to the county where the builder's office is located
• b.The M&A license is limited to the specific trade classifications listed on it, while the Residential Builder license covers building or improving residential structures generally✓
• c.There is no difference, because the two license names are interchangeable and either license covers any residential construction, alteration, or repair work
• d.The M&A license authorizes work on high-rise commercial towers, while the Residential Builder license covers only single-family homes built for the builder's own use

A Residential Builder license covers building and improving residential structures broadly, while a Maintenance & Alteration Contractor license is limited to the specific trades (for example, carpentry, roofing, or masonry) named on it (MCL 339.2404).MCL 339.2404 (M&A license limited to named trades)

A person plans to build several houses for other people for profit in Michigan. Which statement is correct?

• a.A license is required only if the price of any single home built for a buyer is more than $500,000
• b.No license is needed because houses are residential structures rather than commercial buildings
• c.A residential builder license is required because the person is building residential structures for others as a business✓
• d.Only a local building permit is required for each house, and a state license is never needed

Building residential structures for others as a business is exactly what the Residential Builder license regulates. The work is for others and no exemption applies, since the small-job exemption covers only projects under $600, so a state license is required (MCL 339.2403).MCL 339.2403 (license required for others' work)

An unlicensed Michigan builder completes residential work and then sues the homeowner for the unpaid balance. Under MCL 339.2412, what is the result?

• a.The builder may collect the full contract price as long as the work passed final inspection
• b.The builder may not bring or maintain a court action to collect compensation for the work✓
• c.The homeowner must pay double damages because the work was completed and accepted
• d.The builder may sue for the cost of materials but not for the labor on the job

Under MCL 339.2412, a builder who was unlicensed when the work was performed may not bring or maintain an action in any Michigan court to collect compensation for that work — losing the right to sue for either the contract price or the value of labor and materials.MCL 339.2412

Under the Michigan Construction Lien Act, within what time after last furnishing labor or materials must a claimant record a Claim of Lien?

• a.Within one year
• b.Within 10 days
• c.Within 90 days✓
• d.Within 30 days

The Michigan Construction Lien Act (MCL 570.1101 et seq.) requires a Claim of Lien to be recorded within 90 days after the claimant last furnished labor or materials to the project.Michigan Construction Lien Act, MCL 570.1111

After recording a Claim of Lien in Michigan, within what time must the claimant start a proceeding to enforce (foreclose) the lien?

• a.There is no deadline once the lien is recorded
• b.Within 90 days of recording
• c.Within 30 days of recording
• d.Within one year of recording the Claim of Lien✓

Under the Construction Lien Act, a claimant must commence a proceeding to enforce the lien within one year after the Claim of Lien is recorded, or the lien is lost.Michigan Construction Lien Act, MCL 570.1117

A Michigan subcontractor not in direct contract with the owner wants to preserve construction-lien rights. What step is generally required soon after starting work?

• a.Nothing, because lien rights attach automatically and no notice is needed from a subcontractor
• b.Filing a lawsuit against the owner within 10 days of first furnishing labor or materials
• c.Recording a Claim of Lien with the register of deeds before any labor or materials are furnished
• d.Serving a Notice of Furnishing, generally within 20 days of first furnishing labor or materials✓

Under the Construction Lien Act, a claimant not contracting directly with the owner generally must serve a Notice of Furnishing within 20 days of first furnishing labor or materials to preserve lien rights.Michigan Construction Lien Act, MCL 570.1109 (Notice of Furnishing)

Which of the following is a ground for disciplining a Michigan residential builder under MCL 339.2411?

• a.Diverting project funds or failing to account for money received✓
• b.Hiring licensed subcontractors to perform part of a project
• c.Carrying more liability insurance than a contract calls for
• d.Charging market-rate prices for residential building work

MCL 339.2411 lists the conduct that subjects a builder to discipline. It includes abandoning a contract without legal excuse, diverting funds or property received for a project, failing to account for money that belongs to others, and willfully departing from plans or specifications without the owner's consent. Fraud is a ground under the code's general provisions (MCL 339.604).MCL 339.2411 (grounds for discipline)

Under Michigan's builder rules, what must a licensed residential builder's advertising show?

• a.The licensee's name and a telephone number, with nothing else
• b.The licensee's name and a post office box, with nothing else
• c.The licensee's name, license number, and business address✓
• d.The license number and the year the license was first issued

Rule R 338.1532 requires advertising to show the licensee's name, license number, and actual business address. A telephone number or post office box alone is not enough. Separately, MCL 339.2404a requires a licensee to give license information as part of the contract.Mich Admin Code R 338.1532; MCL 339.2404a

Why is holding a valid Michigan license so important to a builder's ability to get paid?

• a.It has no effect on collection rights, because any builder can sue on a signed written contract
• b.Because an unlicensed builder cannot sue to collect, licensure is a precondition to using the courts to enforce payment✓
• c.It matters only because it lowers the permit fees that local building departments charge a builder
• d.It lets the builder charge double the contract price whenever a homeowner pays an invoice late

Because MCL 339.2412 bars an unlicensed builder from suing to collect, a builder must be licensed at the time of the work to preserve the right to enforce payment through the courts.MCL 339.2412 (effect of licensure on collection)

In Michigan, acting as a residential builder without the required license, in addition to barring a suit to collect, may also result in:

• a.Automatic issuance of a license
• b.A tax refund to the builder
• c.Criminal penalties for unlicensed practice✓
• d.A warning with no other consequence in any case

Unlicensed residential contracting in Michigan is not only a bar to collecting through the courts. Under MCL 339.601 it is also a crime: a first offense is a misdemeanor with a fine of $5,000 to $25,000, up to one year in jail, or both.MCL 339.601 (unlicensed practice)

To renew a Michigan residential builder license, a licensee must generally complete what during each three-year cycle?

• a.A new 60-hour prelicensure course each year
• b.The required continuing-competency hours✓
• c.A retake of the full licensing examination
• d.Nothing; the license renews automatically

To renew, a licensee must meet the continuing-competency requirements for each three-year license cycle (MCL 339.2404 and 339.2404b). This keeps licensees current on code and law without repeating the full 60-hour prelicensure course.MCL 339.2404; MCL 339.2404b (continuing competency)

A Michigan builder regularly employs a crew of four employees. What coverage does Michigan law require?

• a.Workers' compensation coverage under the Worker's Disability Compensation Act✓
• b.Flood insurance on every jobsite where an employee is assigned to work
• c.Only professional liability insurance for design errors and omissions
• d.No insurance of any kind unless a homeowner asks for proof of coverage

The Worker's Disability Compensation Act covers a private employer that regularly employs three or more employees at one time. It also covers an employer with fewer than three if at least one of them has worked 35 or more hours a week for 13 or more weeks during the preceding 52 weeks (MCL 418.115). A crew of four meets the first test.Worker's Disability Compensation Act, MCL 418.115

Which set of topics is covered by the Business and Law section of the Michigan Residential Builder exam?

• a.Site engineering, excavation and sitework, footings and foundation walls, concrete, carpentry, masonry, roofing, insulation, ventilation, and windows, doors and skylights
• b.Real estate brokerage, property appraisal, mortgage lending, title examination, escrow accounts, listing agreements, and closing procedures for residential home purchases
• c.Regulatory and statutory rules, insurance/bonds/liens, contracts, project management and administration, accounting and finance, business organization, personnel, and estimating✓
• d.Electrical wiring, plumbing systems, mechanical equipment, boiler installation, elevator inspection, and the other work regulated under the skilled trades laws

PSI's outline for the 50 Business and Law questions lists eight areas: regulatory and statutory requirements (13 questions), insurance, bonds and liens (11), contracts (7), project management and administration (6), accounting and finance (6), types of business organization (4), personnel (2), and estimating (1). This is the business side of running a residential building company.PSI Residential Builder, M&A Contractor, and Salesperson Handbook (Business and Law content outline)

Because the Michigan Residential Builder exam is closed book, how should a candidate prepare for Michigan-specific rules like the $600 threshold and the lien deadlines?

• a.Plan to look them up in a reference book during the examination
• b.Memorize them, since no reference material is allowed in the exam room✓
• c.Rely on handwritten notes brought into the exam room on test day
• d.Ignore them, since Michigan-specific rules are not tested at all

The Michigan exam is closed book, so no reference material is allowed in the room. Candidates must commit Michigan-specific facts — the $600 license threshold, the no-suit rule for unlicensed builders, and the 90-day/one-year lien deadlines — to memory.PSI Residential Builder, M&A Contractor, and Salesperson Handbook (closed-book examination)

What passing raw score does PSI publish for the 160-question Michigan Residential Builder combination exam?

• a.116✓
• b.104
• c.120
• d.128

The passing raw score is 116 for the whole 160-question exam, which has 50 Business and Law questions and 110 Practice/Trade questions. PSI publishes one score for the combination exam, not a separate one for each section.PSI Residential Builder, M&A Contractor, and Salesperson Handbook (examination specifications)