Michigan Residential Builder Exam — All Questions

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)