Owner-builder
A contractor who buys a lot, builds a house, and sells it has stepped into three roles at once: contractor, owner-builder, and seller. Each carries its own body of law, and they do not resolve together. Business and Professions Code section 7044 governs whether a license was required. The Right to Repair Act, Civil Code sections 895 through 945.5, governs what happens if the buyer finds defects. And the real estate disclosure statutes govern what had to be told to the buyer at the point of sale. This guide, reviewed by Jayson R. Elliott, keeps the three separate.
The licensing question and the defect question are asked under different codes, by different decision-makers, at different times, and they turn on different facts. Section 7044 asks whether the improvements were intended or offered for sale, how the work was staffed, and how many structures were involved. The Right to Repair Act asks whether this is new residential construction sold to a buyer within the Act’s scope.
Nothing links the answers. Satisfying section 7044 does not place a spec builder outside the Right to Repair Act, and being outside the Act does not mean the licensing question resolved favorably. Both have to be answered on their own terms.
Section 7044’s first exemption category requires two conditions together: that none of the improvements are intended or offered for sale, and that the owner personally performs all the work or has it performed by the owner’s employees with wages as their sole compensation.
Speculative building fails the first condition by definition. Building in order to sell is the intent that condition excludes. This is worth stating plainly because the “I’m building on my own property” framing feels like it should land in this category, and it does not.
The route that remains is the category covering an owner who builds on their own property and contracts the work to appropriately licensed contractors. That route carries the numerical limit: for single-family residential structures, the exemption applies only where four or fewer are intended or offered for sale in a calendar year — and that limitation does not apply where the owner contracts with a general contractor for the construction.
Then the presumptions attach. Proof of the sale or offering for sale of a structure by or for the owner-builder within one year after completion creates a rebuttable presumption, affecting the burden of proof, that the structure was undertaken for purposes of sale. Proof of the sale or offering for sale of five or more structures within one year after completion creates a conclusive presumption. For a spec builder the rebuttable tier is largely academic — the purpose is not seriously in dispute — but the conclusive tier at five or more is a hard operational ceiling that arrives on a rolling clock measured from each structure’s completion, not from the calendar year the limit uses.
The parent guide covers the exemption categories and the presumption structure in full.
The Right to Repair Act, Civil Code sections 895 through 945.5, applies to new residential construction — single-family homes, townhomes, and condominiums — where the original close of escrow occurred on or after January 1, 2003. It does not apply to commercial construction, and it does not apply to condominium conversions.
A contractor who builds a new home on speculation and sells it to a buyer is selling exactly what the Act was written about. That is the pathway into builder status, and it does not depend on how the licensing question came out.
This is the most significant shift. Outside the Act, the economic loss rule generally bars negligence recovery for construction defects that have not caused actual property damage or personal injury. Within the Act, the building standards themselves define the wrong — a violation is actionable without any requirement that the defect have damaged anything else.
The practical difference is large. A defect that would be a non-starter as a negligence claim against a hired contractor can be a live claim against a builder.
The Act sets out a prelitigation notice-and-repair procedure at Civil Code sections 910 through 938. This cuts both ways for a builder. It is a set of obligations with deadlines, and failing to engage with it properly has consequences. It is also a structured opportunity to inspect and repair before litigation begins — an opportunity a hired contractor facing a common-law claim does not get by statute.
A spec builder who receives a claim notice and treats it as ordinary correspondence has misread the posture. The process has its own timelines.
McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241 held that the Act supplies the virtually exclusive remedy for construction defect claims against builders of new residential construction, covering both economic loss and property damage. For a builder inside the Act’s scope, the economic loss rule is not the defense it is elsewhere — the Act displaces the framework in which that rule does its work.
Contractors who have absorbed the economic loss rule as a general shield should register this specifically. The defense that works well for a hired contractor facing a subsequent purchaser is not the defense available to a builder facing an original buyer.
A spec builder selling the finished house is the seller in a residential real estate transaction, which brings a separate body of obligations that has nothing to do with either statute above. The Real Estate Transfer Disclosure Statement requirements under Civil Code section 1102 and following apply according to their own terms and exemptions, and an “as-is” clause does not waive them — Civil Code section 1102.1 says so directly.
This is a role contractors are least practiced in. A contractor knows what they built and what problems came up during construction, and that knowledge is precisely what disclosure law is concerned with. The related pillar on contractor liability in real estate transactions covers the disclosure and concealment framework in detail.
Three combinations show up in practice:
The point is not that any one of these is common. It is that the licensing answer never tells you the defect answer.
Before you ask
Only through one route. Business and Professions Code section 7044’s category for an owner who performs the work personally or through the owner’s employees requires that none of the improvements be intended or offered for sale, which speculative building fails by definition. The route that remains covers an owner who contracts the work to appropriately licensed contractors, subject to the four-or-fewer single-family limit in a calendar year — a limit that does not apply where the owner contracts with a general contractor.
Frequently yes. The Right to Repair Act, Civil Code sections 895 through 945.5, applies to new residential construction — single-family homes, townhomes, and condominiums — where the original close of escrow occurred on or after January 1, 2003. Selling a newly built home to a buyer is the pathway into the Act, and it does not depend on how the licensing question under Business and Professions Code section 7044 was resolved.
Not in the way it protects a hired contractor. McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241 held that the Right to Repair Act is the virtually exclusive remedy for construction defect claims against builders of new residential construction, reaching both economic loss and property damage. Within the Act’s scope, its standards are actionable without proof that the defect caused resulting damage.
Yes, and this is the most common divergence. Business and Professions Code section 7044 answers a licensing question; Civil Code sections 895 through 945.5 answer a construction-defect question. Qualifying for the owner-builder exemption does not place a spec builder outside the Act, because the two statutes ask different questions under different codes.
A spec builder selling the finished home is the seller in a residential transaction, so the Real Estate Transfer Disclosure Statement requirements at Civil Code section 1102 and following apply on their own terms and exemptions. Civil Code section 1102.1 provides that these obligations are not waived by an “as-is” sale.
Business and Professions Code section 7044 limits the exemption for single-family residential structures to four or fewer intended or offered for sale in a calendar year, unless the owner contracts with a general contractor for the construction. Separately, proof of the sale or offering for sale of five or more structures within one year after completion creates a conclusive presumption that they were undertaken for purposes of sale — and the two measures use different clocks.
Keep reading
Breadcrumb + “the parent guide covers the exemption categories”
Breadcrumb — pillar parent
Builder-vs-hired framework
“the related pillar on contractor liability in real estate transactions”
Economic loss rule section
Civ. Code §1102.1 reference
§7031 payment bar in divergence scenario 2
Inline first mention: spec building, builder, close of escrow, prelitigation notice-and-repair
Attorneys section — end of article
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