Michigan courts have been wrestling with the boundaries of the Occupational Code and statutory requirements relating to residential builder’s licenses, mixed-use housing projects, and commercial construction. Perhaps the most notable question has been whether a residential builder’s license is required for the construction of certain mixed-use housing projects built in a commercial setting. The Michigan legislature has tried to resolve these ambiguities.

The principal challenge presented to commercial contractors was the broad definition of “residential structure” under the Occupational Code which included “combined residential and commercial structure[s].” In general, Michigan law does not afford a remedy in court for a contractor performing work where a license is required. This came as an unwelcome surprise to some commercial construction companies engaged in mixed-use housing projects which are designed and built under commercial codes. For example, a sophisticated general contractor building a 12-story, mixed use, project may have overlooked the need for a residential builder’s license merely because the top 4 floors consisted of luxury condos. The unwelcome surprise to some came in the form of a court refusing to enforce the terms of the party’s contract or hear the contractor’s claims for non-payment simply due to this licensure requirement. This is hardly the result the legislature intended by requiring residential builders to be licensed.

As such, and largely due to efforts by various trade organizations, it appears the legislature has attempted to correct this oversight by providing more clarity regarding when a residential builder’s license is required. Although, it remains to be seen how Michigan courts will interpret these changes. The most notable revisions include a revised definition of what a “residential structure” is and the elimination of operative language such as “combination residential and commercial structure.”

Now, a residential structure is defined as either:

  • “[a] detached 1- or 2-family dwelling and all related facilities appurtenant to that dwelling, used or intended to be used as an adjunct or residential occupancy” and/or;
  • “[a] townhouse of not more than 3 stories above the grade plane in height with a separate means of egress and all related facilities appurtenant to that townhouse, used or intended to be used as an adjunct of residential occupancy.”

These changes are significant because they impliedly exclude larger mixed-use projects, typically built in a commercial setting, from the need to be built by a licensed residential builder.

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