How to set up the terms when someone is acting as GC for your own project?

[Neel Patel]

We are planning on constructing a duplex and taking on the role of Project Manager. We have a GC who would sign on as the general contractor on the building permit but then allow us to oversee the day-to-day responsibilities and hire my own subcontractors. In return for leveraging their license, we've agreed to pay the GC a fixed fee. We're interested in connecting with anyone who has navigated a similar scenario to share their insights.


What measures can we take to ensure the GC doesn't withdraw its license during the construction of the duplex? 

Could you highlight potential challenges and recommend provisions to include in the contract?

Any other advice would be greatly appreciated! 

[Chris Seveney]

Quote from @Neel Patel:

We are planning on constructing a duplex and taking on the role of Project Manager. We have a GC who would sign on as the general contractor on the building permit but then allow us to oversee the day-to-day responsibilities and hire my own subcontractors. In return for leveraging their license, we've agreed to pay the GC a fixed fee. We're interested in connecting with anyone who has navigated a similar scenario to share their insights.


What measures can we take to ensure the GC doesn't withdraw its license during the construction of the duplex? 

Could you highlight potential challenges and recommend provisions to include in the contract?

Any other advice would be greatly appreciated! 

 I did this on my personal residence. The only reason a GC would pull the license is if there were violations that existed, otherwise why would they. What you could do is pay them in increments so they do not pull their license. Give them a monthly or quarterly fee that totals the amount.

What we did is issue them the GC contract as me as a person, then I had a LLC that we acted as a subcontractor per the terms of the contract and then subcontracted out from our contract all of the trades.

[Bruce Woodruff]

This sounds sketchy....so they will be the GC and pull the permit, but you will hire Sub-contractors? 

You're acting essentially as Owner Builder, but that is only allowed on your own residence (in most states).

Whose liability insurance is at risk here? (You will need your own for sure I would guess). 

Will you be doing any work yourself? Who meets with Building Inspectors? 

They are the Prime Contractor and Contractor Of Record, but you are hiring the Subs? Are you planning on using Licensed Subs? I would check and see if this is even legal...this says it might not be: https://genconbd.alabama.gov/administrativecodes/230-X-1-.07...

I don't know why and good GC would allow you to do this, unless it's just the money...lots to go wrong here. And no decent Sub I ever knew would go within a mile of this project....

I guess the big question is - why are you doing this? To save money?

[Bruce Woodruff]

Note: I don't think @Chris Seveney did the same thing you are wanting to do....

[Neel Patel]

Quote from @Chris Seveney:

Quote from @Neel Patel:

We are planning on constructing a duplex and taking on the role of Project Manager. We have a GC who would sign on as the general contractor on the building permit but then allow us to oversee the day-to-day responsibilities and hire my own subcontractors. In return for leveraging their license, we've agreed to pay the GC a fixed fee. We're interested in connecting with anyone who has navigated a similar scenario to share their insights.


What measures can we take to ensure the GC doesn't withdraw its license during the construction of the duplex? 

Could you highlight potential challenges and recommend provisions to include in the contract?

Any other advice would be greatly appreciated! 

 I did this on my personal residence. The only reason a GC would pull the license is if there were violations that existed, otherwise why would they. What you could do is pay them in increments so they do not pull their license. Give them a monthly or quarterly fee that totals the amount.

What we did is issue them the GC contract as me as a person, then I had a LLC that we acted as a subcontractor per the terms of the contract and then subcontracted out from our contract all of the trades.

"What we did is issue them the GC contract as me as a person, then I had aLLC that we acted as a subcontractor per the terms of the contract and then subcontracted out from our contract all of the trades."

Can you maybe expand this a little more? I understand the subbing of the contract work for all of the trades. I just don't understand the part where you say "issue them the GC contract as me as a person". 

Side Note: Yes, giving payments quaterly is a great idea. Thank you for that. 

[Neel Patel]

Quote from @Bruce Woodruff:

This sounds sketchy....so they will be the GC and pull the permit, but you will hire Sub-contractors? 

You're acting essentially as Owner Builder, but that is only allowed on your own residence (in most states).

Whose liability insurance is at risk here? (You will need your own for sure I would guess). 

Will you be doing any work yourself? Who meets with Building Inspectors? 

They are the Prime Contractor and Contractor Of Record, but you are hiring the Subs? Are you planning on using Licensed Subs? I would check and see if this is even legal...this says it might not be: https://genconbd.alabama.gov/administrativecodes/230-X-1-.07...

I don't know why and good GC would allow you to do this, unless it's just the money...lots to go wrong here. And no decent Sub I ever knew would go within a mile of this project....

I guess the big question is - why are you doing this? To save money?

 Yes, we have done work for others by hiring licensed subcontractors by acting as subcontractors. I won't be doing any work myself.

We are definitely going to get liability insurance to cover every aspect of the construction. I would be meeting the Building Inspectors.  

We are doing this to gain more experience with new builds and possibly get our license in the future. 

[Chris Seveney]

@Bruce Woodruff

I did it on my personal residence and I had 20 years experience working for a commercial GC.

My home was the smallest project I ever managed 😀

[Chris Seveney]

@Neel Patel

It was my personal home

I as a person had an owner contract with the GC.

The GC then had a subcontract with my LLc which then hired subcontractors to do the work and each trade was responsible for their licenses. My LLc was a contractor and had insurance etc.

[Bruce Woodruff]

Quote from @Chris Seveney:

@Neel Patel

It was my personal home

You can generally only act as Owner/Builder on your own residence, not investment properties....

[Henry Clark]

We have done two large Selfstorage location in a city.  Both times our Building distributor and contractor signed on as GC.   For no cost.  But we have bought about 40 buildings through him.  He also did the pads and concrete work on all.  Erected most of the buildings except for our largest locations.  

I carried the construction insurance. Only about $300 on each site.  Required each subcontractor to carry insurance and have us named as additional insured.  

I acted as the GC with all contractors.  

The question is so you plan to scale?  What is your business model; 1.  Chase lowest cost vendors?, 2. Build a team?   If building a team then one of your contractors may let you use them as a GC.

My next project our Electrician also has a GC license and he will be listed as GV for a small flat fee, but he will also get $500k of electrical work.  

Getting your permit is the biggest need for your GC.  Past that you have little exposure if you planned to GC anyway.   Just have your subs cover the building inspectors.  Also have that person be one of your contractors.  

[James Hamling]

Quote from @Neel Patel:

We are planning on constructing a duplex and taking on the role of Project Manager. We have a GC who would sign on as the general contractor on the building permit but then allow us to oversee the day-to-day responsibilities and hire my own subcontractors. In return for leveraging their license, we've agreed to pay the GC a fixed fee. We're interested in connecting with anyone who has navigated a similar scenario to share their insights.


What measures can we take to ensure the GC doesn't withdraw its license during the construction of the duplex? 

Could you highlight potential challenges and recommend provisions to include in the contract?

Any other advice would be greatly appreciated! 

 Well first I'd check if it's legal, because in MN it's illegal. And that right there shows who your "partnering" with. 

The legal way would be to do a Cost Plus contract with GC. Where the GC does their job, and project is billed on an open-book basis of cost plus. Meaning, you the property owner pay cost plus fixed fee. 

All things have to go through GC. The moment home owner is hiring sub's, that's acting as GC, an unlicensed GC. The fact your also paying a licensed GC to fraudulently acquire permit only means more violations not that it's legal. 

And yes, it's very easy to get caught. All it takes is 1 vendor to mention it at any of the inspections and your nailed. For the inspector to ask on 1 thing and the sub says "well that's how home owner told me they wanted it" and they say "well what about the GC, what did they say" and "nothing, the home owner is managing this" and pow, your nailed. 

Not to mention most subs won't do it either, they will say no thanks and pass on the job. 

For many reason's it doesn't make any sense. I know you think it does, but it doesn't. Your a retail customer, why would you want to take on all the work and pay retail, vs a GC to do it all who is paying wholesale and thus, your cost is the same only thing that changes is how much of your time and energy is absorbed in it, as well as risk, a bunch or near to none. 

[James Hamling]

Quote from @Bruce Woodruff:

Quote from @Chris Seveney:

@Neel Patel

It was my personal home

You can generally only act as Owner/Builder on your own residence, not investment properties....

In MN regulation states a home owner can act as their own GC as long as the total of subcontractor materials and labor does not exceed $0.00. Lol. 

It used to be something like $1,500, they changed it to $0.00. So you can GC your own job, as long as they do everything for free. Lol. 

The point behind regulation is that a home owner being own GC is for a homeowner doing their own project, themself. Second hiring vendors, it requires a license. 

[Neel Patel]

Quote from @James Hamling:

Quote from @Neel Patel:

We are planning on constructing a duplex and taking on the role of Project Manager. We have a GC who would sign on as the general contractor on the building permit but then allow us to oversee the day-to-day responsibilities and hire my own subcontractors. In return for leveraging their license, we've agreed to pay the GC a fixed fee. We're interested in connecting with anyone who has navigated a similar scenario to share their insights.


What measures can we take to ensure the GC doesn't withdraw its license during the construction of the duplex? 

Could you highlight potential challenges and recommend provisions to include in the contract?

Any other advice would be greatly appreciated! 

 Well first I'd check if it's legal, because in MN it's illegal. And that right there shows who your "partnering" with. 

The legal way would be to do a Cost Plus contract with GC. Where the GC does their job, and project is billed on an open-book basis of cost plus. Meaning, you the property owner pay cost plus fixed fee. 

All things have to go through GC. The moment home owner is hiring sub's, that's acting as GC, an unlicensed GC. The fact your also paying a licensed GC to fraudulently acquire permit only means more violations not that it's legal. 

And yes, it's very easy to get caught. All it takes is 1 vendor to mention it at any of the inspections and your nailed. For the inspector to ask on 1 thing and the sub says "well that's how home owner told me they wanted it" and they say "well what about the GC, what did they say" and "nothing, the home owner is managing this" and pow, your nailed. 

Not to mention most subs won't do it either, they will say no thanks and pass on the job. 

For many reason's it doesn't make any sense. I know you think it does, but it doesn't. Your a retail customer, why would you want to take on all the work and pay retail, vs a GC to do it all who is paying wholesale and thus, your cost is the same only thing that changes is how much of your time and energy is absorbed in it, as well as risk, a bunch or near to none. 

 Thank you for pointing out the flaws with our thinking. I think it is not worth the effort to gain experience this way. 
I was trying to use this project to gain more experience with what I have already learned by taking on big rehabs. 

[James Hamling]

Quote from @Neel Patel:

Quote from @James Hamling:

Quote from @Neel Patel:

We are planning on constructing a duplex and taking on the role of Project Manager. We have a GC who would sign on as the general contractor on the building permit but then allow us to oversee the day-to-day responsibilities and hire my own subcontractors. In return for leveraging their license, we've agreed to pay the GC a fixed fee. We're interested in connecting with anyone who has navigated a similar scenario to share their insights.


What measures can we take to ensure the GC doesn't withdraw its license during the construction of the duplex? 

Could you highlight potential challenges and recommend provisions to include in the contract?

Any other advice would be greatly appreciated! 

 Well first I'd check if it's legal, because in MN it's illegal. And that right there shows who your "partnering" with. 

The legal way would be to do a Cost Plus contract with GC. Where the GC does their job, and project is billed on an open-book basis of cost plus. Meaning, you the property owner pay cost plus fixed fee. 

All things have to go through GC. The moment home owner is hiring sub's, that's acting as GC, an unlicensed GC. The fact your also paying a licensed GC to fraudulently acquire permit only means more violations not that it's legal. 

And yes, it's very easy to get caught. All it takes is 1 vendor to mention it at any of the inspections and your nailed. For the inspector to ask on 1 thing and the sub says "well that's how home owner told me they wanted it" and they say "well what about the GC, what did they say" and "nothing, the home owner is managing this" and pow, your nailed. 

Not to mention most subs won't do it either, they will say no thanks and pass on the job. 

For many reason's it doesn't make any sense. I know you think it does, but it doesn't. Your a retail customer, why would you want to take on all the work and pay retail, vs a GC to do it all who is paying wholesale and thus, your cost is the same only thing that changes is how much of your time and energy is absorbed in it, as well as risk, a bunch or near to none. 

 Thank you for pointing out the flaws with our thinking. I think it is not worth the effort to gain experience this way. 
I was trying to use this project to gain more experience with what I have already learned by taking on big rehabs. 

Try taking it in steps. Get a GC as a JV partner on a property. That way, can have things done but also be "inside" the process and that way really find out how it all really goes. And, control costs if have them do the GC at net-0 as part of their capital contribution.

[Neel Patel]

Quote from @James Hamling:

Quote from @Neel Patel:

Quote from @James Hamling:

Quote from @Neel Patel:

We are planning on constructing a duplex and taking on the role of Project Manager. We have a GC who would sign on as the general contractor on the building permit but then allow us to oversee the day-to-day responsibilities and hire my own subcontractors. In return for leveraging their license, we've agreed to pay the GC a fixed fee. We're interested in connecting with anyone who has navigated a similar scenario to share their insights.


What measures can we take to ensure the GC doesn't withdraw its license during the construction of the duplex? 

Could you highlight potential challenges and recommend provisions to include in the contract?

Any other advice would be greatly appreciated! 

 Well first I'd check if it's legal, because in MN it's illegal. And that right there shows who your "partnering" with. 

The legal way would be to do a Cost Plus contract with GC. Where the GC does their job, and project is billed on an open-book basis of cost plus. Meaning, you the property owner pay cost plus fixed fee. 

All things have to go through GC. The moment home owner is hiring sub's, that's acting as GC, an unlicensed GC. The fact your also paying a licensed GC to fraudulently acquire permit only means more violations not that it's legal. 

And yes, it's very easy to get caught. All it takes is 1 vendor to mention it at any of the inspections and your nailed. For the inspector to ask on 1 thing and the sub says "well that's how home owner told me they wanted it" and they say "well what about the GC, what did they say" and "nothing, the home owner is managing this" and pow, your nailed. 

Not to mention most subs won't do it either, they will say no thanks and pass on the job. 

For many reason's it doesn't make any sense. I know you think it does, but it doesn't. Your a retail customer, why would you want to take on all the work and pay retail, vs a GC to do it all who is paying wholesale and thus, your cost is the same only thing that changes is how much of your time and energy is absorbed in it, as well as risk, a bunch or near to none. 

 Thank you for pointing out the flaws with our thinking. I think it is not worth the effort to gain experience this way. 
I was trying to use this project to gain more experience with what I have already learned by taking on big rehabs. 

Try taking it in steps. Get a GC as a JV partner on a property. That way, can have things done but also be "inside" the process and that way really find out how it all really goes. And, control costs if have them do the GC at net-0 as part of their capital contribution.

 That is a great idea!

[Sean Wilson]

@Neel Patel

As someone who carries a GC license in 8 states, including AL, I can tell you that allowing someone to use your license is one of the fastest ways to receive a board summons and potentially lose your license.  People do it all the time, and it is one of the most common causes for disaplinary action from the contracting board.  In addition to your concern about them pulling their license, you'll have to add the risk of the GC receiving a suspension or losing their license, especially if they are doing this for multiple people.

[Bruce Woodruff]

Quote from @Sean Wilson:

@Neel Patel

As someone who carries a GC license in 8 states, including AL, I can tell you that allowing someone to use your license is one of the fastest ways to receive a board summons and potentially lose your license. 

I wasn't sure that he was going to 'use' the GC's license or had some other plan....but it certainly did sound squirrelly. And you are right, allowing someone to 'use' your license is the quickest way to lose it.....

[Neel Patel]

Quote from @Sean Wilson:

@Neel Patel

As someone who carries a GC license in 8 states, including AL, I can tell you that allowing someone to use your license is one of the fastest ways to receive a board summons and potentially lose your license.  People do it all the time, and it is one of the most common causes for disaplinary action from the contracting board.  In addition to your concern about them pulling their license, you'll have to add the risk of the GC receiving a suspension or losing their license, especially if they are doing this for multiple people.

 Yes, certainly makes sense.