Owner-builder Dilemma (long post)

[Ronald Roetsel]

Guys,

I am looking for advice and guidance, as I am not even sure where to begin or whether what I am trying to do is fully feasible. I am open to seeking professional assistance, including legal advice, but I would appreciate your thoughts first so I can better understand the landscape and reduce the risk of being taken for a ride by attorneys.

I am a W-2 employee, and my wife is a homemaker. In addition to our primary residence, we own a few parcels out of state. My long-term plan is to build a house (and a few additional structures) on one of those properties and eventually retire there.

I would like to act as the owner-builder. I have a background in construction project management, understand building codes, can operate heavy equipment, and can perform most single-family residential construction work myself. That said, I recognize that I will need help - likely 2–3 helpers on an as-needed basis. These would not be formal (insured and bonded) contractors, but rather individuals assisting with tasks such as sheathing, moving materials, site cleanup, painting a fence, holding a surveying rod, and similar work - no experience required.

I can find those people around - neighbor’s adult child looking to earn some money on weekends or other individuals who are available and willing to work. I do not intend to underpay anyone and would be willing to sign an agreement and pay via cash, check, or wire. 

Why not hire a licensed contractor or a GC in the first? Unfortunately, in that location finding a reasonable contractor is almost impossible or their fees are unreasonably high (I mean it). 

This is where my concerns begin piling up:

1. How can I protect myself and my family from being sued - and potentially losing life-assets - for injuries that are not due to negligence on my part (e.g., someone breaks a leg, steps on a nail, gets bitten by a stray dog, etc.)? Are there ways to limit liability?

2. How do I avoid a situation where someone who agreed to work as an independent contractor (for example, on a 1099 basis), works 3 times per week for a month, later claims employee status? One of the employee-contractor determination criteria in that state is the employee must work in (a) agreed hours, (b) be following instructions, and (c) doesn't have to posses own tools. The first two conditions are unrealistic to met - considering I am looking for someone to give me a hand.

3. How can I obtain third-party insurance to cover rented equipment against theft or damage (for example, an excavator tipping over), given that I do not operate a formal business? The optional insurance offered by rental company is high (30% of a rental) and the coverage is questionable.

4. Are there other types of insurance that could help reduce my liability? My current insurance policies (primary residence, vehicles, umbrella) do not appear to cover any of the above. As a reminder, I don't run any company.

Would forming an (anonymous?) LLC - possibly in my wife's name - provide any meaningful benefit in this situation? To be clear, this project is strictly for personal use. I am building for my family and do not intend to sell or profit from the property.

I would appreciate any thoughts or experiences you are willing to share.

Regards,

RR

[Stuart Udis]

@Ronald Roetsel You will need a builder’s risk policy during construction, and many of the things you listed could easily become grounds for an insurer to deny a claim or cancel coverage altogether. Beyond that, if something goes wrong during construction, there is often no meaningful warranty or recourse against anyone but yourself. I can understand building for yourself if it’s your primary business and you have the infrastructure to manage the risk, but taking on one off home builds this way feels like a short-term savings decision that can create long term exposure. The potential money saved upfront is quickly outweighed by the risk if a major issue arises.

If you’re handy and want to save money, the more reasonable compromise is to hire a qualified GC to handle the structure and the major systems such as mechanicals, roofing, and the building envelope, then complete the finish work yourself. That way, you reduce liability exposure, preserve important warranties and risk shifting elements of the project and still capture some cost savings without taking on the full risk of acting as your own builder.