HOUSE OF REPRESENTATIVES
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO THE OWNER-BUILDER EXEMPTION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. In the State of Hawaii, a contractor's license is required to obtain a building permit from the various counties, unless the applicant is an owner-builder. The owner-builder exemption allows owners to perform their own home improvements and construction. As an "owner-builder", an owner can hire employees and contract directly with subcontractors to construct improvements on their property. However, as an "owner-builder", an owner also takes on all of the responsibilities associated with acting as a general contractor, including compliance with building codes, occupational safety and health regulations, wage standards, taxes, and the like.
Oftentimes, owners are advised by unlicensed contractors to obtain an owner-builder permit so that the owner can hire or contract with an unlicensed person. Too often, owners are not fully aware of the risks and responsibilities they have assumed until it is too late.
The purpose of this Act is to limit the application of the owner-builder exemption to residential or farm property only, to improve the ability of the regulated industries complaints office to investigate possible violations of the owner-builder law, and to offer additional disclosures for owner-builders when they enter into agreements with licensed subcontractors.
SECTION 2. Section 444-2.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) This chapter shall not apply to owners or lessees
of property who build or improve residential[
,] or farm[ ,
industrial, or commercial] buildings or structures on property for their
own use, or for use by their grandparents, parents, siblings, or children and
who do not offer the buildings or structures for sale or lease; provided that:
(1) To qualify for an
exemption under this section, the owner or lessee shall register for the
exemption as provided in section 444-9.1; [
(2) The exemption
under this section shall not apply to electrical or plumbing work that must be
performed only by persons or entities licensed in accordance with this chapter,
unless the owner or lessee of the property is licensed for such work under
(3) An owner or lessee exempted under this section shall:
(A) Supervise the construction activity on the exempt buildings or structures;
(B) Hire subcontractors appropriately licensed under this chapter to perform all or part of the construction activity;
(C) Ensure that any electrical or plumbing work is performed by persons and entities appropriately licensed under this chapter or chapter 448E;
(D) Deduct Federal Insurance Contributions Act and withholding taxes, and provide workers' compensation insurance for persons working on the construction activity who are not licensed under this chapter or chapter 448E and who shall be considered employees of the owner or lessee; and
(E) Ensure that the construction activity complies with all applicable laws, ordinances, building codes, and zoning regulations.
(4) Until completion of the construction activity, an owner or lessee exempted under this section shall make available the following records for immediate inspection upon request by the department:
(A) A copy of the building permit application;
(B) A copy of the issued building permit;
(C) Copies of all contracts with the names of all persons who performed or are performing work on the exempt buildings and structures; and
(D) Proof of payment to all persons contracted to work on the exempt buildings and structures; and
(5) Upon completion of the construction activity, an owner or lessee exempted under this section shall keep and maintain the records identified in paragraph (4) for a period of three years from completion of the construction activity and shall make such records available for inspection within seven business days upon request by the department."
SECTION 3. Section 444-23, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:
person who violates section 444-2.5[
, or fails to comply with the
requirements set forth in the disclosure statement required to be provided
under section 444-9.1] shall be fined:
(1) $5,000 or [
fifty per cent of the [ appraised] value of the [ building] construction
or improvement as [ determined by the county tax appraiser,] indicated
on the building permit application, whichever is greater, for the first
(2) $10,000 or [
sixty per cent of the [ appraised] value of the [ building] construction
or improvement as [ determined by the county tax appraiser,] indicated
on the building permit application, whichever is greater, for any
SECTION 4. Section 444-25.5, Hawaii Revised Statutes, is amended to read as follows:
Disclosure; contracts. (a) Prior to entering into a contract with a
homeowner involving home construction or improvements [
and prior to the
application for a building permit], licensed contractors shall:
(1) Explain verbally in detail to the homeowner all lien rights of all parties performing under the contract including the homeowner, the contractor, any subcontractor, or any materialman supplying commodities or labor on the project;
(2) Explain verbally in detail the homeowner's option to demand bonding on the project, how the bond would protect the homeowner, and the approximate expense of the bond; and
(3) Disclose all information pertaining to the contract and its performance and any other relevant information that the board may require by rule.
(b) All licensed contractors performing home construction or improvements shall provide a written contract to the homeowner. The written contract shall:
(1) Contain the information provided in subsection (a) and any other relevant information that the board may require by rule;
(2) Contain notice of the contractor's right to resolve alleged construction defects prior to commencing any litigation in accordance with section 672E-11;
(3) Be signed by the contractor and the homeowner; and
(4) Be executed prior to the performance of any home construction or improvement.
(c) For the
purpose of this section, "homeowner" means the owner or lessee of
residential real property, including owners or lessees of condominium or
.], notwithstanding owner-builder status.
(d) Any violation of this section shall be deemed an unfair or deceptive practice and shall be subject to provisions of chapter 480, as well as the provisions of this chapter."
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act, upon its approval, shall take effect on July 1, 2013.
Owner-Builder Exemption; Responsibilities of and Protections for Owner-Builders; Fines
Sets forth specific responsibilities of and protections for owner-builders exempted under chapter 444, Hawaii Revised Statutes.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.