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Minnesota Department of Labor and Industry Minnesota Department of Labor and Industry Powered by Google

What is residential building contractor licensing about?

RBC renewal

In 1992 the State of Minnesota established a law requiring contractors who build or improve residential real estate to obtain a state license. Prior to 1992, residential contractors were regulated at the local level if they were regulated at all. This minimal oversight exposed consumers to abuses at the hands of unscrupulous actors in the industry, and legitimate contractors were required to comply with a confusing patchwork of local licensing requirements.

The intent of the state licensing program is to provide a measure of consumer protection and to enhance the professionalism of the home building and remodeling industry in Minnesota. Consumer protection is provided by the Contractor Recovery Fund, which compensates homeowners who suffer a financial loss as a result of the misconduct of licensed contractors. Each licensed residential building contractor and remodelers pays a fee into the fund when they obtain their license and when they renew their license. This money is used to pay homeowners who have obtained a civil judgment against their licensed contractor as a result of the contractor’s failure of performance; fraudulent, deceptive, or dishonest practice; or conversion of funds. Consumers who hire an unlicensed contractor are not able to recover money from the Recovery Fund, which is why it is critical for homeowners to verify the licensing status of any contractor they are considering hiring as a part of the process of deciding on a contractor.

The state licensing law applies to work on "residential real estate" which is defined in Minn. Stat. § 326B.802, subd. 13 as "a new or existing building constructed for habitation by one to four families, and includes detached garages." Therefore, state building contractor licensure is not required for work on commercial or agricultural buildings, or on residential buildings with more than four individual units.

Who needs a license?

Anyone who contracts or offers to contract with a homeowner to construct or improve "residential real estate" must be licensed as a residential building contractor or residential remodeler unless they meet one of the exemptions noted below. The only difference between a residential building contractor and a residential remodeler is that a residential building contractor can build new homes and work on existing structures, whereas a remodeler can only work on existing structures.

The following are exempt from the residential building contractor/remodeler licensing requirements:

  • Commercial general contractors who do not perform work on residential building with four or fewer units;
  • Subcontractors (though subcontractors who are not licensed by DLI must register under the Contractor Registration Pilot Program)
  • Employees of a licensed contractor or remodeler;
  • Material suppliers who do not install or attach the items they sell;
  • Owners doing work on their own property (unless they are building or improving properties they own for purposes of resale or speculation);
  • Architects or engineers doing work within the scope of their practice;
  • People whose annual gross receipts from their residential contracting or remodeling activities are less than $15,000 (gross receipts are defined as the total amount derived from residential contracting or remodeling activities, regardless of where the activities are performed, and must not be reduced by cost of goods sold, expenses, losses or any other amount)*;
  • School districts and technical colleges;
  • Specialty contractors who provide only one "special skill" (except residential roofers) see chart below;
  • Any person who only engages in activities found within one of the eight categories listed below is not required to be licensed (except residential roofers).

"Special skill" means one of the following eight categories

1. Excavation

  • excavation
  • trenching
  • grading
  • site grading

2. Masonry/concrete

  • drain systems
  • poured walls
  • slabs and poured-in-place footings
  • masonry walls
  • masonry fireplaces
  • masonry veneer
  • water resistance and waterproofing

3. Carpentry

  • rough carpentry
  • finish carpentry
  • doors, windows and skylights
  • porches and decks (excluding concrete footings)
  • wood foundations
  • drywall installation (excluding taping and finishing)

4. Interior finishing

  • floor covering
  • wood floors
  • cabinet and countertop installation
  • insulation and vapor barriers
  • interior or exterior painting
  • ceramic, marble and quarry tile
  • wallpapering
  • ornamental guardrail and installation of prefabricated stairs

5. Exterior finishing

  • siding
  • soffit, fascia and trim
  • exterior plaster and stucco
  • painting
  • rain carrying systems, including gutters and down spouts

6. Drywall and plaster

  • installation
  • taping
  • finishing
  • interior plaster
  • painting
  • wallpapering

7. Roofing

  • roof coverings
  • roof sheathing
  • roof weatherproofing and insulation
  • repair of roof support system, but not construction of new roof support system

Roofers are required to obtain a license. Contact the Department of Labor and Industry for further information.

8. General installation specialties

  • garage doors and openers
  • pools, spas and hot tubs
  • fireplaces and wood stoves
  • asphalt paving and seal coating
  • exterior plaster and stucco
  • ornamental guardrail and prefabricated stairs

Anyone who is licensed as a residential building contractor or remodeler can engage in all of the special skill categories noted above, including roofing, without obtaining a separate roofer license.

*Note: Any person claiming the "gross receipts" exemption must obtain a Certificate of Exemption from the Department of Labor and Industry by filing an application (PDF) that requires an affidavit stating the applicant does not expect to exceed $15,000 in gross annual receipts during the calendar year for which the exemption is requested, and the payment of a $15 filing fee. The Certificate of Exemption must be renewed annually. If the person's gross receipts exceed $15,000 at any time during an annual exemption period, the Certificate of Exemption must be immediately surrendered and application for a license must be filed.

How do I get licensed?

Licenses are issued to the residential contracting business entity, though each business entity must have an individual who acts as the "qualifying person" for the company’s license. In order to qualify to be a qualifying person, an individual must be an owner or officer of the company or be a managing employee of the company. They must also pass a written exam to be able to act as a qualifying person for a company’s license. An individual conducting business as a sole proprietor may also obtain a license. For an individual proprietorship, the qualifying person must be the proprietor themselves or a managing employee.

Once an applicant’s qualifying person has successfully passed the written exam, the company must submit a fully completed license application packet including all required application documents, the qualifying person’s exam results, liability insurance certificate, Secretary of State filing (if applicable) and the required fees. License applications can be submitted online or by mail.

Like other business licenses issued by CCLD, residential building contractor and remodeler licenses are issued on a two-year license cycle. Residential building contractor and remodeler licenses all expire March 31, with roughly half of the licenses coming up for renewal in even numbered years and the others in odd numbered years. In order to renew a license, the company’s qualifying person must take 14 hours of approved continuing education.

What is the license fee?

The fee required to obtain a new license varies depending on the applicant’s volume of business. All applicants must pay an initial license fee of $200 plus a statewide E-Licensing surcharge of $20 (set to expire June 30, 2015), for a license fee of $220. A separate fee that goes to fund the Contractor Recovery Fund varies between $470 and $670, depending on the applicant/licensee’s gross annual receipts as indicated in the chart below:

Residential Building Contractor/Remodeler Two-Year License Fee Structure

If gross receipts are:

Recovery
fund fee

License
fee

New license
fee total

Renewal license
fee total

less than $1 million

$470

$220

$670

$690

$1million to $5 million

$570

$220

$770

$790

more than $5 million

$670

$220

$870

$890

License renewal fees are $20 more than the initial license application fee due to a required $20 continuing education fee that funds the administration of DLI's continuing education sponsor and course content review and approval program.

How can I make sure my license application will be processed as quickly as possible?

There are several documents required to be submitted in order to obtain a residential building contractor or remodeler license, and some of these documents are detailed and easy to fill out incorrectly. Applications that are missing required documents or signatures, or that are not completed properly will result in delays in processing as you will be required to supplement your submission with the deficient documents or other information.

In addition to the CCLD forms that are required, you will also need to submit a current certificate of liability insurance, Secretary of State filings (if applicable), and your qualifying person’s exam results if the exam was taken through Pearson VUE or an exam vendor other than CCLD. Additionally, you may be required to provide written explanations and supporting documentation for any "yes" answers you are required to provide on the Background Disclosure Form of the application packet.

If applying for a license as a corporation or limited liability company, a copy of the articles of incorporation (for a corporation) or articles of organization (for an LLC) must be submitted. If a business entity is filed in another state, the articles of foreign corporation or foreign limited liability company must be filed with the Minnesota Secretary of State and a copy of that filing must be provided with the license application. If your business entity also plans to use an assumed name, a copy of the certificate of assumed name issued by the Minnesota Secretary of State must be submitted with a copy of the articles of incorporation or articles of organization. You must also submit proof that your Secretary of State filing is active. To do this, access your company’s information on the Secretary of State’s website and print the screen showing the active status of your business filing.

If you are applying for a license as an individual proprietor or partnership and plan on using a business name that does not include the full legal name of the proprietor or all of the members of the partnership, then you will have to provide a copy of the assumed name filing you are required to make with the Minnesota Secretary of State. An assumed name filing must be renewed annually and your filing must be active in order to renew your license every two years.

As you gather and complete the required application forms and documents, keep in mind that it is essential that your business name be listed accurately and consistently throughout all of these documents. Be sure that you only list your business name exactly as it appears on your Secretary of State filings (including all punctuation and using no abbreviations unless they also appear on your Secretary of State filing). As a business person, you must be careful to ensure that you conduct your business legally and responsibly, which means taking care to ensure that you only use business names that are properly filed with the Secretary of State and that those filings are kept current by submitting the required annual renewals (these renewals can be done online with no charge as long as they are completed in a timely manner). Failure to do so opens you to civil liability as well as possible worker misclassification violations.

Insurance requirements

As a residential building contractor or residential remodeler, you are required to maintain a continuous policy of commercial general liability insurance. This insurance policy must include premises and operations insurance and products and completed operations coverage, with limits of at least $100,000 per occurrence, $300,000 aggregate limit for bodily injury, and property damage insurance with limits of at least $25,000 or a policy with a single limit for bodily injury and property damage of $300,000 per occurrence and $300,000 aggregate limits. The insurance must be written by an insurer licensed by the Minnesota Department of Commerce. As proof of your insurance coverage, you are required to submit a certificate of liability insurance with your license application and with each license renewal. This certificate can be on an approved CCLD form or it can be on a current ACORD form (your insurance agent will be able to produce an acceptable certificate for you).  

When your insurance agent produces an insurance certificate for you, it is critical that the coverage complies with the requirements described above, and that the "Insured" on the certificate is printed with your business name exactly as it reads on your license application forms and your filing(s) with the Minnesota Secretary of State. Also, if you are submitting an ACORD form, be sure that the agency is listed in the "Certificate Holder" section as follows:

Minnesota Dept. of Labor and Industry
CCLD Licensing Services
443 Lafayette Road N.
St. Paul, MN 55155

Finally, pay close attention when you complete the Background Disclosure Form. This form is intended to provide CCLD with information about the business, financial, litigation and criminal histories of applicants in order for us to make a determination of whether to grant the license application. To that end, this form asks several yes-or-no questions relating to a variety of background areas. Please be sure to read each of these questions very carefully and understand that each questions is being asked of not only the applicant for the license, but every individual who is an owner, officer, member, partner, qualifying person or managing employee of the applicant. If you have to answer "yes" to any of these questions, you are required to provide a separate, written explanation for the "yes" response and to provide documentation to help DLI to understand what happened and to determine the current status of the matter being disclosed. Failure to respond accurately to these questions provides a basis for denial of a license application or revocation of a license that is issued as a result of the provision of false, incomplete or misleading information on the license application. Most license revocations relating to license application information result from failure to adequately respond to the questions on the Background Disclosure Form. Traffic violations, including DUI or DWI, do not need to be disclosed.

Questions?

For help with questions about the license application process, call DLI's Licensing Unit at (651) 284-5034 or send an e-mail to DLI.license@state.mn.us. Questions about whether a license is required should be directed to DLI's Enforcement Services Unit at (651) 284-5069 or DLI.contractor@state.mn.us.

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