1.5 Rules of Conduct: Place of Business, Advertising, Written Agreements & Records

Place of Business and Name

A residential builder or M&A contractor must maintain a place of business in Michigan (MCL 339.2404(4)). Each additional location needs a branch office license. The business name and address on the license are the ones that must appear in advertising and contracts. A name or address change must be reported within 30 days (MCL 339.2409). A business operating under an assumed name must also file the assumed name properly (Section 3.1).

Advertising Rules (R 338.1532)

The advertising rule is short and heavily tested:

1. All advertising must include the licensee's name, license number, and actual business address as shown on the license.
2. Using only a telephone number or a post office box is prohibited.
3. A builder selling new homes through a licensed real estate broker may show the broker's name, or both names.
4. A licensee may not solicit a home improvement contract by promising the buyer a bonus, in cash or merchandise, that depends on the buyer displaying the home to other people or on the licensee getting orders from third parties.

Rule 4 covers the common "model home" pitch: "We'll discount your roof if you let us use your house as a showcase and send us referrals." False advertising is also a separate ground for discipline under MCL 339.604(f).

Yard signs, truck lettering, websites, social-media posts, and door hangers all count as advertising. Put the license number and the real business address on every one.

Written Agreements (R 338.1533)

LARA's rule on purchase and sales agreements requires:

• All agreements and all changes to agreements between the builder or contractor and the customer must be in writing and signed by the parties, and the customer must receive copies.
• The written agreement must clearly state the terms, including specifications, and for construction, both plans and specifications. The agreement must state the cost, the type and amount of work, and the type and quality of materials.
• For a new home that is substantially complete or matches a model, plans and specifications need not be furnished if the structure is specifically identified and any changes are agreed to in writing.

Related rules strengthen this requirement:

Many people believe that written roofing contracts are required only above $600. That is not the rule. The $600 figure decides whether a license is needed. R 338.1533 requires written, signed agreements for all agreements a licensee makes.

Books, Records, and Financial Statements

• A builder or contractor must keep a complete, accurate set of books and records (R 338.1534).
• When LARA sends notice, the licensee must submit a sworn financial statement within 30 days (R 338.1535). LARA may send the notice because of an unsatisfied judgment, a lien filed against the licensee, or a reasonable belief that the licensee cannot meet contract obligations. Extensions must be requested in writing and may be granted for good cause.
• Under MCL 339.2411(2)(l), insolvency, bankruptcy, receivership, an assignment for creditors, unpaid judgments or liens, and failure to pay obligations in the ordinary course of business are grounds for discipline.

Prohibited Acts in MCL 339.2411(2)

A licensee or applicant who commits any of the following is subject to the Article 6 penalties:

MCL 339.604 adds general grounds that apply to every occupation: fraud or deceit in obtaining a license or in practice, lack of good moral character, gross negligence, false advertising, incompetence, and aiding unlicensed practice. Under MCL 339.2411(3), LARA may also suspend or revoke a license for a knowing violation of the asbestos abatement contractors licensing act.

Refusing to Fix a Serious Defect

Under R 338.1551(4), if a licensee fails or refuses to correct a structural matter that is materially deficient, dangerous, or hazardous to the owners, the refusal is presumed to be dishonest or unfair dealing. R 338.1551(5) adds that all construction, alterations, and repairs must comply with the Michigan construction code.

Applying the Rules

A roofer collects a $6,000 deposit for a Lansing reroof and uses it to cover payroll on another job. The Lansing job then stalls. That one decision can trigger diversion of funds under 2411(2)(b), possible abandonment under (a), and a felony exposure under the Building Contract Fund Act (Section 5.2). The safe practice is to track each deposit to its own job and pay that job's suppliers and labor first.