Category: Licenses

South Carolina, under Title 40, requires all contractors to be licensed. This includes a builder of a new home – obviously! – but it carves out an exception if the owner of land wants to build her own home for her own use. We like this. Property rights and the ability to do what you want with your own property are a wonderful right.

However, the law states that any sale or offer for sale, or offer to rent the home out, within two years after completion or the issuance of the certificate of occupancy is prima facie evidence that this is not being done for the owner. This means that if it’s placed for sale or rent, the law assumes they were not doing it for their own use, and they have to prove otherwise, or they are in violation of Title 40. What does this mean?

For the seller/builder: multiple civil and criminal penalties. Additionally, the complete inability to place a lien on the home, such as a mechanics lien for failure to pay. Unlicensed contractors cannot sue for payment.

For the buyer: if aware, a number of potential issues:

• the buyer will have to list on their seller’s disclosures, if they ever sell, that the entire structure was done by unlicensed contractors, which will have a significant impact on the value of the home. Because this is a known but latent defect, the state requires it to be on the disclosures documents. Failure can result in civil and criminal penalties.
• the buyer should use this info to negotiate a lower price as it has a significant impact on the value.
• if anything goes wrong, there will be no warranty. Unlicensed contractors are operating illegally and cannot provide a warranty as such. The buyer will have no recourse against the seller, where usually there are several types of warranties and covenants – none of those will exist here for the buyer.
• the home will not qualify for FHA, VA, or potentially even conventional financing – the facts must be disclosed, and underwriters will not want this risk. It will be completely unacceptable for FHA and VA due to legal regulations; for conventional it will be a business risk decision (possible, but not probable to be accepted). Your buyer will likely have to be cash only.

In such a situation, the buyer is taking on all of the risk. Best practice is to demand the builder get an exception or rebut the presumption of the legal violations and get their waivers. The buyer can waive whatever the buyer chooses (subject to lenders’ requirements, if any), but should be aware of the risks, both legally and financially, before accepting such a situation.

A CL-100 is a South Carolina document used for real estate evaluation purposes. The “CL” stands for “Clemson Letter,” because the document is governed by the Clemson Department of Pesticide Regulation.

This form is generally requested for most transactions and required by many lenders. It may be waived by a buyer or a lender, but even a buyer who wants to waive it may still find the lender is requiring it (to protect their investment, of course).

The form checks for several types of damage to a home – that created by pests, and that created by moisture or other wood destroying fungi related to such moisture.

The inspection usually costs anywhere from $85 to $250 and takes just an hour or two. It will determine the presence of any currently active or formerly active pests or moisture damage. It’s limited to visible areas – the inspectors, who must be appropriately licensed under category 7A, may not move anything around or remove siding, etc. This can limit the benefit of this inspection, but they can still do a decent job of finding issues.

The form used MUST be the most current form published. Under SC Code 27-1085(K)(2), it’s required that the most recent form be used; if they do not use the most current form, they have not provided you with a CL-100. This is extremely important for both sides of a transaction. A seller does not have to inform a buyer that they have realized the CL-100 sent over is invalid. It is the buyer and the buyer’s agent’s responsibility to ensure an adequate one has been provided.

On the form, if the “Yes” boxes are checked, especially in #3 and #4, the moisture reading must be provided, and the location of the damage must be indicated. A vague comment like “recommend investigation” or “N/A” in the moisture reading lines is invalid.

Damage must be noted in the comments! To “clear” a CL-100, there is no such thing as a “clear letter.” What you need is for an appropriately licensed contractor, determined by the type of damage noted on the CL-100 notes section, to state that it is structurally sound at the time of inspection. It does not require repairs, per se, unless there is question of structural soundness. The only repairs or replies required for any CL-100 are to the ones written on the form itself. If it’s not on there, it’s not part of the transaction – period.

You should always:

• make sure the form used is the most current – if not, don’t pay for the service, they have not performed it.
  • https://www.clemson.edu/public/regulatory/pesticide-regulation/bulletins/bulletin-16-wood-infestation-report.pdf
• check the current licensure of the applicant performing the work:
  • http://regfocus.clemson.edu/dpr/commercial.htm
• respond only to specific, actual damage noted on the form.

*Note: this is general information which can not be relied upon without knowing the specific details of your circumstances, which may cause the info to be inaccurate. You must consult an attorney for your specific case to be sure of your rights and obligations.