Recent Changes in Arizona Laws Governing Contractor Licensing and Complaints

Complaint Deadline. An amendment to A.R.S. § 12-1365 changes the timeframe within which a buyer of a new home may file an ROC complaint. It also reduces confusion as to when the clock starts to run. Now, complaints against a licensed contractor must be filed within two years after (a) close of escrow or (b) actual occupancy, which occurred first. (Before this change went into effect, the complaint had to be filed within two years of the date of occupancy or discovery of the defect.)

Notification of the right to file a complaint must be included in the construction contract, in 10-point type.

Display of License Number. A.R.S. § 32-1124 now requires a contractor to include its license number in all broadcast, published, internet or billboard advertising, including letterhead and other documents that the contractor uses to correspond with customers or potential customers. (Previously, the requirement was less broad, applying only to advertising or printed materials.) While the new statutory language does not mention email, contractors would be wise to include their license number in their email signature as well.

Deletion of "Wrongful" Act. In a welcome change to A.R.S. § 32-1154, which lists the grounds for license suspension or revocation, the word “wrongful” has been removed from subsection (A)(7). The statute now provides that “[t]he doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured” is grounds for disciplinary action. The good news for contractors: It is harder to prove that a contractor committed a “fraudulent” act than merely a “wrongful” one.

Exemption from Discipline. Another favorable change, to A.R.S. § 32-1155, provides that a contractor will not be disciplined for workmanship or for deviation from code, plans or standards if:

• the contractor is not given an opportunity to inspect the work within 15 days of the Registrar’s notice (even if a corrective work order has not yet been issued), or

• the contractor’s work has been subject to neglect, modification or abnormal use.

Recovery Fund. Due to the slow economy and pressures on the State budget, the Residential Contractors’ Recovery Fund balance is at an all-time low. As a result, the Fund is stingier, and taking longer, in making payouts to homeowners. However, when a payout is made, the Fund and the Attorney General are more likely than before to try to recover the payout from the contractor.