902 Regulation of Contractors

• Jurisdiction: Arizona

(a) Registrar of Contractors

Contractors are regulated by the Registrar of Contractors.

A.R.S. § 32-1103 provides for regulation of contractors by the Registrar of Contractors.

A contractor is any person or entity that, for compensation, undertakes to, or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or by or through others, or directly or indirectly supervises others to:

(a) construct, alter, repair, add to, subtract from, improve, move, wreck, or demolish any building, highway, road, railroad, excavation, or other structure, project, development, or improvement, or to do any part thereof, including the erection of scaffolding or any other structure or work in connection with the construction;

(b) connect such structure or improvements to utility service lines and metering devices and the sewer line;

(c) provide mechanical or structural service for any such structure or improvements.

A.R.S. § 32-1101(A)(2).

The term “contractor” includes not only individuals or entities that actually engage in construction or bid on construction, but also people or entities that supervise construction.

The term “contractor” includes: (1) subcontractors and specialty contractors; (2) floor covering contractors; (3) landscape contractors (other than gardeners); and (4) consultants representing themselves as having the ability to supervise or manage a residential construction project, including hiring and firing specialty contractors, scheduling work on the project, and selecting and purchasing construction material. A.R.S. § 32-1101(B).

A.R.S. § 32-1104 provides the powers and duties of the Registrar of Contractors, including making rules and regulations necessary to carry out the regulatory statutes, and numerous record-keeping duties. The rules and regulations are to include standards for good and workmanlike construction (see A.A.C. R4-9-108), but compliance with a state or local building code is sufficient in case of conflict.

A.R.S. § 32-1106 provides various enforcement powers, such as administering oaths, certifying official acts, and issuing subpoenas.

A.R.S. § 32-1107 provides that fees received shall be placed in a contractors’ license fund and provides for the disposition of that fund.

As to the immunity of the Registrar’s office for negligent regulation, see Section 901(a).

The court of appeals in Bentivegna v. Powers Steel & Wire Prods., Inc., 206 Ariz. 581, 585, 81 P.3d 1040, 1044 (App. 2004), clarified that the filing of a Registrar of Contractors’ complaint by property owners is permissive only, and does not subject subsequently filed superior court action to the exhaustion of remedies doctrine.

(b) Requirement for License

One may not act as a contractor unless one has secured a license from the Registrar.

A.R.S. § 32-1151 provides that it is unlawful to act as a contractor, to offer to act in that capacity, or to purport to have the capacity of a contractor, without having a license in the name of that party, unless the party is exempt.

A.R.S. § 32-1153 provides that no contractor may sue in any Arizona court for collection or compensation for contracting work unless duly licensed when the contract sued upon was entered into and when the alleged cause of action arose. As discussed in detail in Section 903, this is an extremely stringent provision. Under it, a contractor might expend substantial sums for labor and materials to benefit an owner, and the owner might benefit, but the owner can refuse to pay if the contractor was not properly licensed. In such a case, the contractor has no legal recourse.

A.R.S. § 32-1164 provides that acting as a contractor without a license is a class 1 misdemeanor, punishable by a fine of not less than $500 for the first offense and not less than $700 for each subsequent offense.

In State of Arizona v. Wilkinson, 202 Ariz. 27, 39 P.3d 1131 (2002), the contractor was convicted of a misdemeanor for contracting without a license. The supreme court held that the homeowner was entitled to restitution from the unlicensed contractor in the criminal proceeding for damages directly caused by the criminal conduct.

In Bentivegna v. Powers Steel & Wire Prods., 206 Ariz. at 586, 81 P.3d at 1045, the court held that A.R.S. § 32-1153 only precluded the contractor from suing in order to collect monies owed arising under contract without first establishing that he was licensed when the cause of action arose and when the contract was entered into between the parties. A.R.S. § 32-1153 does not provide that monies already received by the unlicensed contractor may never be retained by him, nor does the statute provide that the customer of such unlicensed contractor may sue for restitution for sums already paid under a contractual agreement.

(c) Classification of Contractors

The statute sets up general categories of contractors; the Registrar, by rules and regulations, has established more specific classifications. By statute, the Registrar’s classifications must be consistent with the established usage and procedure as found in the construction business. In addition to the scope of work outlined under the classification of general engineering contractor, a person so licensed may also perform the full range of work allowed by other engineering classifications. A general commercial building contractor is one who uses more than two unrelated building trades or crafts; such a contractor may not enter into specialty contracts without having the proper specialty licenses, but may perform only part of a construction project, except in specified trades (such as electrical, plumbing, and mechanical). The court has held that a general building contractor could construct the foundation of a building, even though the foundation by itself was not a structure contemplated by the definition of general building contracting, since the structure to be built was such a structure. The Registrar was upheld in requiring a general building license as well as an engineering license, for building a water treatment plant, although only 25% of the structure was to be devoted to the administrative function.

A.R.S. § 32-1102 provides the following classification of contractors:

For the purpose of license classification, the contracting business shall include:

1. General building contracting which is engaging in the contracting business other than residential contracting in connection with any structure built, being built or to be built for the support, shelter and enclosure of persons, animals, chattels or movable property of any kind requiring in its construction the use of more than two unrelated construction trades or crafts, or to do or superintend the whole or any part thereof which includes the management or direct or indirect supervision of any work performed by a contractor, but does not include a person who merely furnishes materials or supplies as provided in § 32-1121 without fabricating them into or consuming them in performing the work of the general contractor.

2. General engineering contracting which is engaging in the contracting business other than residential contracting in connection with fixed works requiring specialized engineering knowledge and skills and includes irrigation, drainage, water power, water supply, flood control, inland waterways, harbors, railroads, highways, tunnels, airport runways, sewerage, bridges, earthmoving projects, paving, and transmission lines.

3. Residential contracting which is engaging in the contracting business by any general contractor or subcontractor who undertakes to construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any residential structure or appurtenances including swimming pools on or within residential property lines as defined in § 32-1101.

4. Specialty contracting, which is engaging in the contracting business in the performance of construction work requiring special skills and involving the use of specialized construction trades or crafts other than residential contracting.

5. Specialty residential contracting which is engaging in the residential contracting business by the performance of construction work requiring special skill and involving the use of specialized construction trades or crafts within residential property lines.

A.R.S. § 32-1105 provides that the Registrar may adopt rules and regulations to classify contractors “in a manner consistent with established usage and procedure as found in the construction business.” The Registrar may limit the scope of operations of a licensed contractor to the branch in which he or she is licensed. Pursuant to this statute, A.A.C. R4-9-102 and -103 detail extensive commercial and residential license classifications, respectively. A contractor may qualify in more than one classification. A contractor may also use two or more crafts or trades other than those in which he or she is licensed if the work in those crafts or trades is incidental to work for which the contractor is licensed under A.R.S. § 32-1105(D).

In Security Ins. Co. of New Haven v. Day, 6 Ariz. App. 403, 433 P.2d 54 (1967), the owner entered into an agreement with the contractor for the construction of improvements. The surety executed a payment bond. The contractor then contracted with the subcontractor, its responsible managing employee, to “. . . perform certain site work, carpentry, both rough and finish, and concrete work, as well as to do some supervision on the job.” Id. at 404.

The subcontractor recovered $7,747.17 from the surety on the payment bond. The surety appealed on the grounds that the subcontractor had a Class B contractor’s license (Class B-2) but no specialty license.

The court quoted from the relevant statutes, A.R.S. § 32-1102(1) and (3), as quoted above. It also quoted from the Rules and Regulations of the Registrar of Contractors:

“General contractors (Class A, B, B-2 and B-3) may do all or any part of the work required to be done under any contract which they, under their licenses...