Registrar of Contractors statutes

              AUGUST 2003
MAIN OFFICE:
800 W. Washington, 6th Floor
Phoenix, AZ 85007-2940
602-542-1525
TDD 602-542-1588
Or Toll Free Within Arizona
(888) 271-9286
Visit Our Website at
www.rc.state.az.us
JANET NAPOLITANO
GOVERNOR
ISRAEL G. TORRES
DIRECTOR
August 6, 2003
As the Director of the Registrar of Contractor (ROC),
I am pleased to present the “2003 Registrar of
Contractors Arizona Revised Statute Booklet”.
This booklet highlights major laws relevant to Arizona’s vibrant construction
industry, assembled to provide guidance to both contractors and consumers.
The mission of the ROC is to promote quality construction by Arizona
contractors through a licensing and regulatory system designed to protect the
health, safety and welfare of the public.
This agency oversees the licensing and regulation of more than 48,000
commercial and residential contractors. To that end, the ROC has recently
undertaken several outreach efforts designed to educate the public regarding
Arizona’s construction industry and the value of licensed contractors.
I believe that the new efforts at the ROC represent a balanced approach in
meeting our mission while providing services to both the consumer and the
construction industry.
I invite you to contact any one of our 11 offices throughout the state or visit
our website at www.rc.state.az.us to learn more about our services.
Sincerely,
Israel G. Torres
Director
TDD 602 542-1588
Visit our Website at www.rc.state.az.us
STATE OF ARIZONA
REGISTRAR OF CONTRACTORS
OFFICES
PHOENIX MAIN OFFICE PRESCOTT OFFICE
800 W. Washington, 6th Floor 240 S. Montezuma St., Ste. 202B
Phoenix, AZ 85007-2940 Prescott, AZ 86303-3028
(602) 542-1525 (928) 445-5710
Or Toll Free Within Arizona (888) 271-9286
SHOW LOW OFFICE
FLAGSTAFF OFFICE 581 E. Old Linden Rd., Ste. C
2901 Shamrell Blvd., Ste. 100 Show Low, AZ 85901-4819
Flagstaff, AZ 86001-1829 (928) 537-8842
(928) 526-2325
SIERRA VISTA OFFICE
GLENDALE REGIONAL OFFICE 333 W. Wilcox, Ste. 104
17235 N. 75th Ave., Bldg E, Ste. 175 Sierra Vista, AZ 85635-1756
Glendale, AZ 85308-8692 (520) 459-5119
(602) 542-1525
TUCSON REGIONAL OFFICE
KINGMAN OFFICE 400 W. Congress, Ste. 212
519 E. Beale St., Ste. 140 Tucson, AZ 85701-1311
Kingman, AZ 86401-5918 (520) 628-6345
(928) 753-4220
YUMA OFFICE
LAKE HAVASU CITY OFFICE Crescent Center
1845 Mc Culloch Blvd., Ste. B-5 2450 S. 4th Ave., Ste. 117
Lake Havasu City, AZ 86403-5722 Yuma, AZ 85364-8557
(928) 855-2144 (928) 344-6990
MESA REGIONAL OFFICE
2222 S. Dobson Rd., Ste. 101
Mesa, AZ 85202-6483
(602) 542-1525
The mission of the Registrar of Contractors is to promote
quality construction by Arizona contractors through a licensing
and regulatory system designed to protect the health, safety, and
welfare of the public.
Visit our Website at
www.rc.state.az.us
This booklet is printed for the convenience of consumers, contractors and others needing
information regarding Arizona licensing requirements. Every effort has been made to
reproduce the statutes and rules as they appear in the official publications of the State of
Arizona. The reader also may refer to the Arizona Revised Statutes, as amended and the
Arizona Administrative Code printed by the Secretary of State.
This publication includes certain changes which became effective July 2000.
Please refer to page 94 of this booklet for a list of where changes occurred.
AN EQUAL EMPLOYMENT OPPORTUNITY
REASONABLE ACCOMMODATION AGENCY
THIS DOCUMENT IS AVAILABLE IN ALTERNATIVE FORMATS BY
CONTACTING OUR ADA COORDINATOR AT
(602) 542-1525 TDD (602) 542-1588
This publication includes certain changes that became effective August 2003. Please
refer to page 50 of this booklet for a list of where changes occurred.
INDEX TO STATUTES
ARTICLE 1. REGISTRAR OF CONTRACTORS
Section Page
32-1101 Definitions 1
32-1101.01 Local authority 3
32-1102 Classification of licenses; contracting business 3
32-1103 Registrar of contractors; term; salary 4
32-1104 Powers and duties 4
32-1105 Rule making powers for purposes of classifying
and reclassifying contractors 6
32-1106 Enforcement powers 6
32-1107 Registrar of contractors fund 6
ARTICLE 2. LICENSING
32-1121 Persons not required to be licensed; penalties 7
32-1122 Qualifications for license 9
32-1123 Unlicensed contractors; contract bidding; license
denial; exemptions; warning 12
32-1123.01 Staggered periods of licensure; biennial renewal 12
32-1124 Issuance and display of license; suspension 12
41-1065 Hearing on denial of license or permit 13
32-1125 Renewal of license; qualifying party 14
32-1125.01 Inactive license 14
32-1126 Fees 15
32-1127 Responsible managing employee and qualifying
party; definitions 16
32-1128 Asbestos educational pamphlet 16
32-1129 Definitions 16
32-1129.01 Progress payments by owner; conditions; interest 17
32-1129.02 Performance and payment by contractor,
subcontractor or material supplier;
conditions; interest 20
32-1129.03 Interruption of performance of construction
contract; damages; termination of contract 22
32-1129.04 Construction contracts; suspension of performance;
termination 22
32-1129.05 Construction contracts; void provisions 24
32-1129.06 Applicability to state and political subdivisions 24
ARTICLE 2.1 RESIDENTIAL CONTRACTORS’ RECOVERY FUND
32-1131 Definitions 24
32-1132 Residential contractors' recovery fund 25
32-1134 Powers and duties of registrar 26
I
32-1134.01 Additional payments to fund 26
32-1134.02 Insufficiency of fund 26
32-1135 Deposit of assessments 26
32-1136 Statute of limitations; recovery from fund 27
32-1137 Notice of authorized payment to injured person 28
32-1138 Subrogation 28
32-1139 Liability of fund for each residential contractor’s
license; suspension of license; repayment 28
32-1140 Disciplinary action against contractor 29
ARTICLE 3. REGULATION
32-1151 Engaging in contracting without license prohibited 29
32-1151.01 Change in ownership; notice to registrar 29
32-1152 Bonds 29
32-1152.01 Alternatives to cash deposit 34
32-1153 Proof of license as prerequisite to civil action 34
32-1154 Grounds for suspension or revocation of license;
continuing jurisdiction; civil penalty; recovery
fund award 35
32-1155 Filing of complaint; resolution of complaint; service
of notice; failure to answer 37
32-1156 Hearings 38
32-1156.01 Restitution 38
41-1064 Licenses; renewal; revocation; suspension;
annulment; withdrawal 38
32-1157 Appeals; costs; transcript 39
32-1158 Minimum elements of a contract 39
32-1158.01 Swimming pool; spa; construction contracts 40
12-1365 Notification; right to file a complaint with the
registrar of contractors 41
12-1366 Applicability; claims and actions 41
32-1159 Indemnity agreements in construction and
architect-engineer contracts void; definitions 42
32-1160 Claim for termite damages; notice and offer of
settlement; applicability; definition 42
32-1161 Rights of contractor after suspension of license 43
32-1163 Effect of chapter upon federal aid contracts 43
32-1164 Violation; classification 44
32-1165 Advertising; effect of; classification 44
32-1166 Injunctive relief; civil penalty 44
32-1166.01 Service of citation 45
32-1166.02 Time for issuance of citation 45
32-1166.06 Filing registrar’s orders 45
32-1166.07 Waiver of civil penalty 45
32-1167 Qualifying party’s disassociation with licensee;
licensee’s requalification; penalty 46
32-1168 Proof of valid license 46
II
32-1169 Local proof of valid license; violation; penalty 46
ARTICLE 4. QUALIFICATION OF SOLAR CONTRACTORS
32-1170 Definitions 47
32-1170.01 Installation, alteration or repair of solar device
without qualification as solar contractor
prohibited 47
32-1170.02 Qualification examination 47
44-1762 Solar energy device warranties; installation
standards; inspections 47
Laws 1992, Ch. 165, Sec. 14 Proof of license exemption 48
41-3004.01 Registrar of contractors; termination July 1, 2004 49
III
-1-
CH. 10, TITLE 32 §32-1101 §32-1170.03
ARIZONA REVISED STATUTES
ARTICLE 1. REGISTRAR OF CONTRACTORS
§32-1101. Definitions
A. In this chapter, unless the context otherwise requires:
1. "Advertisement" means any written or oral publication, dissemination,
solicitation or circulation which is intended to directly or indirectly induce any person
to enter into an agreement for contracting services with a contractor including
business cards and telephone directory display advertisements.
2. "Commercial contractor" is synonymous with the terms "commercial builder",
"industrial builder" and "public works builder" and means any person, firm,
partnership, corporation, association or other organization, or any combination, that,
for compensation, undertakes to or offers to undertake to, purports to have the
capacity to undertake to, submits a bid to, does himself or by or through others, or
directly or indirectly supervises others, except within residential property lines, 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.
3. "Contractor" is synonymous with the term "builder" and means any person,
firm, partnership, corporation, association or other organization, or a combination of
any of them, that, for compensation, undertakes to or offers to undertake to, purports
to have the capacity to undertake to, submits a bid or responds to a request for
qualification or a request for proposals for construction services to, does himself 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.
-2-
4. "Dual licensed contractor" is synonymous with the term "commercial and
residential builder" and means any person, firm, partnership, corporation, association
or other organization, or any combination, that undertakes to or offers association or
other organization, or any combination, that undertakes to or offers to undertake to,
purports to have the capacity to undertake to, submits a bid to, does himself or by or
through others, or directly or indirectly supervises others under a single license on
commercial or residential property to:
(a) Construct, alter, repair, add to, subtract from, improve, move, wreck or
demolish any building, excavation or other structure or improvement, including any
appurtenances, or to do any part thereof.
(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.
5. "Person" means an applicant, an individual, a member of a limited liability
company, a qualifying party, any partner of a partnership or limited liability
partnership or any officer, director, qualifying party, trustee of a trust, beneficiary of a
trust or owner of at least twenty-five per cent of the stock or beneficial interest of a
corporation.
6. "Registrar" means the registrar of contractors.
7. "Residential contractor" is synonymous with the term "residential builder" and
means any person, firm, partnership, corporation, association or other organization, or
a combination of any of them, that undertakes to or offers to undertake to, purports to
have the capacity to undertake to, submits a bid to, or does himself or by or through
others, within residential property lines:
(a) Construct, alter, repair, add to, subtract from, improve, move, wreck or
demolish any residential structure, such as houses, townhouses, condominiums or
cooperative units. Residential structures also include apartment complexes of four
units or less and any appurtenances on or within residential property lines.
(b) Connect such residential structure to utility service lines, metering devices or
sewer lines.
(c) Provide mechanical or structural service for any such residential structure.
B. "Contractor" includes subcontractors, specialty contractors, floor covering
contractors, landscape contractors, other than gardeners, and consultants representing
themselves as having the ability to supervise or manage a construction project for the
benefit of the property owner including the hiring and firing of specialty contractors,
the scheduling of work on the project and the selection and purchasing of
construction material.
C. For the purposes of this chapter "residential contractor" does not include an
owner making improvements pursuant to section 32-1121, subsection A, paragraph
5.
-3-
D. Only contractors as defined in this section are licensed and regulated by this
chapter.
§32-1101.01. Local authority
The legislature determines that the licensing of construction contractors is a
proper state function. Cities, including charter cities, towns and counties shall not
require licenses of any construction contractors licensed by statute prior to the
effective date of this section.
§32-1102. Classification of licenses; contracting business
For the purpose of license classification, the contracting business shall include:
1. General commercial building contracting, which is engaging in the
contracting business in connection with any structure built, being built or to be built
on commercial property for the support, shelter and enclosure of persons, animals,
chattels or movable property of any kind, or superintending the whole or any part
thereof, and 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 section 32-1121 without fabricating them into or
consuming them in performing the work of the general contractor.
2. General dual licensed contracting, which is engaging in the contracting
business in connection with any structure built, being built or to be built on
residential or commercial property for the support, shelter and enclosure of persons,
animals, chattels or movable property of any kind, or superintending the whole or
any part thereof, and 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 section 32-1121 without
fabricating them into or consuming them in performing the work of the general
contractor.
3. 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, earth moving projects,
paving and transmission lines.
4. General 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.
5. Specialty commercial contracting, which is engaging in the contracting
business in the performance of construction work requiring special skill and
involving the use of specialized construction trades or crafts other than residential
contracting.
-4-
6. Specialty dual licensed contracting, which is engaging in the contracting
business in the performance of construction work requiring special skill and
involving the use of specialized construction trades or crafts in residential and
commercial contracting.
7. 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.
§32-1103. Registrar of contractors; term; salary
The governor shall appoint a registrar of contractors pursuant to section 38-211
for a term coterminous with that of the governor or until his successor is appointed
and qualifies. The registrar is vested with all functions and duties relating to
administration of this chapter. He shall receive compensation as determined
pursuant to section 38-611.
§32-1104. Powers and duties
A. The registrar, in addition to other duties and rights provided for in this
chapter, shall:
1. Maintain an office in Phoenix and in such other cities and towns in the state
as the registrar deems advisable and necessary.
2. Maintain a complete indexed record of all applications and licenses issued,
renewed, terminated, cancelled, revoked or suspended under this chapter, including
timely notation of any judicial disposition on appeal, for a period of not less than
seven years.
3. Furnish a certified copy of any license issued or an affidavit that no license
exists or that a license has been cancelled or suspended including information as to
the status on appeal of such cancellation or suspension, upon receipt of the
prescribed fee, and such certified copy shall be received in all courts and elsewhere
as prima facie evidence of the facts stated therein. The registrar shall also furnish
certified copies of license bonds or cash deposit certificates upon receipt of the
prescribed fee. Fees charged pursuant to this paragraph shall be at a rate of ten
dollars per hour, except that the minimum fee charged pursuant to this paragraph
shall be ten dollars.
4. Employ such deputies, investigators and assistants and procure such
equipment and records as are necessary to enforce this chapter. With respect to the
enforcement of section 32-1164, the registrar or the registrar’s investigators are
vested with the authority to issue a citation to any violators of this chapter in
accordance with section 13-3903. When the registrar or the registrar’s investigators
conduct investigations they are authorized to receive criminal history record
information from the department of public safety and other law enforcement
agencies.
-5-
5. Make rules the registrar deems necessary to effectually carry out the
provisions and intent of this chapter. Such rules shall include the adoption of
minimum standards for good and workmanlike construction. In the adoption of such
rules of minimum standards, the registrar shall be guided by established usage and
procedure as found in the construction business in this state. If the rules of minimum
standards adopted by the registrar are in any manner inconsistent with a building or
other code of the state, a county, city or other political subdivision or local authority
of the state, compliance with such code shall constitute good and workmanlike
construction for the purposes of this chapter.
6. Apply the following to proposed rule changes:
(a) The registrar of contractors shall, at the time the registrar files notice of
proposed rule change with the secretary of state in compliance with title 41, chapter
6, mail to each trade association that qualifies in accordance with subdivision (b) of
this paragraph, and any other individual holding a bona fide contractor's license who
qualifies in accordance with subdivision (b) of this paragraph, a copy of the notice
of proposed rule change.
(b) Every trade association in this state allied with the contracting business that
files a written request that a notice be mailed to it and shows that the association has
an interest in the rules of the registrar of contractors shall receive a copy thereof, as
set forth in subdivision (a) of this paragraph. Such filing of a request shall be made
every two years during the month of January, and it shall contain information as to
the nature of the association and its mailing address. Any duly licensed contractor
who files a written request shall receive a copy of the proposed rule changes in
accordance with this paragraph. Each such request shall be made every two years
during the month of January.
7. Prepare and furnish decals and business management books when deemed
advisable by the registrar. A reasonable fee may be charged for such decals and
business management books.
B. The registrar may develop and institute programs to do both of the following:
1. Educate the public and contractors licensed pursuant to this chapter regarding
statutes, rules, policies and operations of the agency.
2. Assist in the resolution of disputes before a reportable written complaint is
filed.
C. The registrar may adopt rules for the posting of names of applicants and
personnel of applicants for contractors' licenses and furnish copies of such posting
lists upon written request. The name and address of the applicant, together with the
names and addresses and official capacity of all persons associated with the
applicant who have signed the application, shall be publicly posted in the place and
manner to be prescribed by the registrar for a period of not less than twenty days,
except as otherwise provided in this subsection, commencing on the day designated
by the registrar of contractors. The registrar may waive a part of the posting period
when the records reflect that the applicant or qualifying party has previously
-6-
undergone the twenty day posting for a previous license. A reasonable charge of not
to exceed two dollars per month may be made for compilation, printing and postage
for such posting lists.
§32-1105. Rule making powers for purposes of classifying and reclassifying
contractors
A. The registrar may adopt rules necessary to effect the classification of
contractors in a manner consistent with established usage and procedure as found in
the construction business, and may limit the field and scope of operations of a
licensed contractor within any of the branches of the contracting business, as
described in this chapter, to those divisions thereof in which the contractor is
classified and qualified to engage.
B. The registrar shall establish by rule license classifications for dual licensed
contractors. A contractor classified as a dual licensed contractor may perform
equivalent construction work on both commercial and residential projects under a
single license. The registrar shall adopt rules necessary to establish the scope of
work that may be done under the dual license classifications.
C. A licensee may apply for classification and be classified in more than one
classification or division thereof after the licensee meets the qualifications
prescribed by the registrar for such additional classification or classifications. A
single form of application shall be adopted for all licenses issued by the registrar.
D. Nothing in this chapter shall prohibit a specialty contractor from taking and
executing a contract involving the use of two or more crafts or trades if the
performance of the work in the crafts or trades other than those in which the
specialty contractor is licensed is incidental and supplemental to the performance of
work in the craft for which the specialty contractor is licensed.
§32-1106. Enforcement powers
In any investigation, proceeding or hearing he is empowered to institute, conduct
or hold under this chapter, the registrar, a deputy registrar, an assistant, an
administrative law judge or an investigator may administer oaths, certify to official
acts, issue subpoenas for attendance of witnesses and production of books, papers
and records, and exercise the same powers in this regard as conferred upon the
corporation commissioners and public officers by the provisions of section 40-244
and section 12-2212. All the provisions of such sections are incorporated into this
section with the same force and effect as if herein set forth at length, and wherever
in such sections the term "commission" or "commissioners" or similar designation
occurs, it shall, for the purpose of this reference mean the "registrar of contractors."
§32-1107. Registrar of contractors fund
A. The registrar of contractors fund is established. The registrar of contractors
shall administer the fund. The registrar shall deposit, pursuant to sections 35-146
-7-
and 35-147, all monies collected under this chapter, except monies collected for the
residential contractors' recovery fund and the contractors' cash bond fund and
monies received from civil penalties, as follows:
1. For fiscal year 1994-1995, seventy per cent in the registrar of contractors fund
and thirty per cent in the state general fund.
2. For fiscal year 1995-1996, eighty per cent in the registrar of contractors fund
and twenty per cent in the state general fund.
3. For all fiscal years that begin after June 30, 1996, ninety per cent in the
registrar of contractors fund and ten per cent in the state general fund.
B. The registrar shall use monies in the registrar of contractors fund for carrying
out the powers and duties of the registrar and for the purposes of this chapter.
Monies deposited in the registrar of contractors fund are subject to section 35-
143.01.
ARTICLE 2. LICENSING
§32-1121. Persons not required to be licensed; penalties
A. This chapter shall not be construed to apply to:
1. An authorized representative of the United States government, this state or
any county, incorporated city or town, reclamation district, irrigation district or
other municipality or political subdivision of this state.
2. Trustees of an express trust that is not formed for the purpose of conducting
business as a contractor or officers of a court, if they are acting within the terms of
their trust or office.
3. Public utilities operating under regulation of the corporation commission or
construction, repair or operation incidental to discovering or producing petroleum or
gas, or the drilling, testing, abandoning or other operation of a petroleum or gas
well, if performed by an owner or lessee.
4. Any materialman, manufacturer or retailer furnishing finished products,
materials or articles of merchandise who does not install or attach such items or
installs or attaches such items if the total value of the sales contract or transaction
involving such items and the cost of the installation or attachment of such items to a
structure does not exceed seven hundred fifty dollars including labor, materials and
all other items. The materialman, manufacturer or retailer shall inform the purchaser
that the installation may also be performed by a licensed contractor whose name and
address the purchaser may request.
5. Owners of property who improve such property or who build or improve
structures or appurtenances on such property and who do the work themselves, with
their own employees or with duly licensed contractors, if the structure, group of
structures or appurtenances, including the improvements thereto, are intended for
occupancy solely by the owner and are not intended for occupancy by members of
the public as the owner's employees or business visitors and the structures or
-8-
appurtenances are not intended for sale or for rent. In all actions brought under this
chapter, proof of the sale or rent or the offering for sale or rent of any such structure
by the owner-builder within one year after completion or issuance of a certificate of
occupancy is prima facie evidence that such project was undertaken for the purpose
of sale or rent. As used in this paragraph "sale" or "rent" includes any arrangement
by which the owner receives compensation in money, provisions, chattels or labor
from the occupancy or the transfer of the property or the structures on the property.
6. Owners of property who are acting as developers and who build structures or
appurtenances to structures on their property for the purpose of sale or rent and who
contract for such a project with a general contractor licensed pursuant to this chapter
and owners of property who are acting as developers, who improve structures or
appurtenances to structures on their property for the purpose of sale or rent and who
contract for such a project with a general contractor or specialty contractors licensed
pursuant to this chapter. To qualify for the exemption under this paragraph, the
licensed contractors' names and license numbers shall be included in all sales
documents.
7. Architects or engineers engaging in their professional practice as defined in
chapter 1 of this title, provided they do not engage in the activity of a contractor as
defined in sections 32-1101 and 32-1102.
8. A person licensed, certified or registered pursuant to chapter 22 of this title or
a person working under the direct supervision of a person certified or qualified
pursuant to chapter 22 of this title to the extent he is engaged in structural pest
control.
9. The sale or installation of finished products, materials or articles of
merchandise which are not fabricated into and do not become a permanent fixed part
of the structure. This exemption does not apply if a local building permit is required,
if the total price of the finished product, material or article of merchandise including
labor is more than seven hundred fifty dollars or if the removal of the finished
product, material or article of merchandise causes damage to the structure or renders
the structure unfit for its intended use.
10. Employees of the owners of condominiums, townhouses, cooperative units
or apartment complexes of four units or less or the owners' management agent or
employees of the management agent repairing or maintaining structures owned by
them.
11. Any person who engages in the activities regulated by this chapter, as an
employee of an exempt property owner or as an employee with wages as his sole
compensation.
12. A surety company or companies which are authorized to transact business in
this state and which undertake to complete a contract on which they issued a
performance or completion bond, provided all construction work is performed by
duly licensed contractors.
-9-
13. Insurance companies which are authorized to transact business in this state
and which undertake to perform repairs resulting from casualty losses pursuant to
the provisions of a policy, provided all construction work is performed by duly
licensed contractors.
14. Any person other than a licensed contractor engaging in any work or
operation on one undertaking or project by one or more contracts, for which the
aggregate contract price, including labor, materials and all other items, is less than
seven hundred fifty dollars. The work or operations which are exempt under this
paragraph shall be of a casual or minor nature. This exemption does not apply:
(a) In any case in which the performance of the work requires a local building
permit.
(b) In any case in which the work or construction is only a part of a larger or
major operation, whether undertaken by the same or a different contractor, or in
which a division of the operation is made in contracts of amounts less than seven
hundred fifty dollars for the purpose of evasion of this chapter or otherwise.
(c) To a person who utilizes any form of advertising to the public in which his
unlicensed status is not disclosed by including the words "not a licensed contractor"
in the advertisement.
15. A person who is licensed, certified or registered pursuant to title 41, chapter
16 and who is not otherwise required to be licensed under this chapter or an
employee of such person.
16. A person who functions as a gardener by performing lawn, garden, shrub and
tree maintenance.
B. A person who is licensed to perform work in a particular trade pursuant to the
provisions of this chapter shall not be required to obtain and maintain a separate
license for mechanical or structural service work performed within the scope of such
trade by such person.
C. Any person who does not have an exemption from licensure pursuant to
subsection A, paragraph 14, subdivision (c) of this section is subject to prosecution
for a violation of section 44-1522. The attorney general may investigate the act or
practice and take appropriate action pursuant to title 44, chapter 10, article 7.
§32-1122. Qualifications for license
A. A contractor's license shall be issued only by act of the registrar of
contractors. The registrar shall:
1. Classify and qualify applicants for a license.
2. If necessary, change the license classification of a licensee in the case of a
title reclassification, with or without a bond rider for the purpose of continuing
liability on the bond.
3. Conduct investigations the registrar deems necessary.
4. Establish written examinations if deemed necessary to protect the health and
safety of the public.
-10-
B. To obtain or renew a license under this chapter, the applicant shall:
1. Submit to the registrar of contractors a verified application on forms that are
prescribed by the registrar of contractors and that contain the following information
and shall advise the registrar of any change in the information within thirty days:
(a) A designation of the classification of license that is sought by the applicant.
(b) If the applicant is an individual, the applicant's name and address.
(c) If the applicant is a partnership, the names and addresses of all partners with
a designation of any limited partners.
(d) If the applicant is a corporation, an association or any other organization, the
names and addresses of the president, vice-president, if any, secretary and treasurer
or the names and addresses of the functional equivalent of these officers, the
directors and the owners of twenty-five per cent or more of the stock or beneficial
interest.
(e) The name and address of the qualifying party.
(f) If the applicant is a corporation, evidence that the corporation is in good
standing with the corporation commission.
(g) The address or location of the applicant's place of business and the mailing
address if it is different from the applicant's place of business.
(h) The applicant's current privilege license number issued pursuant to section
42-5005.
(i) Proof that the applicant has complied with the statutes or rules governing
workers' compensation insurance.
2. Submit the appropriate bond and fee required under this chapter.
C. To obtain a contractor's license under this chapter other than a residential
contractor's license, the applicant shall submit a detailed statement of current
financial condition containing information required by the registrar of contractors on
a form furnished by or acceptable to the registrar of contractors. Notwithstanding
any other law, a swimming pool contractor shall also submit a detailed statement of
current financial condition as required by this subsection.
D. To obtain or renew a license under this chapter, each person shall be of good
character and reputation. Lack of good character and reputation may be established
by showing that a person has engaged in contracting without a license or committed
any act that, if committed or done by any licensed contractor, would be grounds for
suspension or revocation of a contractor's license or by showing that the person was
named on a contractor's license that was suspended or revoked in another state.
E. To obtain a license under this chapter, a person shall not have had a license
refused or revoked, within one year before the person's application, or shall not have
engaged in the contracting business, nor shall the person have submitted a bid
without first having been licensed within one year before the person's application,
nor shall a person act as a contractor between the filing of the application and actual
issuance of the license. The registrar may find any of those actions or circumstances
to be excusable if there was reasonable doubt as to the need for licensure or the
-11-
actions of the applicant did not result in an unremedied hardship or danger or loss to
the public. A person who has been convicted of contracting without a license is not
eligible to obtain a license under this chapter for one year after the date of the last
conviction.
F. Before a license is issued, the qualifying party shall:
1. Have had a minimum of four years' practical or management trade experience,
at least two of which must have been within the last ten years, dealing specifically
with the type of construction, or its equivalent, for which the applicant is applying
for a license. Technical training in an accredited college or university or in a
manufacturer's accredited training program may be substituted for a portion of such
experience, but in no case may credited technical training exceed two years of the
required four years' experience. The registrar of contractors may reduce the four
years' practical or management experience requirement if in the registrar's opinion it
has been conclusively shown by custom and usage in the particular industry or craft
involved that the four year requirement is excessive. The registrar may waive the
work experience documentation and verification or the examination requirement if
the records reflect that the qualifying party is currently or has previously been a
qualifying party for a licensee in this state in the same classification within the
preceding five years.
2. Successfully show, by written examination, if required, qualification in the
kind of work for which the applicant proposes to contract, the applicant's general
knowledge of the building, safety, health and lien laws of the state, administrative
principles of the contracting business and the rules adopted by the registrar of
contractors pursuant to this chapter, demonstrate knowledge and understanding of
construction plans and specifications applicable to the particular industry or craft
and of the standards of construction work and techniques and practices in the
particular industry or craft and demonstrate a general understanding of other related
construction trades, in addition to any other matters as may be deemed appropriate
by the registrar to determine that the qualifying party meets the requirements of this
chapter. The registrar shall maintain multiple versions of examinations for each type
of license that requires an examination.
G. No license shall be issued to a minor, to any partnership in which one of the
partners is a minor, or to any corporation in which a corporate officer is a minor.
H. Before receiving, renewing and holding a license pursuant to this chapter, the
registrar may require a license applicant or licensee to submit to the registrar a full
set of fingerprints and the fees required in section 41-1750. The registrar shall
submit the fingerprints and fees to the department of public safety for the purpose of
obtaining a state and federal criminal records check pursuant to section 41-1750 and
public law 92-544. The department of public safety may exchange this fingerprint
data with the federal bureau of investigation.
-12-
§32-1123. Unlicensed contractors; contract bidding; license denial; exemptions;
warning
A. Except as provided in subsection D of this section, if an entity that is not
licensed pursuant to this chapter bids on a contract for a project with an aggregate
worth of more than seven hundred fifty dollars, the registrar shall not issue the entity
a license pursuant to this chapter for one year after the date of the bid.
B. This section does not apply to an entity that bids on a contract for either of
the following:
1. A department of transportation project.
2. A project that is subject to the federal acquisition regulation, Title 48 code of
federal regulations, including the department of defense federal acquisition
regulation.
C. This section does not affect the licensing exemptions prescribed in section
32-1121.
D. If an entity bids on a contract for a project pursuant to subsection A of this
section and the project has an aggregate worth of more than seven hundred fifty
dollars and less than twenty thousand dollars, the registrar shall issue the entity a
written warning relating to the unlicensed activity if the registrar has not previously
issued the entity a warning.
§32-1123.01. Staggered periods of licensure; biennial renewal
The registrar shall maintain a system of staggered licensure to distribute the
work of licensure throughout the twelve months of the year. From and after January
1, 1993, the registrar shall implement a system for biennial license renewal and
provide for proration of license renewal fees for that purpose. The registrar may
grant an exception to the biennial licensing or biennial renewal requirements of this
section and may allow an annual renewal for up to two years based on a written
petition by a contractor claiming that the biennial requirements would cause a real
and immediate hardship. The registrar shall notify the contractor in writing of the
decision and shall specify the terms of the exception if granted.
§32-1124. Issuance and display of license; suspension
A. Upon receipt by the registrar of the fee required by this chapter and an
application furnishing complete information as required by the registrar, the registrar
shall notify the applicant within sixty days from the date of the filing of a complete
application of the action taken on the application, and if the registrar determines that
the applicant is qualified to hold a license in accordance with the provisions of this
chapter, the registrar shall issue a license to the applicant permitting the applicant to
engage in business as a contractor under the terms of this chapter.
B. Licenses issued under this chapter and any renewals shall be signed by the
registrar or the registrar's designated representative and by the licensee. The license
shall be nontransferable, and satisfactory evidence of possession shall be exhibited
-13-
by the licensee upon demand. The license number appearing on any licenses held by
the licensee shall be preceded by the acronym "ROC" and shall be posted in a
conspicuous place on premises where any work is being performed, shall be placed
on all written bids submitted by the licensee and shall be placed on all advertising,
letterheads and other documents used by the licensee in the conduct of business
regulated by this chapter. A violation of the provisions of this subsection relating to
posting and placement of license numbers shall be, at the discretion of the registrar,
grounds for disciplinary action pursuant to section 32-1154, subsection A,
paragraph 13, but not grounds for preventing the award of a contract, voiding an
awarded contract, or any other claim or defense against the licensee.
C. If an application for a license is denied for any reason provided in this
chapter, the application fee paid by the applicant shall be forfeited and deposited
pursuant to section 32-1107. A reapplication for a license shall be accompanied by
the fee fixed by this chapter.
D. On issuance or renewal of a license, the registrar, at the request of a licensee,
shall issue a single license certificate showing all contracting licenses held by the
licensee which are currently in good standing and their dates of expiration.
E. The registrar may establish procedures to allow a licensee to establish a
common expiration or renewal date for all licenses issued to the licensee and may
provide for proration of license fees for that purpose.
F. The registrar shall suspend by operation of law a license issued under this
chapter if any of the following occurs:
1. The licensed entity is dissolved. The dissolution of the licensed entity
includes the death of a sole owner, a change to the partnership by either adding or
removing a partner, the revocation or dissolution of corporate authority or the
dissolution of a limited liability company or limited liability partnership.
2. The licensed entity does not have authority to do business in this state.
3. The license is obtained or renewed with an insufficient funds check. The
license remains suspended until the registrar receives a certified check, a money
order or cash as payment for the license fees and assessments.
§41-1065. Hearing on denial of license or permit
Proceedings for licenses or permits on application when not required by law to
be preceded by notice and opportunity for hearing shall be governed by the
provisions of the law relating to the particular agency, provided that when an
application for a license or permit is denied under the provisions of the law relating
to a particular agency the applicant shall be entitled to have a hearing before such
agency on such denial upon filing within fifteen days after receipt of notice of such
refusal a written application for such hearing. Notice shall be given in the manner
prescribed by section 41-1061. At such hearing such applicant shall be the moving
party and have the burden of proof. Such hearing shall be conducted in accordance
with this article for hearing of a contested case before an agency. Such hearing
-14-
before such agency shall be limited to those matters originally presented to the
agency for its determination on such application.
§32-1125. Renewal of license; qualifying party
A. A license issued under this chapter shall be suspended on the day following
its renewal date by operation of law. An application for renewal of any current
contracting license addressed to the registrar, with a valid bond or cash deposit on
file with the registrar, accompanied by the required fee and received by the registrar
or deposited in the United States mail postage prepaid on or before the renewal date
shall authorize the licensee to operate as a contractor until actual issuance of the
renewal license. The registrar may refuse to renew a license if a licensee or person
has committed or been found guilty of any act listed in section 32-1154.
B. A license which has been suspended by operation of law for failure to renew
may be reactivated and renewed within one year of its suspension by filing the
required application and payment of the application fee in the amount provided for
renewal in this chapter in addition to a fifty dollar fee. When a license has been
suspended for one or more years for failure to renew, a new application for a license
must be made and a new license issued in accordance with this chapter.
C. A licensee may make written application to the registrar for exemption from a
qualifying party. The applicant shall show to the satisfaction of the registrar that
during the past five years:
1. The license has been in effect.
2. A transfer of ownership of fifty per cent or more of the stock, if applicable, or
beneficial interest, in the licensee has not occurred.
3. No more than five valid complaints which have not been resolved by the
licensee, as determined by the registrar, have been filed against the licensee.
The application shall be approved or denied within thirty days after its receipt. If
the application is not approved, the licensee may within thirty days request a hearing
to be held pursuant to section 32-1156. If the application is approved, the exemption
takes effect immediately.
D. A licensee which is exempt from the requirement for a qualifying party
pursuant to subsection C of this section may be required by the registrar after a
hearing to obtain a qualifying party within sixty days on a finding that:
1. A transfer of ownership of fifty per cent or more of the stock, if applicable, or
beneficial interest, in the licensee has occurred.
2. A violation of section 32-1154 has occurred.
§32-1125.01. Inactive license
A. A contractor may request the registrar, on forms prescribed by the registrar, to
inactivate his current license for a period not to exceed five years at one time by
giving written notice to the registrar. The registrar may, in the absence of any
disciplinary proceeding or disciplinary suspension and upon payment of reasonable
-15-
fees determined by the registrar, issue to the contractor an inactive license
certificate. The inactive license certificate may consist of an endorsement upon the
contractor's license stating that the license is inactive. The registrar may not refund
any of the license renewal fee which a contractor paid prior to requesting inactive
status.
B. A contractor's license which is not suspended or revoked and is inactive may
be reactivated as an active license upon payment of the current renewal fee and
thirty days' written notice to the registrar. No examination may be required to
reactivate an inactive license. If the license is not reactivated within five years, a
new application for licensing must be made unless the contractor requests, on forms
prescribed by the registrar, to inactivate the license for an additional period not to
exceed five years. No contractor may inactivate the license more than twice.
C. The holder of an inactive license shall not practice as a contractor until his
license is reactivated as an active license.
D. The inactive status of a contractor's license shall not bar any disciplinary
action by the registrar against a licensed contractor for any of the grounds stated in
this chapter.
§32-1126. Fees
A. The license fees prescribed by this chapter shall be as follows:
1. Application fees for an original biennial license:
(a) For general residential contracting and subclassifications of general
residential contracting, not more than five hundred dollars.
(b) For general commercial contracting and subclassifications of general
commercial contracting, not more than one thousand five hundred dollars.
(c) For general dual licensed contracting, not more than two thousand dollars.
(d) For specialty residential contracting, not more than three hundred fifty
dollars.
(e) For specialty commercial contracting, not more than one thousand dollars.
(f) For specialty dual licensed contracting, not more than one thousand three
hundred fifty dollars.
2. Biennial renewal fee:
(a) For general residential contracting and subclassifications of general
residential contracting, not more than three hundred twenty dollars.
(b) For general commercial contracting and subclassifications of general
commercial contracting, not more than one thousand dollars.
(c) For general dual licensed contracting, not more than one thousand three
hundred twenty dollars.
(d) For specialty residential contracting, not more than two hundred seventy
dollars.
(e) For specialty commercial contracting, not more than nine hundred dollars.
-16-
(f) For specialty dual licensed contracting, not more than one thousand one
hundred seventy dollars.
B. The registrar may establish reasonable fees for services performed by the
registrar relating to reexaminations, processing of applications for change of
qualifying party and approval of name changes on licenses.
C. The penalty for failure to apply for renewal of a license within the time
prescribed by this chapter shall be fifty dollars.
D. The registrar may establish a separate fee for examination.
E. The registrar may contract with private testing services to establish and
administer such examinations and may authorize the payment of the examination fee
to the private testing service.
§32-1127. Responsible managing employee and qualifying party; definitions
The terms "responsible managing employee" and "qualifying party" shall, for the
purpose of administering this chapter, be synonymous, and shall mean an employee
who is regularly employed by the licensee and is actively engaged in the
classification of work for which such responsible managing employee qualifies in
behalf of the licensee. While engaged as a qualifying party for a licensee, the
qualifying party shall not take other employment that would conflict with his duties
as qualifying party or conflict with his ability to adequately supervise the work
performed by the licensee. Such person may act in the capacity of the qualifying
party for one additional licensee if one of the following conditions exists:
1. There is a common ownership of at least twenty-five per cent of each licensed
entity for which the person acts in a qualifying capacity. 2. One licensee is a
subsidiary of another licensee for which the same person acts in a qualifying
capacity. "Subsidiary" as used in this section means a corporation of which at least
twenty-five per cent is owned by the other licensee.
§32-1128. Asbestos educational pamphlet
A. The director of occupational safety and health within the industrial
commission with the assistance of the registrar of contractors and the director of the
department of environmental quality shall prepare an educational pamphlet relating
to asbestos to help contractors identify asbestos in the workplace and to inform them
of state and federal asbestos rules and of the health hazards associated with asbestos
contact.
B. The registrar shall distribute asbestos educational pamphlets with each
contractor's license or license renewal.
§32-1129. Definitions
In sections 32-1129.01, 32-1129.02, 32-1129.03, 32-1129.04 and 32-1129.05,
unless the context otherwise requires:
-17-
1. "Construction contract" means a written or oral agreement relating to the
construction, alteration, repair, maintenance, moving or demolition of any building,
structure or improvement or relating to the excavation of or other development or
improvement to land.
2. "Contractor" means any person, firm, partnership, corporation, association or
other organization, or a combination of any of them, that has a direct contract with
an owner to perform work under a construction contract.
3. "Owner" means any person, firm, partnership, corporation, association or
other organization, or a combination of any of them, that causes a building, structure
or improvement to be constructed, altered, repaired, maintained, moved or
demolished or that causes land to be excavated or otherwise developed or improved,
whether the interest or estate of the person is in fee, as vendee under a contract to
purchase, as lessee or another interest or estate less than fee.
4. "Subcontractor" means any person, firm, partnership, corporation, association
or other organization, or a combination of any of them, that has a direct contract
with a contractor or another subcontractor to perform a portion of the work under a
construction contract.
§32-1129.01. Progress payments by owner; conditions; interest
A. By mutual agreement with a contractor, an owner may make progress
payments on construction contracts of less than sixty days. An owner shall make
progress payments to a contractor on all other construction contracts. Progress
payments shall be made on the basis of a duly certified and approved billing or
estimate of the work performed and the materials supplied during the preceding
thirty day billing cycle, or such other billing cycle as stated in the construction
contract. If billings or estimates are to be submitted in other than thirty day billing
cycles, the construction contract and each page of the plans, including bid plans and
construction plans, shall specifically identify such other billing cycle in a clear and
conspicuous manner as prescribed in subsection B. Except as provided in subsection
C, the owner shall make progress payments to the contractor within seven days after
the date the billing or estimate is certified and approved pursuant to subsection D.
B. A construction contract may provide for a billing cycle other than a thirty day
billing cycle if the construction contract specifically sets forth such other billing
cycle and either of the following applies:
1. The following legend or substantially similar language setting forth the other
billing cycle appears in clear and conspicuous type on each page of the plans,
including bid plans and construction plans:
Notice of Alternate Billing Cycle
-18-
This contract allows the owner to require the submission of billings or estimates
in billing cycles other than thirty days. Billings or estimates for this contract shall be
submitted as follows:
2. The following legend or substantially similar language setting forth the other
billing cycle appears in clear and conspicuous type on each page of the plans,
including bid plans and construction plans:
Notice of Alternate Billing Cycle
This contract allows the owner to require the submission of billings or estimates
in billing cycles other than thirty days. A written description of such other billing
cycle applicable to the project is available from the owner or the owner's designated
agent at (telephone number or address, or both), and the owner or its designated
agent shall provide this written description on request.
C. An owner may make progress payments later than seven days after the date
the billing or estimate is certified and approved if both:
1. The construction contract in a clear and conspicuous manner specifically
provides for a later payment defined by a specified number of days after certification
and approval.
2. The following legend or substantially similar language setting forth the
specified number of days appears in clear and conspicuous type on each page of the
plans, including bid plans and construction plans:
Notice of Extended Payment Provision
This contract allows the owner to make payment within ___ days after
certification and approval of billings and estimates.
D. A billing or estimate shall be deemed approved and certified fourteen days
after the owner receives the billing or estimate, unless before that time the owner or
the owner's agent prepares and issues a written statement detailing those items in the
billing or estimate that are not approved and certified. An owner may decline to
approve and certify a billing or estimate or portion of a billing or estimate for
unsatisfactory job progress, defective construction work or materials not remedied,
disputed work or materials, failure to comply with other material provisions of the
construction contract, third party claims filed or reasonable evidence that a claim
will be filed, failure of the contractor or a subcontractor to make timely payments for
labor, equipment and materials, damage to the owner, reasonable evidence that the
construction contract cannot be completed for the unpaid balance of the construction
contract sum or a reasonable amount for retention. The owner is deemed to have
received the billing or estimate when the billing or estimate is submitted to any
-19-
person designated by the owner for the receipt of these submissions or for review or
approval of the billing or estimate.
E. An owner may withhold from a progress payment only an amount that is
sufficient to pay the direct expenses the owner reasonably expects to incur to correct
any items set forth in writing pursuant to subsection D.
F. An owner may extend the period within which the billing or estimate is
certified and approved if both:
1. The construction contract in a clear and conspicuous manner specifically
provides for an extended time period within which a billing or estimate shall be
certified and approved defined by a specified number of days after the owner has
received the billing or estimate.
2. The following legend or substantially similar language, setting forth the
specified number of days, appears in clear and conspicuous type on each page of the
plans, including bid plans and construction plans:
Notice of Extended Certification and
Approval Period Provision
This contract allows the owner to certify and approve billings and estimates
within ____ days after the billings and estimates are received from the contractor.
G. After the effective date of a construction contract, an owner and contractor
may change the number of specified days after certification and approval for the
owner to make payment to the contractor or within which a billing or estimate must
be certified and approved. Any contractor or subcontractor that does not provide
written consent to the change will continue to be paid as previously agreed.
H. When a contractor completes and an owner approves and certifies all work
under a construction contract, the owner shall make payment in full on the
construction contract within seven days. When a contractor completes and an owner
approves and certifies all work under a portion of a construction contract for which
the contract states a separate price, the owner shall make payment in full on that
portion of the construction contract within seven days. On projects that require a
federal agency's final approval or certification, the owner shall make payment in full
on the construction contract within seven days of the federal agency's final approval
or certification.
I. Payment shall not be required pursuant to this section unless the contractor
provides the owner with a billing or estimate for the work performed or the material
supplied in accordance with the terms of the construction contract between the
parties.
J. A construction contract shall not alter the rights of any contractor,
subcontractor or material supplier to receive prompt and timely progress payments
as provided under this article.
K. If an owner or a third party designated by an owner as the person responsible
for making progress payments on a construction contract does not make a timely
payment pursuant to this section, the owner shall pay the contractor interest at the
-20-
rate of one and one-half per cent a month or fraction of a month on the unpaid
balance, or at a higher rate as the parties to the construction contract agree.
L. On the written request of a subcontractor, the owner shall notify the
subcontractor within five days after the issuance of a progress payment to the
contractor. On the written request of a subcontractor, the owner shall notify the
subcontractor within five days after the owner makes the final payment to the
contractor on the construction contract.
M. In any action or arbitration brought to collect payments or interest pursuant
to this section, the successful party shall be awarded costs and attorney fees in a
reasonable amount.
N. If the owner and contractor are a single entity, that entity shall pay its
subcontractors or material suppliers within fourteen days after the billing or estimate
is certified and approved unless the deadlines for approval and certification or for
payment have been modified pursuant to subsection C or F.
§32-1129.02. Performance and payment by contractor, subcontractor or
material supplier; conditions; interest
A. Notwithstanding the other provisions of this section, performance by a
contractor, subcontractor or material supplier in accordance with the provisions of a
construction contract entitles the contractor, subcontractor or material supplier to
payment from the party with whom the contractor, subcontractor or material supplier
contracts.
B. If a subcontractor or material supplier has performed in accordance with the
provisions of a construction contract, the contractor shall pay to its subcontractors or
material suppliers and each subcontractor shall pay to its subcontractors or material
suppliers, within seven days of receipt by the contractor or subcontractor of each
progress payment or final payment, the full amount received for such subcontractor's
work and materials supplied based on work completed or materials supplied under
the subcontract. Payment shall not be required pursuant to this subsection unless the
subcontractor or material supplier provides to the contractor or subcontractor a
billing or invoice for the work performed or material supplied in compliance with
the terms of the contract between the parties. Each subcontractor or material
supplier shall provide a waiver of any mechanic's or materialman's lien conditioned
upon payment for the work completed or material supplied. The contractor or
subcontractor may require that such conditional waivers of lien be notarized. Any
diversion by the contractor or subcontractor of payments received for work
performed pursuant to a contract, or failure to reasonably account for the application
or use of such payments, constitutes grounds for disciplinary action by the registrar
of contractors. Violations of this section shall be grounds for suspension or
revocation of a license or other disciplinary action by the registrar pursuant to
section 32-1154, subsections B, C and D. The subcontractor or material supplier
may notify the registrar of contractors and the owner in writing of any payment less
-21-
than the amount or percentage approved for the class or item of work as set forth in
this section.
C. Nothing in this section prevents the contractor or subcontractor, at the time of
application or certification to the owner or contractor, from withholding such
application or certification to the owner or contractor for payment to the
subcontractor or material supplier for unsatisfactory job progress, defective
construction work or material not remedied, disputed work, failure to comply with
other material provisions of the construction contract, third party claims filed or
reasonable evidence that a claim will be filed, failure of the subcontractor to make
timely payments for labor, equipment and materials, damage to a contractor or
another subcontractor or material supplier, reasonable evidence that the subcontract
cannot be completed for the unpaid balance of the subcontract sum or a reasonable
amount for retention that does not exceed the actual percentage retained by the
owner.
D. If a periodic or final payment to a subcontractor or material supplier is
delayed by more than seven days after receipt of periodic or final payment by the
contractor or subcontractor, the contractor or subcontractor shall pay its
subcontractor or material supplier interest, except for periods of time during which
payment is withheld pursuant to subsection C of this section, beginning on the
eighth day, at the rate of one and one-half per cent per month or a fraction of a
month on the unpaid balance or at such higher rate as the parties agree.
E. Any licensed contractor, licensed subcontractor or material supplier who files
a complaint with the registrar of contractors under this section shall be required to
post a surety bond or cash deposit of five hundred dollars or one-half of the amount
due, whichever is less, with the registrar to secure the payment of claims under this
section. If the complaint is determined by the registrar to be without merit and
frivolous, the registrar shall order the person who filed the complaint to pay one-half
of the amount of the required surety bond or cash deposit to the respondent and one-half
to the registrar for deposit into the state general fund. If no claim may be made
under this section against the surety bond or cash deposit, the surety bond or cash
deposit shall be returned to the complainant. The surety bond or cash deposit shall
be in the name of the licensee or material supplier who files the complaint and shall
be subject to claims by the registrar of contractors and the respondent licensee as
provided in this section. The surety bond or cash deposit shall be conditioned upon
and provide for payment upon the presentation of a certified copy of the order of the
registrar and a certification by the complainant of nonpayment within thirty days
after the order becomes final. The surety bond shall be executed by the complainant
as principal with a corporation duly authorized to transact surety business in this
state. Evidence of the surety bond shall be submitted to the registrar in a form
acceptable to the registrar. The cash deposit shall be deposited, pursuant to sections
35-146 and 35-147, by the registrar in the contractors prompt pay complaint fund
and shall be held for the payment of claims.
-22-
F. In any action or arbitration brought to collect payments or interest pursuant to
this section, the successful party shall be awarded costs and attorney fees in a
reasonable amount.
§32-1129.03. Interruption of performance of construction contract; damages;
termination of contract
A. A contractor licensed under this chapter may interrupt the performance of a
construction contract without penalty or liability for breach of contract if any
applicable law or rule requires the cessation of work or the contractor encounters
any hazardous substance or hazardous material which is required to be removed or
contained by any applicable law or rule and either of the following apply:
1. Any applicable law or rule prohibits the contractor from proceeding to remove
or contain the hazardous material or hazardous substance unless the contractor is
duly licensed and the contractor is not so licensed.
2. The removal or containment of the hazardous material or hazardous substance
cannot be accomplished without a cessation of work.
B. A contractor licensed under this chapter whose work is impaired, impeded or
prohibited under subsection A may interrupt performance of the construction
contract as provided in this section only to the extent of the area affected by the
hazardous materials or hazardous substances removed or contained by the owner or
as otherwise required by applicable statute or rule.
C. A person who interrupts the performance of a construction contract under
subsection A is entitled to reasonable and foreseeable damages caused by the delay
unless the existence of the specific hazardous substance or hazardous material is
disclosed in writing prior to entering into the contract. The right to damages is
conditioned upon notification within a reasonable period of time to the owner of the
discovery by the person of the existence of the hazardous material or hazardous
substance. This section shall not affect any legal rights and remedies otherwise
existing between the parties, including but not limited to rights to damages, setoff
and counterclaim.
D. The owner may terminate the construction contract on payment to the
contractor, subcontractor or other person whose work is delayed under subsection A
of the amount of any services or materials supplied or expended which conform to
the contract terms and specifications and the payment of damages subject to the
provisions of subsection C to the date of the termination of the contract.
§32-1129.04. Construction contracts; suspension of performance; termination
A. A contractor may suspend performance under a construction contract or
terminate a construction contract for failure by the owner to make timely payment of
the amount certified and approved pursuant to section 32-1129.01. A contractor
shall provide written notice to the owner at least seven calendar days before the
contractor's intended suspension or termination unless a shorter notice period is
-23-
prescribed in the construction contract between the owner and contractor. A
contractor shall not be deemed in breach of the construction contract for suspending
performance or terminating a construction contract pursuant to this subsection. A
construction contract shall not extend the time period for a contractor to suspend
performance or terminate a construction contract under this subsection.
B. A subcontractor may suspend performance under a construction contract or
terminate a construction contract if the owner fails to make timely payment of
amounts certified and approved pursuant to section 32-1129.01 for the
subcontractor's work and the contractor fails to pay the subcontractor for the
certified and approved work. A subcontractor shall provide written notice to the
contractor and owner at least three calendar days before the subcontractor's intended
suspension or termination unless a shorter notice period is prescribed in the
construction contract between the contractor and subcontractor. A subcontractor
shall not be deemed in breach of a construction contract for suspending performance
or terminating a construction contract pursuant to this subsection. A construction
contract shall not extend the time period for a subcontractor to suspend performance
or terminate a construction contract under this subsection.
C. A subcontractor may suspend performance under a construction contract or
terminate a construction contract if the owner makes timely payment of amounts
certified and approved pursuant to section 32-1129.01 for the subcontractor's work
but the contractor fails to pay the subcontractor for the certified and approved work.
A subcontractor shall provide written notice to the contractor and owner at least
seven calendar days before the subcontractor's intended suspension or termination
unless a shorter notice period is prescribed in the construction contract between the
contractor and subcontractor. A subcontractor shall not be deemed in breach of a
construction contract for suspending performance or terminating a construction
contract pursuant to this subsection. A construction contract shall not extend the
time period for a subcontractor to suspend performance or terminate a construction
contract under this subsection.
D. A subcontractor may suspend performance under a construction contract or
terminate a construction contract if the owner declines to approve and certify
portions of the contractor's billing or estimate pursuant to section 32-1129.01 for
that subcontractor's work but the reasons for that failure by the owner to approve
and certify are not the fault of or directly related to the subcontractor's work. A
subcontractor shall provide written notice to the contractor and the owner at least
seven calendar days before the subcontractor's intended suspension or termination
unless a shorter notice period is prescribed in the construction contract between the
contractor and subcontractor. A subcontractor shall not be deemed in breach of a
construction contract for suspending performance or terminating a construction
contract pursuant to this subsection. A construction contract shall not extend the
time period for a subcontractor to suspend performance or terminate a construction
contract under this subsection.
-24-
E. A contractor or subcontractor that suspends performance as provided in this
section is not required to furnish further labor, materials or services until the
contractor or subcontractor is paid the amount that was certified and approved,
together with any costs incurred for mobilization resulting from the shutdown or
start-up of a project.
F. In any action or arbitration brought pursuant to this section, the successful
party shall be awarded costs and attorney fees in a reasonable amount.
G. Written notice required under this section shall be deemed to have been
provided if either of the following occurs:
1. The written notice is delivered in person to the individual or a member of the
entity or to an officer of the corporation for which it was intended.
2. The written notice is delivered at or sent by any means that provides written,
third party verification of delivery to the last business address known to the party
giving notice.
§32-1129.05. Construction contracts; void provisions
The following are against this state's public policy and are void and
unenforceable:
1. A provision, covenant, clause or understanding in, collateral to or affecting a
construction contract that makes the contract subject to the laws of another state or
that requires any litigation, arbitration or other dispute resolution proceeding arising
from the contract to be conducted in another state.
2. A provision, covenant, clause or understanding in, collateral to or affecting a
construction contract stating that a party to the contract cannot suspend performance
under the contract or terminate the contract if another party to the contract fails to
make prompt payments under the contract pursuant to section 32-1129, 32-1129.01
or 32-1129.02.
§32-1129.06. Applicability to state and political subdivisions
Sections 32-1129.01, 32-1129.02, 32-1129.04 and 32-1129.05 do not apply to
this state or political subdivisions of this state.
ARTICLE 2.1 RESIDENTIAL CONTRACTORS' RECOVERY FUND
§32-1131. Definitions
In this article, unless the context otherwise requires:
1. "Assessment" means the contribution by a contractor to the residential
contractors' recovery fund.
2. "Fund" means the residential contractors' recovery fund.
3. "Person injured" means any owner of residential real property which is
classified as class three property under section 42-12003 and which is actually
occupied or intended to be occupied by the owner as a residence including
-25-
community property, tenants in common or joint tenants who are damaged by the
failure of a residential contractor or a dual licensed contractor to adequately build or
improve a residential structure or appurtenance on that real property. Included in
this definition are lessees of residential real property who contract directly with a
residential contractor or indirectly with a subcontractor of that contractor and
homeowners' or unit owners' associations after transfer of control from the builder or
developer for damages to the common elements within the complex.
4. "Residential contractor" means a contractor as defined in section 32-1101
who is licensed to perform work on residential property pursuant to this chapter and
who engages in residential contracting.
§32-1132. Residential contractors' recovery fund
A. The residential contractors' recovery fund is established, to be administered
by the registrar, from which any person injured by an act, representation, transaction
or conduct of a residential contractor licensed pursuant to this chapter that is in
violation of this chapter or the rules adopted pursuant to this chapter may be
awarded in the county where the violation occurred an amount of not more than
thirty thousand dollars for damages sustained by the act, representation, transaction
or conduct. An award from the fund is limited to the actual damages suffered by the
claimant as a direct result of the contractor's violation but shall not exceed an
amount necessary to complete or repair a residential structure or appurtenance
within residential property lines. If the claimant has paid a deposit or down payment
and no actual work is performed or materials are delivered, the award of actual
damages shall not exceed the exact dollar amount of the deposit or down payment
plus interest at the rate of ten per cent a year from the date the deposit or down
payment is made or not more than thirty thousand dollars, whichever is less. Interest
shall not be paid from the fund on any other awards under this chapter unless
ordered by a court of competent jurisdiction. An award from the fund shall not be
available to persons injured by an act, representation, transaction or conduct of a
residential contractor who was not licensed pursuant to this chapter or whose license
was in an inactive status, expired, cancelled, revoked, suspended or not issued at the
time of the contract. No more than the maximum individual award from the fund
shall be made on any individual residence or to any injured person. Notwithstanding
any other provision of law, monies in the residential contractors' recovery fund shall
not be directly awarded for attorney fees or costs except in contested cases appealed
to the superior court.
B. Except as provided in section 32-1152, subsection C, every person making
application for a contractor's license or for renewal of a contractor's license to
engage in residential contracting shall pay an assessment of not more than six
hundred dollars during the biennial license period for deposit in the fund. In the
event that the registrar does not issue the license, this assessment shall be returned to
the applicant.
-26-
§32-1134. Powers and duties of registrar
A. The registrar shall:
1. Establish assessments and maintain the fund balance at a level sufficient to
pay operating costs and anticipated claims using the cash basis of accounting.
2. Cause an examination of the fund to be made every three years by an
independent certified public accountant.
3. File with the department of insurance an annual statement of the condition of
the fund.
4. Employ accountants and attorneys from monies in the fund, but not to exceed
ten thousand dollars in any fiscal year, that are necessary for the performance of the
duties prescribed in this section.
5. Employ or contract with individuals and procure equipment and operational
support, to be paid from or purchased with monies in the fund, but not to exceed ten
per cent of the fund in any fiscal year as may be necessary to monitor, process or
oppose claims filed by injured persons which may result in collection from the
recovery fund.
B. Notwithstanding section 32-1135, the registrar may expend interest monies
from the fund to increase public awareness of the fund. This expenditure shall not
exceed fifty thousand dollars in any fiscal year.
§32-1134.01. Additional payments to fund
If at any time the balance remaining in the residential contractors' recovery fund
is less than two million dollars, every residential contractor who paid into the fund
pursuant to section 32-1132 may be reassessed in an amount determined by the
registrar pursuant to section 32-1134 and shall make the required payment into the
fund. The registrar shall suspend a residential contractor's license for failure to make
the required payment until the amount owed is paid in full.
§32-1134.02. Insufficiency of fund
If at any time the monies deposited in the residential contractors' recovery fund
are insufficient to satisfy any duly authorized claim or portion thereof, the registrar
shall, when sufficient monies have been deposited in the residential contractors'
recovery fund, satisfy any unpaid claims or portion of unpaid claims with priority
for payment based on the time of filing a certified copy of the court order with the
registrar.
§32-1135. Deposit of assessments
The assessments received by the registrar for deposit in the fund shall be held in
trust for carrying out the purposes of the fund. On notice from the registrar, the state
treasurer shall invest and divest monies in the fund as provided by section 35-313,
and monies earned from investment shall be credited to the fund.
-27-
§32-1136. Statute of limitations; recovery from fund
A. An action for a judgment which may subsequently result in an order for
collection from the fund shall not be commenced later than two years from the date
of the commission of the act by the contractor that is the cause of the injury or from
the date of occupancy. When any injured person commences action for a judgment
which may result in collection from the fund, the injured person shall notify the
registrar in writing to this effect at the time of the commencement of the action. The
registrar may at any time intervene in and defend any such action.
B. When any injured person recovers a valid judgment against any residential
contractor for such act, representation, transaction or conduct which is in violation
of this chapter or the rules adopted pursuant to this chapter, the injured person may
on twenty days' written notice to the registrar apply to the court for an order
directing payment out of the fund, of the amount unpaid on the judgment, subject to
the limitations stated in this article. If the injured person failed to give notice to the
registrar at the time of commencement of the action as required by subsection A of
this section, the court may direct payment out of the fund upon receipt of a consent
to payment signed on behalf of the registrar. If the injured person has given notice to
the registrar as required by subsection A of this section, the court may direct
payment out of the fund either on receipt of a consent to payment signed on behalf
of the registrar or, in the absence of any written consent, after the notice period
required by subsection B of this section. If the court receives written objections by
the registrar, the court shall not direct payment from the fund without affording the
registrar a reasonable opportunity to present and support his objections.
C. The injured person shall not be the spouse of the residential contractor or the
personal representative of the spouse of the residential contractor.
D. The court shall proceed on an application in a summary manner and, on the
hearing, the injured person is required to show that he:
1. Has given notice as required by subsections A and B of this section.
2. Has obtained a judgment which has become final, as provided in subsection B
of this section, stating the amount and the amount owing at the date of the
application.
3. Has proceeded against any existing bond covering the residential contractor
and has not collected upon such bond an amount of thirty thousand dollars or more,
except when the award is made pursuant to subsection E of this section or section
32-1154.
4. Is not aware of any personal or real property or other assets of the debtor
which can be applied in satisfaction of the judgment.
E. The court shall make an order directed to the registrar requiring payment from
the fund of whatever sum it finds to be payable on the claim, in accordance with this
section, if the court is satisfied on the hearing of the truth of all matters required to
be shown by the injured person by subsection D of this section. The recovery limits
established under this article apply to all judgments awarded after September 1,
-28-
2002. If the injured person has recovered a portion of his loss from sources other
than the fund, the registrar, if the award is made pursuant to section 32-1154, or the
court shall deduct the amount recovered from other sources from the amount of
actual damages suffered pursuant to section 32-1132, subsection A and direct the
difference, not to exceed thirty thousand dollars, to be paid from the fund.
F. On receipt of a certified copy of the order specified in subsection E of this
section, the registrar may authorize payment from the residential contractors'
recovery fund even if an appeal has been instituted but not completed.
§32-1137. Notice of authorized payment to injured person
On authorization of payment from the residential contractors' recovery fund, the
registrar shall notify the injured person that:
1. The amount authorized for payment is subject to repayment by the recipient if
the judgment of the court is finally reversed.
2. It is the responsibility of the recipient to respond to an appeal from the
judgment.
3. On appeal from the judgment, postponement of acceptance by the injured
person of the amount authorized for payment does not operate as a waiver of any
rights of the injured person.
§32-1138. Subrogation
The state has the right of subrogation to the extent of payments made from the
residential contractors' recovery fund including the right to collect from a bond, cash
payment or alternative to cash payment made pursuant to section 32-1152 or 32-
1152.01. The registrar and the attorney general shall promptly enforce all
subrogation claims.
§32-1139. Liability of fund for each residential contractor's license; suspension
of license; repayment
A. The liability of the fund shall not exceed two hundred thousand dollars for
any one residential contractor's license. If claims against the fund on behalf of any
one residential contractor's license exceed two hundred thousand dollars, the claims
shall be paid in order of the date of entry of the order of the registrar or court, and
the registrar or a court entering an order for payment after the sum of two hundred
thousand dollars has been paid from the fund shall modify the order indicating that
no further recovery from the fund shall be allowed.
B. If any amount is paid from the fund in settlement of a claim arising from the
act, representation, transaction or conduct of a residential contractor, the license of
the contractor shall be automatically suspended by operation of law until the amount
paid from the fund is repaid in full, plus interest at the rate of ten per cent a year.
Any person who is or was, at the time of the act or omission, named on a license that
has been suspended because of a payment from the recovery fund is not eligible to
-29-
receive a new license or retain another existing license that also shall be suspended
by operation of law, nor shall any suspended license be reactivated, until the amount
paid from the fund is repaid as provided in this subsection.
§32-1140. Disciplinary action against contractor
This article does not limit the authority of the registrar to take disciplinary action
against any licensed contractor for a violation of this chapter, or of the rules and
regulations of the registrar, nor does the repayment in full of all obligations to the
fund by any contractor nullify or modify the effect of any other disciplinary
proceeding brought pursuant to this chapter or the rules and regulations.
ARTICLE 3. REGULATION
§32-1151. Engaging in contracting without license prohibited
It is unlawful for any person, firm, partnership, corporation, association or other
organization, or a combination of any of them, to engage in the business of, submit a
bid or respond to a request for qualification or a request for proposals for
construction services as, act or offer to act in the capacity of or purport to have the
capacity of a contractor without having a contractor's license in good standing in the
name of the person, firm, partnership, corporation, association or other organization
as provided in this chapter, unless the person, firm, partnership, corporation,
association or other organization is exempt as provided in this chapter. Evidence of
securing a permit from a governmental agency or the employment of a person on a
construction project shall be accepted in any court as prima facie evidence of
existence of a contract.
§32-1151.01. Change in ownership; notice to registrar
A corporation, association or other organization which is a licensed contractor
shall immediately notify the registrar of any transfer of ownership of fifty per cent or
more of the stock or beneficial interest in the company.
§32-1152. Bonds
A. Before granting an original contractor's license, the registrar shall require of
the applicant a surety bond in a form acceptable to the registrar or a cash deposit as
provided in this section. No contractor's license may be renewed unless the
applicant's surety bond or cash deposit is in full force and effect.
B. The bonds, or the cash deposit as provided in this section, shall be in the
name of the licensee in amounts fixed by the registrar with the following schedules
after giving due consideration to the volume of work and the classification
contemplated by the applicant:
-30-
1. General commercial building contractors and subclassifications of general
commercial contractors shall furnish a surety bond or cash deposit in an amount
which shall be determined as follows:
(a) If the estimated annual volume of construction work of the applicant is ten
million dollars or more, the applicant shall furnish a surety bond or cash deposit of
not less than fifty thousand dollars or more than one hundred thousand dollars.
(b) If the estimated annual volume of construction work of the applicant is more
than five million dollars and less than ten million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than thirty-five thousand dollars or more
than seventy-five thousand dollars.
(c) If the estimated annual volume of construction work of the applicant is more
than one million dollars and less than five million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than fifteen thousand dollars or more than
fifty thousand dollars.
(d) If the estimated annual volume of construction work of the applicant is more
than five hundred thousand dollars and less than one million dollars, the applicant
shall furnish a surety bond or cash deposit of not less than ten thousand dollars or
more than twenty-five thousand dollars.
(e) If the estimated annual volume of construction work of the applicant is more
than one hundred fifty thousand dollars and less than five hundred thousand dollars,
the applicant shall furnish a surety bond or cash deposit of not less than five
thousand dollars or more than fifteen thousand dollars.
(f) If the estimated annual volume of construction work of the applicant is less
than one hundred fifty thousand dollars, the applicant shall furnish a surety bond or
cash deposit of five thousand dollars.
2. Specialty commercial contractors shall furnish a surety bond or cash deposit
in an amount which shall be determined as follows:
(a) If the estimated annual volume of construction work of the applicant is ten
million dollars or more, the applicant shall furnish a surety bond or cash deposit of
not less than thirty-seven thousand five hundred dollars or more than fifty thousand
dollars.
(b) If the estimated annual volume of construction work of the applicant is more
than five million dollars and less than ten million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than seventeen thousand five hundred
dollars or more than thirty-seven thousand five hundred dollars.
(c) If the estimated annual volume of construction work of the applicant is more
than one million dollars and less than five million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than seven thousand five hundred dollars or
more than twenty-five thousand dollars.
(d) If the estimated annual volume of construction work of the applicant is more
than five hundred thousand dollars and less than one million dollars, the applicant
-31-
shall furnish a surety bond or cash deposit of not less than five thousand dollars or
more than seventeen thousand five hundred dollars.
(e) If the estimated annual volume of construction work of the applicant is more
than one hundred fifty thousand dollars and less than five hundred thousand dollars,
the applicant shall furnish a surety bond or cash deposit of not less than two
thousand five hundred dollars or more than seven thousand five hundred dollars.
(f) If the estimated annual volume of construction work of the applicant is less
than one hundred fifty thousand dollars, the applicant shall furnish a surety bond or
cash deposit of two thousand five hundred dollars.
3. The total amount of the surety bond or cash deposit required of a licensee who
holds more than one license under paragraphs 1 and 2 of this subsection shall be the
sum of the surety bond or cash deposit required for each license based on the
estimated annual volume of construction work of the applicant allocated to and
performed under each license. The applicant at his option may post a single surety
bond or cash deposit which shall be the sum of the bonds or deposits determined
under this subsection for all such licenses.
4. General dual licensed contractors and subclassifications of general dual
licensed contractors shall furnish a single surety bond or cash deposit with amounts
for each classification of license that are determined based on the volume of
commercial work as determined under paragraph 1 of this subsection and the
volume of residential work as determined under paragraph 5 of this subsection.
Liability under the bond or cash deposit shall be limited to the amount established
for each commercial or residential license and is subject to the limitations and
requirements set forth in subsection E of this section.
5. General residential contractors and subclassifications of general residential
contractors shall furnish a surety bond or cash deposit in an amount of not more
than fifteen thousand dollars and not less than five thousand dollars.
6. Specialty dual licensed contractors shall furnish a single surety bond or cash
deposit with amounts for each classification of license that are determined based on
the volume of commercial work as determined under paragraph 2 of this subsection
and the volume of residential work as determined under paragraph 7 of this
subsection. Liability under the bond or cash deposit shall be limited to the amount
established for each commercial or residential license and is subject to the
limitations and requirements set forth in subsection E of this section.
7. Specialty residential contractors shall furnish a surety bond or cash deposit in
an amount of not more than seven thousand five hundred dollars and not less than
one thousand dollars.
8. Dual licensed swimming pool contractors and residential swimming pool
general contractors shall furnish a surety bond or cash deposit in the same amounts
based on the volume of work as determined under paragraph 1 of this subsection for
a general commercial contractor.
C. Dual licensed contractors and residential contractors shall also either:
-32-
1. Furnish an additional surety bond or cash deposit in the amount of two
hundred thousand dollars solely for actual damages suffered by persons injured as
described in section 32-1131. This bond shall be subject to the limitations on the
amounts that may be awarded to individual claimants as established in section 32-
1132.
2. Participate in the residential contractors' recovery fund and pay the assessment
prescribed by section 32-1132.
D. The surety bonds shall be executed by the contractor as principal with a
corporation duly authorized to transact surety business in this state. Evidence of a
surety bond shall be submitted to the registrar in a form acceptable to the registrar.
The contractor may in the alternative establish a cash deposit in the amount of the
bond with the state treasurer in accordance with rules adopted by the registrar. Such
cash bond monies shall be deposited, pursuant to sections 35-146 and 35-147, in the
contractors' cash bond fund. The state treasurer shall invest and divest monies in the
fund as provided by section 35-313, and monies earned from investment shall be
credited to the state general fund. Such cash deposits may be withdrawn, if there are
no outstanding claims against them, two years after the termination of the license in
connection with which the cash is deposited. The cash deposit may be withdrawn
two years after the filing of a commercial surety bond as a replacement to the cash
deposit.
E. The bonds or deposit required by subsection B of this section shall be for the
benefit of and shall be subject to claims by the registrar of contractors for failure to
pay any sum required pursuant to this chapter. The bond or deposit required by
subsection B, paragraphs 1, 2 and 3 of this section is for the benefit of and subject to
claims by a licensee under this chapter or a lessee, owner or co-owner of
nonresidential real property including, but not limited to, a tenant in common or
joint tenant, or their successors in interest, who has a direct contract with the
licensee against whose bond or deposit the claim is made and who is damaged by
the failure of the licensee to build or improve a structure or appurtenance on that
real property at the time the work was performed in a manner not in compliance with
the requirements of any building or construction code applicable to the construction
work under the laws of this state or any political subdivision, or if no such code was
applicable, in accordance with the standards of construction work approved by the
registrar. The residential bond or deposit required by subsection B, paragraphs 4
through 8 of this section is for the benefit of and subject to claims by any person
furnishing labor, materials or construction equipment on a rental basis used in the
direct performance of a construction contract involving a residential structure or by
persons injured as defined in section 32-1131. The bond or deposit required by
subsection C, paragraph 1 of this section is for the benefit of and is subject to claims
only by persons injured as described in section 32-1131. The person seeking
recovery from the bond or cash deposit shall maintain an action at law against the
contractor if claiming against the cash deposit or against the contractor and surety if
-33-
claiming against the surety bond. If the person seeking recovery is required to give
the notice pursuant to section 33-992.01, he is entitled to seek recovery only if he
has given such notice and has made proof of service. The surety bond or cash
deposit shall be subject to claims until the full amount thereof is exhausted. The
court may award reasonable attorney's fees in a judgment against a contractor's
surety bond or cash deposit. No suit may be commenced on the bond or for
satisfaction from the cash deposit after the expiration of two years following the
commission of the act or delivery of goods or rendering of services on which the suit
is based, except that time for purposes of claims for fraud shall be measured as
provided in section 12-543. The surety bond or cash deposit shall be continuous in
form and shall be conditioned so that the total aggregate liability of the surety or
cash deposit for all claims, including reasonable attorney's fees, shall be limited to
the face amount of the surety bond or cash deposit irrespective of the number of
years the bond or cash deposit is in force. If the corporate surety desires to make
payment without awaiting court action, the amount of any bond filed in compliance
with this chapter shall be reduced to the extent of any payment or payments made by
the corporate surety in good faith thereunder. Any such payments shall be based on
priority of written claims received by the corporate surety prior to court action. If
more than one cash deposit exists, the judgment against the contractor shall state
which cash deposit shall be used to satisfy the judgment. A certified copy of the
judgment shall then be filed with the registrar, and such judgment shall specify that
it may be satisfied from the contractor's cash deposit. Priority for payment shall be
based upon the time of filing with the registrar. Upon receipt of a certified copy of
the judgment, the registrar may authorize payment from the cash deposit of the
amount claimed or of whatever lesser amount remains on file. In any action against a
cash deposit, the claimant, at the time of filing suit, may notify the registrar in
writing of the action against the cash deposit, but shall not name as a defendant in
the action the registrar, the treasurer, or the state. Failure to so notify the registrar at
the time of filing suit may result in the cash deposit being withdrawn by the licensee
prior to judgment pursuant to subsection D of this section.
F. When a corporate surety cancels a bond, the surety shall not less than thirty
days prior to the effective date of the cancellation give the principal and the registrar
a written notice of the cancellation. Notice to the principal shall be by certified mail
in a sealed envelope with postage fully prepaid. Proof of notice to the principal shall
be made available to the registrar on request. On reduction or depletion of the cash
deposit, the registrar shall immediately notify the licensee of said reduction or
depletion and that the licensee must replenish the cash deposit or furnish a surety
bond on or before thirty days from the date of said reduction or depletion or the
contractor's license shall be suspended on the thirtieth day without further notice or
hearing. Notice to the contractor shall be by certified mail in a sealed envelope with
postage fully prepaid thereon, addressed to the contractor's latest address of record
in the registrar's office. The contractor's license shall be suspended by operation of
-34-
law on the date the bond is canceled or thirty days from the date of reduction or
depletion of the cash deposit unless a replacement bond or cash deposit is on file
with the registrar.
G. The registrar and the state treasurer shall have no personal liability for the
performance of duties relating to the bonds, cash deposits, certificates of deposit,
investment certificates or share accounts required or permitted by this chapter as
long as such duties are performed in good faith.
H. In the following instances the registrar, after a hearing, may require, as a
condition precedent to issuance, renewal, continuation or removal of suspension of a
license, a surety bond or cash deposit in an amount and duration to be fixed by the
registrar based upon the seriousness of the violations, which shall be not more than
ten times the amount required by subsection B of this section:
1. When a license of either the applicant or the qualifying party has been
suspended or revoked or a surety bond or cash deposit requirement has been
increased under section 32-1154 previously as the result of disciplinary action for a
violation of this chapter.
2. When either the applicant or qualifying party was an officer, member, partner
or qualifying party for a licensee at any time during which cause for disciplinary
action occurred resulting in suspension or revocation of such licensee's license and
such applicant or qualifying party had knowledge of or participated in the act or
omission which was the cause of such disciplinary action for a violation of this
chapter.
3. The bonds required by this subsection shall be in addition to any other bond
or cash deposit required by this chapter or any other bond required of a contractor
by an owner or any other contracting party on any contract undertaken by him
pursuant to the authority of such license.
§32-1152.01. Alternatives to cash deposit
A. As an alternative to the cash deposit provided for in section 32-1152,
subsection B, a contractor may substitute any of the following:
1. Certificates of deposit assigned to the registrar, issued by banks doing
business in this state and insured by the federal deposit insurance corporation.
2. Investment certificates or share accounts assigned to the registrar and issued
by a savings and loan association doing business in this state and insured by the
federal deposit insurance corporation.
B. The terms and conditions surrounding each of such types of security shall be
prescribed by the registrar.
§32-1153. Proof of license as prerequisite to civil action
No contractor as defined in section 32-1101 shall act as agent or commence or
maintain any action in any court of the state for collection of compensation for the
performance of any act for which a license is required by this chapter without
-35-
alleging and proving that the contracting party whose contract gives rise to the claim
was a duly licensed contractor when the contract sued upon was entered into and
when the alleged cause of action arose.
§32-1154. Grounds for suspension or revocation of license; continuing
jurisdiction; civil penalty; recovery fund award
A. The holder of a license or any person listed on a license pursuant to this
chapter shall not commit any of the following acts or omissions:
1. Abandonment of a contract or refusal to perform after submitting a bid on
work without legal excuse for the abandonment or refusal.
2. Departure from or disregard of plans or specifications or any building codes
of the state or any political subdivision of the state in any material respect which is
prejudicial to another without consent of the owner or the owner's duly authorized
representative and without the consent of the person entitled to have the particular
construction project or operation completed in accordance with such plans and
specifications and code.
3. Violation of any rule adopted by the registrar.
4. Failure to comply with the statutes or rules governing social security, workers'
compensation or unemployment insurance.
5. Failure to pay income taxes, withholding taxes or any tax imposed by title 42,
chapter 5, articles 1 and 4 and incurred in the operation of the licensed business.
6. Misrepresentation of a material fact by the applicant in obtaining a license.
7. The doing of a wrongful or fraudulent act by the licensee as a contractor
resulting in another person being substantially injured.
8. Conviction of a felony.
9. Failure in a material respect by the licensee to complete a construction project
or operation for the price stated in the contract, or in any modification of the
contract.
10. Aiding or abetting a licensed or unlicensed person to evade this chapter,
knowingly combining or conspiring with a licensed or unlicensed person, allowing
one's license to be used by a licensed or unlicensed person or acting as agent,
partner, associate or otherwise of a licensed or unlicensed person with intent to
evade this chapter.
11. Failure by a licensee or agent or official of a licensee to pay monies in excess
of seven hundred fifty dollars when due for materials or services rendered in
connection with the licensee's operations as a contractor when the licensee has the
capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has
received sufficient monies as payment for the particular construction work project or
operation for which the services or materials were rendered or purchased.
12. Failure of a contractor to comply with any safety or labor laws or codes of
the federal government, state or political subdivisions of the state.
13. Failure in any material respect to comply with this chapter.
-36-
14. Knowingly entering into a contract with a contractor for work to be
performed for which a license is required with a person not duly licensed in the
required classification.
15. Acting in the capacity of a contractor under any license issued under this
chapter in a name other than as set forth upon the license.
16. False, misleading or deceptive advertising whereby any member of the
public may be misled and injured.
17. Knowingly contracting beyond the scope of the license or licenses of the
licensee.
18. Contracting or offering to contract or submitting a bid while the license is
under suspension or while the license is on inactive status.
19. Failure to notify the registrar in writing within a period of fifteen days of any
disassociation of the person who qualified for the license. Such licensee shall have
sixty days from the date of such disassociation to qualify through another person.
20. Subsequent discovery of facts which if known at the time of issuance of a
license or the renewal of a license would have been grounds to deny the issuance or
renewal of a license.
21. Having a person named on the license who is named on any other license in
this state or in another state which is under suspension or revocation unless the prior
revocation was based solely on a violation of this paragraph.
22. Continuing a new single family residential construction project with actual
knowledge that a pretreatment wood-destroying pests or organisms application was
either:
(a) Not performed at the required location.
(b) Performed in a manner inconsistent with label requirements, state law or
rules.
23. Failure to take appropriate corrective action to comply with this chapter or
with rules adopted pursuant to this chapter without valid justification within a
reasonable period of time after receiving a written directive from the registrar. The
written directive shall set forth the time within which the contractor is to complete
the remedial action. The time permitted for compliance shall not be less than fifteen
days from the date of issuance of the directive. A license shall not be revoked or
suspended nor shall any other penalty be imposed for a violation of this paragraph
until after a hearing has been held.
24. Prohibit, threaten to prohibit, retaliate, threaten to retaliate or otherwise
intimidate any contractor or materialman from serving a preliminary notice pursuant
to section 33-992.01.
B. The registrar may on the registrar's own motion, and shall on the written
complaint of any person, investigate the acts of any contractor within this state and
may temporarily suspend, with or without imposition of specific conditions in
addition to increased surety bond or cash deposit requirements, or permanently
revoke any or all licenses issued under this chapter if the holder of the license issued
-37-
pursuant to this chapter is guilty of or commits any of the acts or omissions set forth
in subsection A of this section.
C. The expiration, cancellation, suspension or revocation of a license by
operation of law or by decision and order of the registrar or a court of law or the
voluntary surrender of a license by a licensee shall not deprive the registrar of
jurisdiction to proceed with any investigation of or action or disciplinary proceeding
against such licensee, or to render a decision suspending or revoking such a license,
or denying the renewal or right of renewal of such license.
D. The registrar may impose a civil penalty of not to exceed five hundred dollars
on a contractor for each violation of subsection A, paragraph 23 of this section.
Civil penalties collected pursuant to this subsection shall be deposited in the
residential contractors' recovery fund. The failure by the licensee to pay any civil
penalty imposed under this subsection results in the automatic revocation of the
license thirty days after the effective date of the order providing for the civil penalty.
No future license may be issued to an entity consisting of a person associated with
the contractor, as defined in section 32-1101, subsection A, paragraph 5, unless
payment of any outstanding civil penalty is tendered.
E. Notwithstanding any other provisions in this chapter, if a contractor's license
has been revoked or has been suspended as a result of an order to remedy a violation
of this chapter, and the contractor refuses or is unable to comply with the order of
the registrar to remedy the violation, the registrar may order payment from the
residential contractors' recovery fund to remedy the violation. The registrar shall
serve the contractor with a notice setting forth the amount claimed or to be awarded.
If the contractor contests the amount or propriety of the payment, the contractor
shall respond within ten days of the date of service by requesting a hearing to
determine the amount or propriety of the payment. Failure by the contractor to
respond in writing within ten days of the date of service shall be deemed a waiver by
the contractor of the right to contest the amount claimed or to be awarded. Service
may be made by personal service to the contractor or by mailing a copy of the notice
by registered mail with postage prepaid to the contractor's latest address of record on
file in the registrar's office. If service is made by registered mail, it is effective five
days after the notice is mailed. Except as provided in section 41-1092.08, subsection
H, the contractor or injured person may seek judicial review of the registrar's final
award pursuant to title 12, chapter 7, article 6.
§32-1155. Filing of complaint; resolution of complaint; service of notice; failure
to answer
A. Upon the filing of a written complaint with the registrar charging a licensee
with the commission, within two years prior to the date of filing the complaint, of an
act that is cause for suspension or revocation of a license, the registrar after
investigation may issue a citation or upon written request of the complainant may
issue a citation directing the licensee, within ten days after service of the citation
-38-
upon the licensee, to appear by filing with the registrar the licensee’s written answer
to the citation and complaint showing cause, if any, why the licensee’s license
should not be suspended or revoked. Service of citation upon the licensee shall be
fully effected by personal service or by mailing a true copy thereof, together with a
true copy of the complaint, by registered mail in a sealed envelope with postage
prepaid and addressed to the licensee at the licensee’s latest address of record in the
registrar's office. Service of the citation and complaint shall be complete at the time
of personal service or five days after deposit in the mail.
B. Failure of the licensee to answer within ten days after service shall be deemed
an admission by the licensee of the licensee’s commission of the act or acts charged
in the complaint and the registrar may then suspend or revoke the licensee’s license.
§32-1156. Hearings
A. Title 41, chapter 6, article 10 applies to hearings under this chapter.
B. In a hearing or rehearing conducted pursuant to this section a corporation
may be represented by a corporate officer or employee who is not a member of the
state bar if:
1. The corporation has specifically authorized the officer or employee to
represent it.
2. The representation is not the officer's or employee's primary duty to the
corporation but is secondary or incidental to the officer's or employee's duties
relating to the management or operation of the corporation.
§32-1156.01. Restitution
After a hearing pursuant to this article, an administrative law judge may
recommend that a licensee provide restitution to any person who is injured or whose
property is damaged by an action of the licensee.
§41-1064. Licenses; renewal; revocation; suspension; annulment; withdrawal
A. When the grant, denial or renewal of a license is required to be preceded by
notice and an opportunity for a hearing, the provisions of this article concerning
contested cases apply.
B. When a licensee has made timely and sufficient application for the renewal of
a license or a new license with reference to any activity of a continuing nature, the
existing license does not expire until the application has been finally determined by
the agency, and, in case the application is denied or the terms of the new license
limited, until the last day for seeking review of the agency order or a later date fixed
by order of the reviewing court.
C. No revocation, suspension, annulment or withdrawal of any license is lawful
unless, prior to the action, the agency provides the licensee with notice and an
opportunity for a hearing in accordance with this chapter. If the agency finds that the
public health, safety or welfare imperatively requires emergency action, and
-39-
incorporates a finding to that effect in its order, summary suspension of a license
may be ordered pending proceedings for revocation or other action. These
proceedings shall be promptly instituted and determined.
§32-1157. Appeals; costs; transcript
A. Except as provided in section 41-1092.08, subsection H, a final decision of
the registrar may be appealed to the superior court pursuant to title 12, chapter 7,
article 6.
B. The party who is appealing may request in writing and shall receive from the
registrar a certified copy of all documents and evidence in the administrative record.
The party shall pay the registrar for the cost of producing the administrative record.
Within thirty days after receipt of the request and payment, the registrar shall certify
the administrative record and file it with the clerk of the superior court in the county
in which the appeal is pending.
C. By order of the court or by stipulation of the parties to the action, the record
may be shortened or supplemented.
D. If the appeal is from an action instituted by the registrar and the court
determines that the appellant is the successful party in the appeal, the appealing
party is entitled to recover from the registrar any monies paid by the appealing party
for transcriptions or for copies of documents provided by the registrar.
§32-1158. Minimum elements of a contract
A. From and after December 31, 1992, any contract in an amount of more than
seven hundred fifty dollars and less than one hundred fifty thousand dollars entered
into between a contractor and the owner of a property to be improved shall contain
in writing at least the following information:
1. The name of the contractor and the contractor's business address and license
number.
2. The name and mailing address of the owner and the jobsite address or legal
description.
3. The date the parties entered into the contract.
4. The estimated date of completion of all work to be performed under the
contract.
5. A description of the work to be performed under the contract.
6. The total dollar amount to be paid to the contractor by the owner for all work
to be performed under the contract, including all applicable taxes.
7. The dollar amount of any advance deposit paid or scheduled to be paid to the
contractor by the owner.
8. The dollar amount of any progress payment and the stage of construction at
which the contractor will be entitled to collect progress payments during the course
of construction under the contract.
-40-
B. At the time of signing a contract the owner shall be provided a legible copy of
all documents signed and a written and signed receipt for and in the true amount of
any cash paid to the contractor by the owner.
C. The requirements of this section shall not constitute prerequisites to the formation
or enforcement of a contract. Failure to comply with the requirements of this section
shall not constitute a defense by either party to an action for compensation,
damages, breach, enforcement or other cause of action based on the contract.
§32-1158.01. Swimming pool; spa; construction contracts
A. In addition to the requirements of section 32-1158, a licensed contractor who
enters into a contract for the construction or installation of a residential in-ground
swimming pool or spa with a purchaser who resides in the residence or who intends
to reside in the residence after the completion of the contract shall include at least
the following provisions:
1. A provision providing the purchaser the opportunity to request standard
contractor's payment and performance bonds in a form approved by the registrar,
securing the completion of the work and payment for services and materials. The
cost of the payment and performance bond shall be paid by the purchaser of the
swimming pool or spa and the contractor shall not charge a surcharge or a service
charge.
2. The following payment provisions:
(a) A down payment payable on the execution of the contract of not more than
one thousand dollars.
(b) After the completion of the excavation work on the swimming pool or spa, a
payment of not more than thirty per cent of the amount of the original contract price
plus any written change orders approved by the purchaser.
(c) After the installation of steel, plumbing and pneumatically applied concrete
materials or the installation of a prefabricated swimming pool or spa, a payment of
not more than thirty per cent of the amount of the original contract price plus any
written change orders approved by the purchaser.
(d) After the installation of decking materials, a payment of not more than thirty
per cent of the amount of the original contract price plus any written change orders
approved by the purchaser.
(e) Before the application of the finishing interior materials or completion of all
work on a prefabricated pool or spa, payment of all remaining sums due on the
original contract plus any written change orders approved by the purchaser.
3. A provision that gives notice to the purchaser, in a form approved by the
registrar that is in at least ten point type, of the purchaser's right to receive written
material that advises the purchaser of the provisions of this section and of the
procedures provided for by the registrar for the resolution of claims and disputes
with licensed contractors.
-41-
4. A provision in a form approved by the registrar that is in at least ten point
type, advising the purchaser of the purchaser's rights under Title 44, Chapter 15.
B. If a purchaser requires the contractor to furnish a payment and performance
bond securing the performance of the contract, the provisions of subsection A,
paragraph 2 of this section may be changed in any manner agreed to by the parties to
the contract.
C. Any changes, additions or deletions to the work specified in the original
contract shall be included in a written change order.
D. A contractor's failure to comply with this section is a violation of section 32-
1154, subsection A.
§12-1365. Notification; right to file a complaint with the registrar of contractors
A. A written contract for the sale of a newly constructed dwelling between a
buyer of a newly constructed dwelling and the seller responsible for the original
construction of the dwelling shall contain, or provide separate notice of, the
following provision:
Under Arizona Revised Statutes section 32-1155, a buyer of a dwelling has the
right to file a written complaint against the homebuilder with the Arizona registrar
of contractors within two years of the commission of an act in violation of Arizona
Revised Statutes section 32-1154, subsection A.
B. The notice required in subsection A of this section shall be prominently
displayed and appear in at least ten-point bold type.
C. The buyer of the dwelling is not deemed to have received the notice required
pursuant to subsection A of this section, unless the buyer initials the notice
provision.
§12-1366. Applicability; claims and actions
A. This article does not apply:
1. If a contract for the sale of a dwelling or an association’s community
documents contain commercially reasonable alternative dispute resolution
procedures. If the contract for the sale of a dwelling contains the procedures, the
procedures shall conspicuously appear in the contract in bold and capital letters. If
the contract for sale of a dwelling contains the procedures, a disclosure statement in
at least twelve point font, bold and capital letters shall appear on the face of the
contract and shall describe the location of the alternative dispute resolution
procedures within the contract.
2. To personal injury claims.
3. To death claims.
4. To claims for damage to property o