One issue that arises quite normally and frequently, during the sale of residential real estate, is the matter of maintenance and repair of the subject property.  The vast majority of transactions will include the default provisions of the Arizona Association of REALTORS^®, Residential Resale Real Estate Purchase Contract that allow for the buyer to conduct any and all inspections and investigations they choose to, during a ten day inspection period.  Prior to the expiration of that inspection period, the buyer may elect to request that the seller make repairs to the property.  Should the seller agree to some or all of the requested repairs, they must then “complete any repairs in a workmanlike manner and deliver any paid receipts evidencing the corrections and repairs”?

Though the contract does not specify it, maintenance and repairs must be performed by a licensed contractor except otherwise provided for (when no license exists for the activity, e.g. recaulking a counter top edge), by a properly qualified and capable person.  And, there are many different types of licensed contractors: commercial, residential, plumbing, electrical, painting, roofing, carpentry, swimming pool service and repair, drywall, fencing, air conditioning and refrigeration, and dozens and dozens of others.  A complete list may be viewed at:  http://www.azroc.gov/l_class.html.

Consumer Protection

So, where does this requirement come from then (if not from the Residential Purchase Contract) for using licensed contractors?  Fortunately, the Arizona State Registrar of Contractors (AZROC) was established as a regulatory agency in 1931 by the Arizona State Legislature.  The agency's mission 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.

The Arizona Revised Statute (ARS), Title 32, Chapter 10, Articles 1 through 4, http://www.azroc.gov/statutes.html  provides the authority for administration and enforcement by AZROC.  Additionally, Arizona Administrative Code, Title 4, Chapter 9:  http://www.azsos.gov/public_services/Title_04/4-09.htm  establishes the Rules and Regulations for the practices of AZROC.

Common Problems or Complaints

The most common complaints received by AZROC include:

            -    failure to fulfill the terms of the agreement,

            -    poor workmanship,

            -    abandoning a project or refusing to perform,

            -    failure to pay subcontractors,

-    violation of building codes or failure to comply with safety or labor laws,

-          departure from project plans or specifications,

-          using false, misleading or deceptive advertising,

-          failing to pay taxes related to their business.

Basic Guidelines for Hiring a Contractor

1)         Only do business with licensed contractors.

2)         Ask for references and check them out.

3)         Always verify that their license is active and in good standing.

4)         Obtain at least three written bids.

5)         Ask about expected problems or challenges during the project.

6)         Always have a written contract.

7)         Make sure you understand the terms of the contract (read it).

8)         Be cautious about advancing monies for work not yet completed.

9)         Put any and all changes in writing.

10)     Make frequent inspections and a final inspection before paying.

Licensed Contractors

To obtain a license, contractors must pass a business management test and possibly a trade test, depending upon the type of construction performed.  The contractor’s work history and experience must be listed and many license classifications require a specified length of experience.

There are many kinds of contractors – those who specialize in one area of work such as plumbing, electrical, painting or roofing, for example – and general contractors who will manage a job that may call for specialists in several areas.

ARS 32-1124(B) requires that all advertising by a licensed contractor include the contractor’s license number preceded by the acronym “ROC”, for example, ROC123456.  A license number is always six digits and may contain leading zeros.

In addition to the license number disclosure in advertising, license numbers are required to be posted in a conspicuous place on premises where any work is being performed, and shall be placed on all documents used by the licensee in the regular conduct of business.  This includes, but is not limited to, written bids, letterhead, loan forms, and business cards.

A licensed contractor who fails to comply with the State of Arizona’s advertising and license disclosure requirements is subject to discipline under the Registrar of Contractors statutes governing licensed contractors.

License Status

To check on the status of a licensee, click on:

http://www.azroc.gov/clsc/AZROCLicenseQuery

• A contractor's license status (current, suspended, revoked, inactive, cancelled, expired) may change very quickly so you should recheck license status of the contractor you have chosen on the day you enter into a contract. If you contract with a contractor whose license is not current, you will not be eligible to receive funds from the Residential Contractors' Recovery Fund.

Warranty

Any complaint about poor workmanship or an alleged deficiency by a licensed contractor to AZROC must fall within a two-year time frame starting from the date the date the repair or remodel construction was completed or the date of occupancy of a new structure.  Hence, if a new home builder tells you that they are only providing a one-year warranty, know that you have two years by law.  That is worth repeating.  All new construction has a two year warranty on it.  By law.  Period.

Recovery Fund

A Residential Contractor’s Recovery Fund was established in 1981 to assist homeowners injured by licensed residential contractors in the recovery of damages of up to $30,000.  However, there is maximum limit of $200,000 total in claims paid per each residential license.  So, if you suspect a generic problem attributable to a builder, perhaps in the same subdivision, take action early or the $200,000 could evaporate quickly.

The Recovery Fund compensates homeowners only for actual damages caused by the conduct of a duly licensed contractor.

Unlicensed Contractors

Now, let’s dispel the common myth that unlicensed contractors are cheaper than those who are licensed.  On the surface, that may appear to be true in some cases.  The licensed plumber or electrician will probably have a higher billing rate per hour than their unlicensed counterpart.  Why?  Perhaps it is because they may not be as accountable for their actions (or inactions), and they may not have the appropriate training, certifications, insurance, bonding, warranties, etc., etc.  All of those things cost money and are a legitimate basis for billing rates.

And, since there is little or no remedy for the homeowner (except expensive and time consuming legal recourse) if the unlicensed contractor fails to complete the job or do the repairs in a satisfactory workmanlike manner, the unlicensed contractor could end up costing substantially more in the long run.

Contracting without a license is a Class 1 misdemeanor, punishable by up to a $2,500 fine and 6 months in prison.  It should be noted that conviction of a second offense within a two year period could be designated a felony punishable by up to 18 months in prison and up to a $150,000 fine.

Do you really want to engage somebody that is willing to take that kind of risk -especially when you are in escrow and trying to sell your house?

By the way, anyone (including real estate agents) directly involving themselves in such activity, i.e.  recommending to their clients that they contract or hire someone without a license – when inappropriate, may be party to those crimes.

And, no claims can be made on the AZROC recovery fund as a result of damages caused by an unlicensed contractor.

Mechanics Liens Not Possible by Unlicensed Contractors

Conversely, it is good to know that unlicensed contractors cannot place a lien on your property for any reason – even to include alleged non-payment for services provided.  ARS 32-1101 provides that no such contractor may 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 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.

“Handyman” Exemption

So, under Arizona law, all residential and commercial contractors must be licensed by the state unless they are exempt.  An obvious exemption is when there is not a license category available for the work to be done.  This is rare however because of the category:  General Residential Contractor.  One definite exemption, however, is called the handyman exemption, which applies to contractors who only perform work where no building permit is required and the total contract price is less than $1,000 (including all charges for materials and labor).

Where there are small, simple repairs or maintenance that meets these criteria, using a handyman may be just fine.  However, keep in mind that there are further AZROC provisions for unlicensed persons working with electrical appliances and fixtures including:

1. Electrical appliances and fixtures must remain unaltered, unchanged, and unmodified by any person.

2. Electrical appliances and fixtures must remain as originally designed by the manufacturer.

3. Electrical appliances and fixtures must use a two or three pronged plug and plug into a common electrical outlet.

4. Electrical appliances and fixtures must not use any other form of energy to operate such as natural gas, propane, etc.

5. Electrical appliances and fixtures may not be attached by nail, screw or other fastening device (such as silicone) to the frame or foundation of any residential structure.

Also know that, as of August 2001, handymen are required [ARS 32-1121(A)(14), subparagraph (c)] to display the following statement in all of their advertising:  “not a licensed contractor”.  Unlicensed contractors who fail to include "not a licensed contractor" in advertisements lose their exempt status from licensure and are subject to criminal prosecution or civil fines, and they become subject to investigation and prosecution for violations of the Arizona Consumer Fraud Act.

To file any specific complaint with the ROC, their form must be used:  http://www.azroc.gov/Acrobat/Inspect/RC-C-099Web.pdf.

To report fraudulent or unlicensed contracting:  http://www.azroc.gov/Invest/tips_form.html

For more information visit the Registrar's website at www.azroc.gov or contact the ROC Tucson Regional Office at 400 West Congress Street, Suite 212, Tucson, AZ 85701, (520) 628-6345.

DISCLAIMER

John P. Hale is owner and Designated Broker of Touchstone Residential Realty, Inc., 2485 West Tom Watson Drive, Tucson, Arizona 85745.  He has been a residential real estate agent in the greater Tucson Metropolitan area since 2000.  In addition to being licensed as a Broker rather than a salesperson, John holds the following designations awarded by the National Association of REALTORS^®:  ABR – Accredited Buyer Representative, ASR – Accredited Seller Representative, CRS – Certified Residential Specialist, and GRI – Graduate Realtor Institute.  And, John is among the very few that have been named, MRE – Master of Real Estate by the Arizona Association of Real Estate.

Please note that this article was written by him to reflect the author’s opinion of good practice at the time of its’ writing for the general benefit of those considering sale or purchase of residential real estate, it is not intended as definitive legal advice and you should not act upon it as such without seeking independent legal counsel.  Frequent changes in the law and standards of practice may cause this information to become outdated and no longer applicable or even incorrect.