Construction Industry Update

Jeff Fleetham

Director, Registrar of Contractors

In the state of Arizona, real estate agents are licensed to better protect the public; the same holds true for contractors.

An individual working unlicensed as a real estate agent negatively impacts the livelihood of licensed agents, posing untold financial and safety risks for the public. Similarly, construction contracting work performed by unlicensed entities poses devastating effects on the safety and welfare of the public, as well as the livelihood of Arizona’s licensed contracting professionals.

The Arizona Registrar of Contractors (AZ ROC) is a state agency that serves two core functions: licensing and regulation of the licensing of contractors. Currently, there are approximately 37,000 licensed contracting entities in the state of Arizona with 106 classifications ranging from landscaping and painting to general contracting and carpentry, remodeling and repairs.

The importance of a residential buyer or seller using a licensed contracting professional begins with the assurance that the work will be completed by an individual with the knowledge and experience required to perform the work. It ends with their potential access to a restitution fund, known as the Registrar’s Residential Recovery Fund, if the contracted-for work fails to meet professional industry standards.

As one can imagine, Arizona Revised Statutes and Rules related to contracting can intimately relate to the work encountered by Arizona’s licensed real estate agents on a daily basis.

Though certainly not an exhaustive list, the Arizona real estate industry likely comes into contact with work impacted by contracting licensure requirements, including ARS 32-1121(A)(14), ARS 32-1121(A)(5) & (A)(6), ARS 32-1151, and ARS 32-1169:

• The term handyman is commonly used to generally describe an individual who can fix many, if not all, small projects around the home. In Arizona, however, the statute dictates work allowed to be done by a person not required to be licensed. ARS 32-1121(A)(14), or the so-called “handyman exemption,” details persons not required to be licensed and in general, if it requires a permit or the cost of labor plus material exceeds $1,000, then a licensed contractor is required.
• “Flipping.” More homes were flipped in Maricopa County, Arizona than in any other county in the nation between April 2013 and March 2014.¹ Although the number of “fix and flip” homes is believed to have declined in recent years, there are specific licensure and statutory requirements addressing a property owner that are in place today. These requirements apply if a property owner attempts to sell such property after improving or building structures or appurtenances with the intent to sell. The specific statutes are ARS 32-1121(A)(5) & (6).
• ARS 32-1121(A)(5) essentially allows a property owner, with their own employees or with duly licensed contractors, to build or improve the property without themselves needing to be licensed. This applies if the property is not intended to be placed for sale or for rent. Prima facie evidence of intent for sale or for rent is doing either within one year of completion of the project.
• ARS 32-1121(A)(6) exempts developers who build structures or appurtenances on their property with the intent to sell or rent, AND who contract with a licensed general contractor. It exempts developers who improve structures or appurtenances on their property with the intent to sell or rent AND who contract with a general contractor or specialty contractors, from licensure IF a list of the licensed contractors’ names as well as license numbers are included in all sales documents.
• Finally, licensed real estate agents may encounter questions surrounding the permit of projects; whether a seller secured them and whether a buyer needs to secure one. AZ ROC recommends real estate agents become familiar with ARS 32-1121(A)(14)(a), ARS 32-1151 and ARS 32-1169. These statutes relate to the need for a licensed contractor to perform work requiring a permit, the prima facie evidence of the existence of a contract when permits are secured, and the need to list a licensed contractor when pulling a permit.

Requirements for contractors are detailed, extensive and explicit in rule as well as by statute. If you are a real estate professional with specific questions regarding any of the statutes listed above, we recommend that you consult with an attorney.

If you would like to obtain information regarding licensed contractors that a buyer or seller may want to hire to complete a project, you or your client can refer to the Contractor Search at https://roc.az.gov or contact AZ ROC directly at 877.692.9762.
¹Source: Arizona Republic