Contracting Licenses for Commercial and Residential Builders

It is illegal for a commercial or residential builder to conduct business in Arizona without first obtaining an appropriate contractor’s license. In this, we will examine the licensing requirements and some situations in which a license is not required. We will also look at the consequences of engaging in contracting without a license.

“Contractor” is synonymous with the term “builder.” It means any person or company that, for compensation, directly or indirectly constructs, alters, repairs, adds to, subtracts from, improves, moves, wrecks or demolishes any building, road, railroad, excavation or other structure, project development or improvement.

Also included within the definition of contracting is:

1. the erection of scaffolding or any other structure or work in con­nection with the construction
2. connecting a structure or improvements to utility service lines and metering devices and the sewer line, and
3. providing mechanical or structural services for any structure or improvement.

The term contractor includes subcontractors, specialty con­tractors, floor covering contractors, landscape contractors (other than gardeners), and project managers and consultants.

A “residential contractor” is the same as a residential builder, and generally means anyone who works on residen­tial structures, such as houses, townhouses, condominiums, cooperative units, and apartment complexes of four units or less.

Exemptions to Licensing Requirements

There are 16 separate exemptions to the licensing require­ments. They are set forth in A.R.S. Section 32-1121(A).  The most common exemptions are listed below:

A property owner who improves his property or builds structures on his property for occupancy solely by him and his family. To qualify for this exemption, the owner-builder cannot offer to rent or sell the structure for one year after completion or issuance of a certificate of occupancy.

A supplier of finished products, materials or arti­cles of merchandise who does not install or attach the items (unless the value is $1,000 or less).

A person who sells or installs certain electrical fixtures and appliances, regardless of the value.

A property owner who is acting as a developer and who builds a structure on his property for sale or rent and who contracts for the project with a prop­erly licensed contractor. The licensed contractor’s name and license number must be included in all sales documents.

A gardener who performs lawn, garden, shrub and tree maintenance.

A person engaging in work for which the total con­tract price, including all labor and materials, but excluding certain electrical fixtures and appliances, is less than $1,000. Under this exemption, the work must be of a casual or minor nature, and the person must disclose in any advertising that he is “not a licensed contractor.”

Penalties for Violation

Acting in the capacity of a contractor without a license is a class 1 misdemeanor. For the first offense, an unlicensed con­tractor will be fined not less than $1,000. For the second and any subsequent offense, the minimum fine is $2,000.

In addition, an unlicensed contractor is prohibited from collecting any monies owed under a construction contract. In order to maintain a civil action to collect compensation, the contractor must prove that he was licensed when the contract was entered into and when the claim arose.

Licensing Information

As shown above, anyone engaging in contracting activities within the state of Arizona, whether as a commercial or resi­dential contractor, unless exempt, must obtain a license from the Arizona Registrar of Contractors. Contractor information and forms may be obtained from the Registrar of Contractor’s Web site, www.azroc.gov.

Any consumer who is harmed by a contractor, whether or not the contractor is licensed, should promptly report the matter to the Registrar of Contractors. The Registrar of Con­tractors may be reached by calling (602) 542-1525, or toll free outside Maricopa County within Arizona, (877) 692-9762.