Contractor Licensing in Arizona: The Registrar of Contractors

“How do I get a contractor license in Arizona?” Arizona keeps it in one place. The Registrar of Contractors (ROC), under Title 32, Chapter 10 of the Arizona Revised Statutes (A.R.S.), licenses general contractors and the specialty trades alike, electricians, plumbers and HVAC contractors included. What shapes Arizona’s system is a split between residential and commercial work, a bond sized to your volume, and a fund that pays homeowners when a residential contractor fails them. This is Arizona in detail; the method for any state is in Do I Need a Contractor License?

Who needs one

The ROC’s summary: any business that contracts or offers to contract to build, alter, repair, add to, subtract from, improve, move, wreck or demolish any building or other structure, or to do any part of that work, must be licensed. That includes subcontractors, floor covering contractors and hardscape contractors, and you must be licensed before you submit a bid. The statute makes it unlawful to engage in the business, submit a bid, or act or offer to act as a contractor without a license in good standing in the name of the person or business, unless an exemption applies (A.R.S. §32-1151).

Residential, commercial or dual

The ROC issues separate licenses for commercial and residential work, and dual licenses that cover both, for each trade. Residential contracting means work on residential structures, such as houses, townhouses, condominiums and cooperative units, and the appurtenances within residential property lines; commercial is everything else. Within each side there are general and specialty classifications. A few that home-service trades hold:

Some classifications carry a dollar cap. R-61, carpentry, remodeling and repairs, covers projects of $50,000 or less including labor and materials; R-62, minor home improvements, covers projects of $5,000 or less and excludes structural work. On the general side, the B general residential contractor may build and repair all or any part of a residential structure, B-3 covers remodeling and repair of existing homes, and B-2 covers commercial projects of $2,000,000 or less. Each of these must subcontract electrical, plumbing, air conditioning and certain other work to an appropriately licensed contractor; the ROC’s classifications page lists the exact scope of each.

The qualifying party and the exams

• The license belongs to the business. It may be issued to a sole proprietorship, partnership, LLC or corporation, and it “belongs to the business and not to the qualifying party.” An LLC or corporation must be registered with the Arizona Corporation Commission and in good standing. Everyone listed on the license is responsible for the business’s contracting.
• The qualifying party is a person regularly employed by the business and actively engaged in the classification: the owner, a partner, an LLC member, an officer or an employee.
• Experience. At least four years of practical or management trade experience, two of them within the last ten years, in the type of work the license covers. Technical training may substitute for up to two of the four years, and the registrar may reduce the requirement where custom in the trade shows four years is excessive (§32-1122(E)(1)).
• Exams. The qualifying party must pass, with at least 70%, the online Statutes and Rules Training Course and Exam (SRE) and a trade exam unless it is waived. The ROC’s fee page lists $61 for the SRE and $66 for a trade exam, paid to the testing vendors. Exams must be taken not more than two years before the application (§32-1122(E)(2)).
• Licensed in another state? Arizona has no direct reciprocity, but the trade exam and experience may be waived if the qualifying party held a comparable license, obtained by trade exam, within the past five years. The SRE cannot be waived unless the person was a qualifying party on an Arizona license within the past five years.
• Background checks are required for every person named on the application, through the ROC’s vendor, and expire 90 days after completion.

The bond and the fees

Every license needs a surety bond or a cash deposit before it is issued and to be renewed (§32-1152(A)). The statute sets ranges; the ROC’s bond page sets the amounts by license type and the gross volume you expect per license:

A dual license’s bond is the residential and commercial amounts added together. The bond must be continuous; a surety that cancels must give you and the ROC 30 days’ notice, and unless you replace the bond the license is suspended. The ROC’s fee page lists a new two-year specialty residential (R) license at $720 in all: an $80 application fee, a $270 license fee and a $370 Recovery Fund assessment. A new specialty dual (CR) license is $850, a general residential license $870, and a specialty commercial (C) license $580, which pays no Recovery Fund assessment. Exam fees are on top.

The Recovery Fund

Residential and dual contractors either pay an assessment into the Residential Contractors’ Recovery Fund or post an additional $200,000 bond (§32-1152(C)); the ROC says the vast majority participate in the Fund. The Fund pays eligible homeowners, mainly owners who live or intend to live in the home, who are damaged by a licensed residential contractor’s violation of the chapter. The homeowner must first claim against your license bond, and the maximum individual award is $30,000 (§32-1132.01(D)). The Fund’s total liability for any one license is $200,000 (§32-1139(A)).

The part to remember as a contractor: if the Fund pays a claim arising from your work, your license is automatically suspended until the amount is repaid in full, plus interest at 10% a year, and anyone named on that license cannot get or keep another license until it is (§32-1139(B)). The Fund protects your customers; it does not protect you.

The handyman exemption, in short

Work on one project whose aggregate price, labor and materials included, is less than $1,000 (certain unmodified plug-in appliances are not counted) is exempt if it is casual or minor. The exemption does not apply if the work needs a local building permit, if it is part of a larger operation, if the operation is split into contracts under $1,000, for evasion or otherwise, or if you advertise without the words “not a licensed contractor” (§32-1121(A)(14)). Gardeners doing lawn, garden, shrub and tree maintenance are also exempt (§32-1121(A)(16)). The handyman rules across four states are in What Can a Handyman Do Without a License?

What working unlicensed costs

• A crime. Acting as a contractor without a license is a class 1 misdemeanor, with a fine of at least $1,000 for a first offense and at least $2,000 after that (§32-1164).
• No suit to collect. A contractor cannot bring a court action to collect for work that needs a license without alleging and proving it was licensed when the contract was made and when the claim arose (§32-1153).
• The evidence is easy. A permit from a government agency, or employing someone on a project, is accepted in court as prima facie evidence that a contract existed (§32-1151).

Once you are licensed

Your number, preceded by “ROC,” goes in a conspicuous place where work is being performed, on every written bid and estimate, and on advertising, letterheads and customer documents; broadcast, internet and billboard ads may instead include a web address that links directly to a site showing your name and number (§32-1124(B)). The wider picture is in Your License Number in Ads. Any contract over $1,000 with a property owner must be in writing with your name, business address and license number, the owner’s name and mailing address, the job address, the date, the estimated completion date, the work, the total price including taxes, any deposit, any progress payments and the stage at which each is due, and the owner’s right to file a written complaint with the registrar, with the registrar’s telephone number and website address and a statement that complaints must be made within the time the statute allows, prominently displayed in at least ten-point bold type; both of you sign it, and you give the owner copies of everything signed and a receipt for any cash (§32-1158).

Four things to do

1. Match every service you sell to a classification on the ROC’s list, residential, commercial or dual.
2. Pick the qualifying party and check the four years of experience before paying for exams.
3. Estimate your volume honestly for the bond, and budget the Recovery Fund assessment for residential work.
4. Put “ROC” and your number on your estimate and contract templates the day the license issues.

General information, not legal or tax advice. Rules change and vary by state; check with the agency named above or a professional for your situation.