Licensing is a huge part of the construction world. Each state has its own requirements for contractors licenses, and contracting without a license can lead to serious consequences.
Keeping up with all the requirements can be a real pain. We hope this post will make that a little easier for those in Arizona that are in the contracting business. Let’s look at exactly who needs an Arizona contractor’s license.
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Who Needs an Arizona Contractor’s License?
When it comes to licensing in Arizona, contractors are stuck between AROC and a hard place — “AROC” being the Arizona Registrar of Contractors, and the hard place being potential jail time for unlicensed contractors (more on that later).
According to the AROC website, a license is required for any person or business who “contracts or offers to contract to build, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, development or improvement.” This applies to any construction job in Arizona where labor and material costs exceed $1,000.
Like with many states, there are different levels for which a different Arizona contractor’s license is required.
Types of AZ Contractor Licenses
Arizona has 3 main classifications of contractor licenses:
General Commercial Contractors (B-1)
Allows you to take on jobs of any size, from large commercial projects to small home remodeling jobs.
General Small Contractors (B-2)
Allows you to work on pretty much any job, except the project cannot exceed $750,000 for labor and costs
General Residential Contractors
Only permits work on residential jobs; regardless if its construction, remodeling or repair. This type of license also covers specialized licenses:
- General remodeling/repair
- Residential engineering
- General swimming pool
There are some other classifications, though. Read AROC’s helpful breakdown of license classifications.
The basic requirements to file for a license are as follows:
- 18+ years old
- 4 years of work experience
- 70% or higher on 2 exams:
- Business & management exam
- Trade exam
As stated above, Arizona requires a license for any project over $1,000. If the labor and costs are less than $1,000, you may fall under the “minor work” exception. However, the law states that the work performed must be of a casual or minor nature. Also, if the work requires any local building permits, a licensed contractor must be used.
Violating Arizona license requirements comes with some harsh penalties. Importantly, unlicensed contractors cannot file a mechanics lien. But, unlicensed contractors are also precluded from filing any action for collecting compensation for work performed that required a license.
In addition to that, there are also criminal penalties that may be imposed. In Arizona, it is a class 1 misdemeanor for a person not licensed as a contractor to:
- Act in the capacity of a contractor (even merely bidding on a project); or
- Advertise that they are able to perform any service or contract for compensation.
A first offense comes with a fine of no less than $1,000, plus the possibility of 6 months jail time. For any subsequent offenses, the contractor can be fined up to $2,500.
A defendant may also have to pay all taxes associated with the money they were paid for the work, even if they have to refund the money they were paid. Civil penalties under consumer fraud may come into play, too. This could also lead to fines up to $10,000 for each act of illegal contracting!
AROC keeps a database of all licensed contractors in the state, and owners and GCs should refer to that database before hiring. Plus, on residential jobs, using a licensed contractor makes owners eligible for up to $30,000 compensation if something goes awry. When a licensed contractor provides faulty work on a residential property, the owner may be entitled to as much as $30,000 from AROC’s Residential Recovery Fund. It’s a special fund that all licensed Arizona contractors to pay into, and it provides a helpful safety net for owners.
Getting your license is a relatively easy task, and performing work without a license can have a serious impact on your business – and your life! Regardless of whether you agree with the licensure rules, it’s important to maintain your Arizona contractor’s license.
For more information on contractor licensing in Arizona, visit the Registrar of Contractors website.