During this most recent session, the Arizona Legislature passed and the Governor signed new legislation affecting contractors throughout the state. The legislation, Senate Bill 1397, was referred to as the “registrar of contractors omnibus” in the Governor’s signing letter. Because SB 1397 significantly revises Title 32, Chapter 10, it is worth reviewing in its entirety. There are at least three categories of changes that industry members should consider before it takes effect on August 27, 2019.

First, one theme of the changes is a streamlined licensing process. Along with House Bill 2569, which offers greater recognition of workers’ out-of-state experience for the purposes of licensing, SB 1397 reduces one procedural barrier: the posting list. Previously, an applicant needed to wait for a period of time to pass, typically 20 days, before they were allowed to obtain a license. Now, if the other requirements are met, the “registrar shall issue a license…” Previously, this had the potential to be a significant issue when entities, perhaps unexpectedly and at the last minute, determined that they needed a contractor’s license. This often occurred when an out-of-state contractor was considering bidding on an Arizona project and realized it needed a contractor’s license before bidding because of A.R.S. § 32-1123. Now, assuming that the rest of your materials are ready, there is one less time constraint to obtaining a license. Relatedly, the license requirements for joint ventures are clarified with a new specific statutory section. It clarifies that the joint venture does not need its own license, but that, along with other caveats, the member doing the contracting work needs to have a license. There are several other revisions on the licensing front, including clarifying the ability to allow one-year licenses, that you may want to review.

Second, SB 1397 also has important information for homeowners as the Residential Recovery Fund statutes have been updated. A major change is the clarification of who is eligible to recover. A new section, A.R.S. § 32-1132(B), explains when individuals, limited liability companies, trusts, planned communities and lessees are eligible to recover. If you are considering pursing a claim on the Recovery Fund, you may want to review how you fit into this revised scheme.

Finally, there are a few changes regarding how the Registrar will investigate contractors and how contractors need to respond. For example, a change to A.R.S. § 32-1154(A)(6), which is a part of the list of acts licensees may not commit, now provides a specific definition for a “fraudulent act.” Likewise, pursuant to A.R.S. § 32-1154(A)(10), which covers the failure to pay materialmen or service providers, the burden of proof is now more clearly on the contractor. Perhaps most interestingly, A.R.S. § 32-1154(B) was clarified to explain that the Registrar has the authority to investigate contractors on the Registrar’s own motion, as opposed to waiting for a complaint.

These are just three examples of the changes presented by SB 1397. The bill itself is nearly 60 pages and has many nuances that will require individual analysis for individual businesses and their situations. It is worth taking the time now, before the legislation takes effect, to review and consider how it will affect your business.