Arizona Contractor License FAQs - Recovery Fund

Arizona Contractor Recovery Fund

What is the Recovery Fund and its purpose?

The recovery fund is a form of financial protection provided by licensed Arizona residential contractors to residential consumers.

The recovery fund is governed by statute and available only to owner / occupants of class five residential property. A "person injured" as defined by statute, can recover losses incurred due to poor workmanship or non-performance by a licensed residential contractor.

I would like to file (a claim) against the recovery fund. What is the procedure?

An action against the recovery fund must be commenced no later than two years from the commission of the act of the contractor, the cause of the injury, or from the date of occupancy. The recovery fund is available to owner's of class five real residential property which is actually occupied or intended to be occupied by the owner as a residence.

The homeowner can pursue the fund by way of the administrative procedure or the civil procedure.

Administrative Procedure for Recovery - An administrative claim can be filed

if the contractor has not filed bankruptcy and the license has been revoked or suspended as a result of an order to remedy a violation as a result of the homeowner's complaint.

An administrative claim must be filed on forms prescribed by the Registrar and submitted to our office along with all supporting documentation. Basic documentation would include a copy of the contract with the contractor, proof of payment on that contract and at least three itemized bids from licensed Arizona residential contractors as to the necessary costs to complete or repair the project.

Civil Procedure for Recovery - A civil action must be brought against the contractor in either Justice of the Peace Court or Superior Court. The plaintiff (claimant) must also pursue the contractor's license bond. This can be accomplished in the same action.

The claimant must notify the Registrar, of the commencement of the action, pursuant to A.R.S. §32-1136. Submit a copy of the summons and complaint, judgment and all supporting documentation for review prior to obtaining a certified order from the court directing payment from the recovery fund. The fund does not cover court costs or attorney's fees.

Why do you need all of these documents?

This documentation establishes / documents the "injury" described in your claim, provides for consistency in the awarding of funds and establishes a clean audit trail. The recovery fund is audited every three years by a CPA.

How much will I be paid by the recovery fund?

The recovery fund does not guarantee payment to anyone. However, a "person injured" can recover as much as $20,000. An award is limited to actual damages (workmanship) but shall not exceed an amount necessary to complete or repair the project. The maximum payout per residential contractors license is $100,000.

When will I get my check?

If all statutory requirements are met and all required documents are filed with the claim, an administrative payout could occur in a minimum of 14 weeks, provided a hearing is not requested or the contractor does not file bankruptcy.

Payouts on civil claims vary and are dependent upon the speed of the civil court system.

Why does the contractor get a chance to request another hearing? I had a hearing and the Registrar ruled in my favor!

The contractor is guaranteed the right to due process under the U.S. Constitution. The first hearing was for disciplinary purposes. A recovery fund hearing would address different issues such as eligibility requirements or the appropriateness of the proposed monetary award.

A hearing can be requested by the contractor, homeowner or the Registrar of Contractors.

After an award is made does the recovery fund select/hire the contractor, or do I make that decision?

Generally an award is made based on the low bid. The recovery fund does not select or hire the contractor. The check is issued to the homeowner and you contract directly with the contractor. The homeowner is free to select and hire the contractor of their choice. The homeowner would be responsible for paying any difference in costs.

I am having trouble getting bids. When I mention the Registrar of Contractors Recovery Fund nobody wants to bid the job. Will you recommend contractors for me to call?

Since the agency licenses and regulates contractors, we can't recommend anyone to you. This could be considered a conflict of interest. You might consider not volunteering this information since you will contract directly with the contractor after receiving the award.

I have damages that I need to get fixed now. I can't wait for the recovery fund. If I proceed will I hurt my claim for recovery against the fund?

If you feel you need to get the work done, the decision must be made by you, the homeowner.

You will want to fully document the condition of the home with photos, etc., so that you are prepared to support your claim if a hearing is requested. Obtain at least three itemized bids from licensed Arizona residential contractors and submit them to the fund along with copies of cancelled checks as proof of payment to the new contractor.

In any case, the recovery fund can not guarantee payment nor can it guarantee that you will receive full reimbursement for the amounts you spend.

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