Have you ever hired a licensed contractor to perform work at your home, only later to discover that the work the contractor did was substandard? If so, did the contractor close his or her business before correcting the substandard work? In this unfortunate scenario, there is potential relief in the form of the Recovery Fund governed by the Arizona Registrar of Contractors (“ROC”).
A Homeowner may be entitled to recover up to $30,000 from the Recovery Fund to correct a Contractor’s substandard work. The property must be residential property and must be actually occupied or intended to be occupied by the owner. The Contractor must have been licensed at the time the poor workmanship was performed in order for the homeowner to be eligible to recover. There is a two year statute of limitations from the date of the injury (the date the substandard work was performed) or from the date the Homeowner moved into the property for a claim to be filed. A Homeowner has two ways to get to the Recovery Fund. In both proceedings, the Homeowner will need to establish that the Contractor’s work deviated from the acceptable standards of workmanship in the industry.
The first option is for the homeowner to file a lawsuit in the appropriate court of law naming the Contractor. The Homeowner will also name the Contractor’s license bondholder as a party to the suit, and give written notice to the ROC that the Homeowner is seeking monies from the Recovery Fund. Typically, the Homeowner will file a breach of contract and/or negligence claim against the Contractor. If the Homeowner prevails in the lawsuit against the Contractor, the Homeowner will receive a Judgment against Contractor. Upon the Homeowner’s receipt of a judgment from the Court, an additional “Judgment Notice” must be given to the ROC. The ROC has 20 days from this Notice to object. If there is no objection, the Homeowner may apply for the funds from the ROC using the Court’s Judgment. Keep in mind that even though the Judgment may be for more than $30,000, the Recovery Fund will not issue any monies above that amount.
The second method, which avoids the courthouse altogether, requires the Homeowner to file an administrative claim directly with the ROC. The ROC first inspects the property to determine if there are any violations. This inspection may take anywhere from 30-40 days after the ROC Claim is filed. If violations are found, the ROC, through its inspector, will issue a Corrective Work Order to the violating Contractor. The Contractor is given 15 days to correct the violations. If there is a disagreement about the corrective work, either party may ask for an administrative hearing. At that point, the parties go before an Administrative Law Judge (“ALJ”) where each side presents evidence. If the ALJ agrees with the Homeowner, then the Homeowner may apply for an award from the Recovery Fund. The application for the Recovery Fund award requires additional legwork by the Homeowner. First, the Homeowner must provide details of the cost of repair as set forth in three detailed estimates from three licensed contractors. Once the Homeowner has complied with the process, there will still be a waiting period to receive the funds. While this method does not require that attorneys get involved, the Contractor is afforded many opportunities throughout the administrative process to challenge all assertions made by the Homeowner.
Both methods have pros and cons. For example, if there is litigation and the Contractor does not contest the suit, an award from the Recovery Fund may come faster than under the Administrative method. However, if the Contractor prevails against the Homeowner, the Homeowner is susceptible to a judgment in which the Homeowner would have to the pay the Contractor’s attorney’s fees. Under the Administrative route, neither side will face exposure to the other side’s attorneys’ fees. The Administrative route, however, may take longer than litigation, and may take several months to progress through the ROC, even if the Contractor does not contest the claim. Sometimes one method may be preferable to the other. Sometimes both methods make sense. The important lesson, however, is to make sure that your contractor is licensed with the ROC so that no matter which path you may have to take, the Recovery Fund is an option.