By Rick Erickson http://www.swlaw.com/attorneys/rick_erickson
Sweeping changes at the Registrar of Contractors have the construction and real estate industries concerned and curious. The Registrar recently received some poor performance reports by the Auditor General and State Ombudsmen. As a result, the Registrar overhauled its procedures for handling complaints and adjudicating contested cases against Arizona contractors. You should be following these changes before the Registrar rolls out its new approach this summer.
The Registrar regulates contractor licensing and enforcement of workmanship standards against thousands of licensees throughout Arizona. In doing so, the Registrar dictates administrative remedies available to property owners on residential and commercial projects. The Registrar’s mission statement is “to promote quality construction by Arizona contractors through a licensing and regulatory system designed to protect against the health, safety and welfare of the public.”
In finding the balance between quality construction and the public welfare, the Registrar not only deals with complaints filed by property owners against contractors. The Registrar may see complaints by design professionals demanding that contractors answer for obvious construction problems that have been mischaracterized as design issues. The Registrar may also see complaints by agents and brokers seeking punishment of contractors whose shoddy work kills the deal to sell or lease a building or home. The Registrar, in addition, handles complaints filed by contractors against other contractors for violation of prompt payment requirements or other actions suggesting unscrupulous conduct on the project.
In other words, the real estate and construction industries share an interest in strict but efficient oversight of licensed contractors in Arizona. Aggressive enforcement of workmanship standards is good policy and deterrence, but overkill hurts the industry.
According to the Registrar’s statistics, for example, 93% of licensed Arizona contractors are not named in complaints. Most contractors follow the rules and standards of quality construction. Only 1% of the remaining 7% of Arizona contractors make up the frequent flier list of licensees more often targeted in repeated Registrar complaints. Therefore, enforcement has to promote fairness to the contractors in the same way enforcement protects the public.
To further promote fairness in the complaint process, the Registrar says it is going to evolve from being “referee” to acting as the “regulator” of complaints. The complainant will hand off all control of the matter to the Registrar, which will focus more on the 1% of recidivist bad actors. The Registrar will be less inclined to punish contractors unless the Registrar inspector’s investigation reveals repeat offenses, aggravating factors and no attempt at mitigation with the complainant.
Gone are the days when complainants purposefully exploited the process to leverage contractors into paying civil claims or to perform endless maintenance on originally compliant and sufficient work. Investigators will have broad discretion to gather facts, close cases and refer complaints for further adjudication. The Registrar’s staff of attorneys will play a central role in deciding on citations, letters of concern and directives (formerly called “corrective work orders”).
Finally, the complainant no longer has standing to pursue a citation and administrative remedies before the Office of Administrative Hearings. The Registrar prosecutes the citation much like a criminal charge and relies on the Attorney General to assign counsel on behalf of the complainant. The complainant’s role is reduced to testifying at the hearing, while the respondent must defend as always in the adversarial proceeding. There is also an arbitration option available to a contractor subject to a citation but otherwise in good standing with the Registrar (i.e. having no other complaints).
In the end, the Registrar hopes to significantly reduce the numbers of complaints. That number was recently as high as 12,000 complaints per year and was understandably unmanageable for the Registrar and its limited staff. The Registrar also aims to identify, cite and ban the worst contractors from Arizona rather than lose focus on defect and damages disputes that belong in justice and superior courts down the street.
Most, if not all, of the Registrar’s changes will take effect on July 1, 2014. For additional details and quick reference, go to: