SB1565 - 572R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 32-1132, Arizona Revised Statutes, is amended to read:

START_STATUTE32-1132. Residential contractors' recovery fund; claimants; eligibility; definition

A. The residential contractors' recovery fund is established to be administered by the registrar for the benefit of claimants that are damaged by an act, representation, transaction or conduct of a residential contractor that is licensed pursuant to this chapter and that is in violation of this chapter or the rules adopted pursuant to this chapter.

B. Only the following claimants are eligible for an award from the residential contractors' recovery fund:

1. An individual who both:

(a) Owns residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance.

(b) Actually occupies or intends to occupy the residential real property described in subdivision (a) of this paragraph as the individual's primary residence. The criteria prescribed pursuant to section 42-12053, subsection B may be used to establish whether an individual occupies or intends to occupy the residential real property as the individual's primary residence.

2. A limited liability company to which both of the following apply:

(a) The limited liability company owns the residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance.

(b) At least one of the limited liability company's members actually occupy occupies or will occupy the residential real property as described in subdivision (a) of this paragraph as their the member's primary residence. The criteria prescribed pursuant to section 42-12053, subsection B may be used to establish whether a member occupies or intends to occupy the residential real property as the member's primary residence.

3. A trust to which all of the following apply:

(a) The trust is a revocable living trust.

(b) The trust owns the residential real property that is damaged by the failure of a residential contractor to adequately build or improve a residential structure or appurtenance.

(c) All of the trust's trustors actually occupy or intend to occupy the residential real property described in subdivision (b) of this paragraph as their primary residence. The criteria prescribed pursuant to section 42-12053, subsection B may be used to establish whether the trustors occupy or intend to occupy the residential real property as the trustorS' primary residence.

4. A planned community as defined in section 33-1802 or unit owners' association as defined in section 33-1202 if both:

(a) The builder or developer transferred control to the planned community as defined in section 33-1802 or unit owners' association as defined in section 33-1202.

(b) A licensed residential contractor's failure to adequately build or improve a residential structure or appurtenance caused damage to the common elements within the complex.

5. A lessee of residential real property that meets all of the following:

(a) Contracts directly with a residential contractor or indirectly with a subcontractor of the residential contractor.

(b) Actually occupies or intends to occupy the residential real property described in subdivision (a) of this paragraph as the lessee's primary residence. The criteria prescribed pursuant to section 42-12053, subsection B may be used to establish whether a lessee occupies or intends to occupy the residential real property as the lessee's primary residence.

(c) Is damaged by the licensed residential contractor's failure to adequately build or improve a residential structure or appurtenance.

C. In order for a claimant to be eligible for an award from the residential contractors' recovery fund, the contractor whose actions damaged the claimant must have been appropriately licensed at one of the following times:

1. The date that the underlying contract was signed.

2. The date that the first payment was made.

3. The date that the underlying work first commenced.

D. For the purposes of this section, "appropriately licensed" means the residential contractor held a valid residential contractor license that was issued pursuant to this chapter and that was not canceled, in inactive status, expired, suspended or revoked. END_STATUTE

Sec. 2. Section 32-1132.01, Arizona Revised Statutes, is amended to read:

START_STATUTE32-1132.01. Actual damages; fund; limitations; definition

A. An award from the residential contractors' recovery fund is limited to residential real properties. The fund may not issue an award covering damages to commercial property.

B. An award from the residential contractors' recovery fund may not exceed the actual damages suffered by the claimant as a direct result of a contractor's violation. Actual damages:

1. May not exceed an a reasonable amount necessary to complete or repair a residential structure or appurtenance within residential property lines.

2. Must be established by bids supplied by or the reasonable value of work performed by a person that is licensed pursuant to this chapter if the person is required to be licensed pursuant to this chapter.

C. If the claimant paid a deposit or down payment and no actual work is performed or materials are delivered, the claimant's actual damages are the exact dollar amount of the deposit or down payment plus interest at the rate of ten percent a year from the date the deposit or down payment is made, but may not exceed $30,000 $40,000. Interest may not be paid from the fund on any other awards under this chapter unless ordered by a court of competent jurisdiction.

D. The maximum individual award from the residential contractors' recovery fund is $30,000 $40,000. An individual claimant may not be awarded more than the maximum individual award.

E. Monies in the residential contractors' recovery fund may not be awarded for attorney fees or costs, except in contested cases appealed to the superior court.

F. If the claimant has recovered a portion of the claimant's loss from sources other than the fund, the registrar shall deduct the amount recovered from other sources from the amount of actual damages suffered pursuant to subsection B of this section and direct the difference, not to exceed $30,000 $40,000, to be paid from the fund.

G. The claimant may not be the spouse of the residential contractor or the personal representative of the spouse of the residential contractor.

H. For the purposes of this section, "actual damages" means the reasonable cost of completing the contract and repairing the contractor's defective performance, minus the part of the contract price still unpaid. END_STATUTE

Sec. 3. Section 32-1133, Arizona Revised Statutes, is amended to read:

START_STATUTE32-1133. Civil recovery; statute of limitations

A. An action for a judgment that may subsequently result in an order for collection from the residential contractors' recovery fund may not be commenced later than two years after the date of the commission of the act by the contractor that is the cause of the injury or from the date of occupancy.

B. When a claimant commences an action for a judgment that may result in collection from the fund, the claimant must notify the registrar in writing to this effect within thirty calendar days after the commencement of the action. The registrar at any time may intervene in and defend the action.

C. When any claimant recovers a valid judgment against any residential contractor for an act, representation, transaction or conduct that is in violation of this chapter or the rules adopted pursuant to this chapter, the claimant, on twenty days' written notice to the registrar, may apply to the court for an order directing payment out of from the fund, of the amount unpaid on the judgment, subject to the limits stated in this article. If the claimant fails to notify the registrar within thirty calendar days after commencement of the action as required by this subsection, the court may direct payment out of from the fund on receipt of a consent to payment signed on behalf of the registrar. If the claimant gives notice to the registrar as required by this subsection, the court may direct payment out of from the fund either on receipt of a consent to payment signed on behalf of the registrar or, in the absence of any written consent, after the notice period required by this subsection. If the court receives written objections by the registrar, the court may not direct payment from the fund without affording the registrar a reasonable opportunity to present and support the registrar's objections.

D. The court may proceed on an application in a summary manner and, on the hearing, the claimant is required to show that the claimant has done all of the following:

1. Given notice as required by subsections B and C of this section.

2. Obtained a judgment that has become final, as provided in subsection C of this section, stating the amount and the amount owing at the date of the application.

3. Proceeded against any existing bond covering the residential contractor. A claimant fulfills the requirement of this paragraph by sending a demand to the surety and receiving a determination from the surety.

E. The court may make an order directed to the registrar requiring payment from the fund of whatever sum it finds to be payable on the claim, in accordance with this section, if the court is satisfied on the hearing of the truth of all matters required to be shown by the claimant by subsection D of this section. The recovery limits established under this article apply to all judgments awarded beginning September 1, 2002. If the claimant has recovered a portion of the claimant's loss from sources other than the fund, the court shall deduct the amount recovered from other sources from the amount of actual damages suffered pursuant to section 32-1132.01, subsection A and direct the difference, not to exceed $30,000 $40,000, to be paid from the fund.

F. On receipt of a certified copy of the order specified in subsection E of this section, the registrar may authorize payment from the residential contractors' recovery fund even if an appeal has been instituted but not completed. END_STATUTE

Sec. 4. Section 32-1133.01, Arizona Revised Statutes, is amended to read:

START_STATUTE32-1133.01. Administrative recovery; statute of limitations

A. Notwithstanding any other provision in this chapter, if a contractor license has been revoked or suspended as a result of an order to remedy a violation of this chapter, the registrar may order payment from the residential contractors' recovery fund to remedy the violation.

B. The registrar must serve the contractor with a notice setting forth the amount claimed or to be awarded.

C. If the contractor contests the amount or propriety of the payment, the contractor must respond in writing within ten days after the date of service by requesting a hearing to determine the amount or propriety of the payment. The contractor's failure to respond in writing within ten days after the date of service may be deemed a waiver by the contractor of the right to contest the amount claimed or to be awarded.

D. Service of the notice required by subsection B of this section may be made by personal service to the contractor or by mailing a copy of the notice by certified mail with postage prepaid to the contractor's latest address of record on file in the registrar's office.

E. If service is made by certified mail, it is effective five days after the notice is mailed. Except as provided in section 41-1092.08, subsection H, the contractor or claimant may seek judicial review of the registrar's final award pursuant to title 12, chapter 7, article 6.

F. A claimant to the residential contractors' recovery fund pursuant to this section must show that the claimant has proceeded against any existing bond covering the residential contractor. A claimant fulfills the requirement of this subsection by sending a demand to the surety and receiving a determination from the surety.

G. A claim for payment from the residential contractor's recovery fund must be submitted within two years after all proceedings, reviews and appeals connected with the registrar's final order terminate. END_STATUTE

Sec. 5. Section 32-1134, Arizona Revised Statutes, is amended to read:

START_STATUTE32-1134. Powers and duties of registrar

A. The registrar shall:

1. Establish assessments and maintain the fund balance at a level sufficient to pay operating costs and anticipated claims using the cash basis of accounting.

2. Cause an examination of the fund to be made every three years by an independent certified public accountant.

3. File with the department of insurance and financial institutions an annual statement of the condition of the fund.

4. Employ accountants and attorneys from monies in the fund, but not to exceed $10,000 in any fiscal year, that are necessary for the performance of the duties prescribed in this section.

5. 4. Employ or contract with individuals and procure equipment and operational support, to be paid from or purchased with monies in the fund, but not to exceed in any fiscal year fourteen twenty percent of the total amount deposited in the fund in the prior fiscal year as may be necessary to monitor, process or oppose claims filed by claimants, which may result in collection from the recovery fund.

B. Notwithstanding section 32-1135, the registrar may expend spend interest monies from the fund to increase public awareness of the fund. This expenditure may not exceed $50,000 in any fiscal year. END_STATUTE

Sec. 6. Section 32-1139, Arizona Revised Statutes, is amended to read:

START_STATUTE32-1139. Liability of fund for each residential contractor's license; suspension of license; repayment

A. The liability of the fund shall not exceed two hundred thousand dollars $300,000 for any one residential contractor's license. If claims against the fund on behalf of any one residential contractor's license exceed two hundred thousand dollars $300,000, the claims shall be paid based on a pro rata share of the common liability, and the registrar or a court entering an order for payment after the sum of two hundred thousand dollars $300,000 has been paid from the fund shall modify the order indicating that no further recovery from the fund shall be is allowed.

B. If any amount is paid from the fund in settlement of a claim arising from the act, representation, transaction or conduct of a residential contractor, the license of the contractor shall be automatically suspended by operation of law until the amount paid from the fund is repaid in full, plus interest at the rate of ten per cent percent a year. Any person who is or was, at the time of the act or omission, named on a license that has been suspended because of a payment from the recovery fund is not eligible to receive a new license or retain another existing license, that which also shall be suspended by operation of law, nor shall and any suspended license may not be reactivated, until the amount paid from the fund is repaid as provided in this subsection.

C. After receiving an award from the fund pursuant to this article, a person is deemed to have assigned to the registrar the person's rights for recovery against the responsible residential contractor licensed pursuant to this chapter to the extent of the person's award from the fund. END_STATUTE