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SB1565 - 572R - I Ver
REFERENCE TITLE:
registrar of contractors; recovery fund
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SB 1565
Introduced by
Senator
Dunn
AN
ACT
Amending sections 32-1132, 32-1132.01,
32-1133, 32-1133.01, 32-1134 and 32-1139, Arizona
Revised Statutes; RELATING to the residential contractors' recovery fund.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 32-1132, Arizona Revised
Statutes, is amended to read:
START_STATUTE
32-1132.
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_STATUTE
32-1132.01.
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_STATUTE
32-1133.
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_STATUTE
32-1133.01.
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_STATUTE
32-1134.
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_STATUTE
32-1139.
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