Restoration Contractors Face Strict Contract Requirements
To avoid ROC discipline, contractors that perform restoration work would be wise to ensure that their form contracts comply with Arizona law.
The massive hail storm that tore through
the Valley in October 2010 not only caused $2.7 billion in
property damage; it also gave birth, within days, to a cottage
industry of hail storm damage repair. Hundreds of contractors,
including storm-chasers from out of state, descended on
storm-damaged neighborhoods with offers to repair roofs, air
conditioning units, windows, and other storm damage; waive
insurance deductibles; and assist homeowners in making claims on
their homeowners policies.
Due to the volume of work and the
severity of the damage, it was not surprising that hundreds of
disputes arose, ranging from claims of faulty workmanship and
abandonment of a project to bad faith denials of an insurance
claim. (See the October 3, 2011, Arizona Republic
2010 Phoenix-Area Hailstorm: Damage and Disputes).
To help protect Arizona homeowners from
being victimized again by shady operators, in 2012 the
Legislature passed a new law,
A.R.S. § 32-1158.02 (Residential Construction Contracts),
which established a number of new requirements for contracts for
the residential repair or replacement of damage resulting
directly from a catastrophic storm. The statute mandates a
number of disclosures in storm damage repair contracts,
a statement, in bold, 10-point
type, regarding the owners cancellation rights;
a notification that the
contractor has not advised the owner that the loss will be
covered by insurance; and
a statement that the owner is
responsible for payment for work performed should the insurer
deny all or part of the claim.
The 2012 statute also:
limits down-payments to no
more than 50% of the total contract price;
requires that refunds be
provided within ten days of the date the contract was canceled;
mandates that any change
orders be in writing and signed by the homeowner;
creates additional disclosure
requirements for estimates made by the contractor in
anticipation of making an insurance claim; and
sets forth the circumstances
under which a contractor can negotiate with an insurer on behalf
of an owner.
Punishment for failing to comply with
A.R.S. § 32-1158.02 can be severe, with the contractors license
subject to suspension or revocation for non-compliance.
It is important for contractors to note
that the 2012 statutes disclosure requirements are in addition
to the already lengthy disclosure obligations set forth in
A.R.S. § 32-1158.
With this in mind, the new enforcement
policies recently implemented by the Arizona Registrar of
Contractors (ROC) have resulted in an uptick in disciplinary
actions against contractors whose form contracts do not comply
with A.R.S. § 32-1158, and it is anticipated that the ROCs
new-found vigilance in this regard will extend to the newer
statute as well.
Contractors that perform restoration
work, whether on a full- or part-time basis, should avoid
getting caught in the storm by taking the simple of step of
having their form contracts audited for compliance with A.R.S.
§§ 32-1158 and -1158.02. Sacks Tierney construction attorneys
are available to assist with any contract review needs.