Home construction

A $74,000 order issued by the Arizona Registrar of Contractors illustrates the potential consequences for contractors of restitution orders, as well as a possible shift toward more aggressive restitution orders in the future.

The contract required the contractor to get all required permits and inspections. However, despite the contractor’s assurances, during the project the contractor either failed to get the permits and inspections or failed to get them on time. At one point, the contractor reached out to a local building official and asked whether doing certain work without a permit would be punished only by a “slap on the wrist.”

During the project, the ROC suspended the contractor’s license seven times, with one suspension of over three months. The contractor did not inform the homeowner of the suspensions and continued to work as usual on the project. The contractor continued to demand and receive from the homeowner regular payments, including a $57,000 payment for framing supplies that the contractor never ordered. 

The contractor also consistently failed to complete portions of the project on time. After starting demolition, it took the contractor over nine months to perform 10 to 15 percent of the work. Because of these failures, the homeowner and the contractor agreed to scale back the contractor’s role. But even after this agreement, the contractor failed to complete the work it agreed to do. 

Finally, the homeowner fired the contractor for failing to complete the contract. The contractor returned part of the homeowner’s money and promised to complete an “accounting” for the rest and return any excess money. The contractor never gave an accounting to the homeowner; after the homeowner filed an ROC complaint, the contractor returned the $57,000 framing payment. 

ROC Citation.

The homeowner’s ROC complaint was unusual in that it did not include workmanship allegations, which are often major components of ROC complaints. After receiving the homeowner’s complaint, the Registrar cited the contractor for four violations of Arizona law found in

A.R.S. § 32-1154(A)


  • doing a fraudulent act;

  • failing to complete the contract or modifying the contract;

  • failing to have a contract that complied with Arizona law, and

  • contracting while the contractor’s license was suspended.

Administrative Ruling.

At an administrative hearing, an administrative law judge found that the contractor violated all the sections of Arizona law noted above.

In addition, the judge reviewed the contract between the homeowner and the contractor and, as mentioned above, determined that the contractor was obligated to apply to the final invoice the homeowner’s first 10% payment (or $74,144). Since the contractor failed to complete the project and issue a final invoice, the judge determined the contractor should return $74,144 to the homeowner as restitution. 

The judge issued a three-part order that the ROC accepted:

  • The ROC should suspend the contractor’s license until receiving proof that the contractor made the $74,144 restitution payment to the homeowner.

  • If the contractor failed to pay the restitution within 30 days, the ROC would revoke the contractor’s license, and no other entity associated with the contractor could get a license until the restitution was paid.

  • The contractor must provide proof, within 30 days, that it had modified its contract to comply with Arizona law.

Restitution Wrap-Up.

Restitution awards are always case-specific. In this case, the contractor’s fraudulent behavior and frequent license suspensions showed that the contractor was a particularly bad actor, and its bad behavior undoubtedly contributed to the size of the restitution award.

Nevertheless, the size of the award on its face is significant, and contractors should take note of it.

In our experience over the last several years, the ROC and administrative law judges have been relatively conservative in ordering restitution – both with regard to ordering restitution at all and to the magnitude of the payment – but the large award described in this article could pave the way for more common and more substantial restitution awards down the road.

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