When a contractor becomes licensed by the State of Arizona, the licensee must post a license bond ranging from $4,250 to $100,000. This money may be posted in the form of cash, a certificate of deposit or a surety bond. The first thing to do is to find out the type of bond held by the contractor and to make sure it has not already been exhausted.
If the contractor has posted a surety bond, the surety company has the right to pay a written claim prior to court action, but some will require you to get a judgment against the contractor and the surety company. To collect from a surety bond you must file a written claim with the surety company. If the surety company will not pay the claim, you will have to bring a lawsuit against both the contractor and the surety company. You may need to seek legal counsel for assistance in filing a lawsuit. The Registrar of Contractors does not participate in the preparation of your civil action to collect from a surety bond. We recommend that you review the statutes governing bonds and the recovery fund beginning with A.R.S. §32-1131. Copies of the ROC statutes are available at any of our offices or on this website.
If the contractor has posted a cash bond or a certificate of deposit, only the contractor has to be sued. You must send written notice to the Registrar of Contractors of any lawsuit you may file to collect from a contractor's cash bond or certificate of deposit. This will prevent the bond from being refunded to the contractor pending resolution of the claim. Civil judgments must specify that claim can be paid from the cash bond or certificate of deposit assigned to the Registrar of Contractors. If multiple judgments are received, cash bonds are disbursed in the order the judgments are received. It is possible that a contractor's bond could be depleted before you make recovery. It is always advisable to act promptly if a problem occurs.
Lawsuits against license bonds must be started within two years after the commission of the act on which the claim is based. If payment is made from a license bond, the contractor's license is automatically suspended by the operation of law until the full bond amount is replaced.