HOME CONSTRUCTION REGULATIONS IN ARIZONA

Written by: J. Robert Eckley

Eckley & Associates Video ArticleFrom: January 1999 edition of The Arizona Journal of Real Estate and Business

Yikes! Your real estate client just called and told you that he is livid about the new home you just sold him! Within a few weeks of moving in, the floor tiles have become spontaneous illustrations of continental drift, the exterior stucco has transformed into lunar topography and an unanticipated water feature has suddenly spouted in the backyard…complete with quicksand and toads.

The house is falling around the client’s ears, he is hysterical and he wants blood! At this point: Anyone’s will do. Including yours when he soon finds out that the regulatory system set out in Arizona to divert and resolve home construction problems actually dumps legitimate complaints right back into the antagonized consumer’s lap, and, ultimately, by your connection to the sale and the client, right back into yours.

After all, wasn’t it you that referred to this post “Twister” home as “a fabulous investment” and its Neanderthal builder as “one of the brightest beacons in the industry?” Now this pitch is coming back at you like Africanized bees on Viagra! How did this happen, and how can you protect yourself from this liability boomerang?

Let’s first examine the system failures that really created this mess, then see what is left for us to do about it:

SYSTEM FAILURE ONE: IT’S ACTUALLY AMAZING THAT THIS HOUSE HAS ONLY BECOME CRIPPLED AT THIS POINT.

AFTER ALL, IT WAS BORN A REGULATORY ORPHAN AND IT’S STILL ONE.

I’m sorry to have to be so frank: There is no genuine supervision over an Arizona builder at the assembly stage of a home. In fact, any one can pull a building permit and can even in doing so fraudulently call themselves a “licensed builder,” since the jurisdiction issuing the permit won’t even check with the Registrar of Contractors to see if this is true. Functionally, then, the building department aids unlicensed builders to pose to the public as legitimate ones! Worse, no one from the building department has any time to review potential code issues and no jurisdiction by law to examine workmanship. Obviously the harried inspector zipped past your client’s home site for a quick peek at the code issues—like slab form settings, the plumbing and electrical—on his way to the other fifty homes he has time to do little more then blink at that day. He has no time for workmanship matters (basic code is as far as he goes and that has nothing to do with craftsmanship) and, jurisdictionally, he will not even look at the cosmetic matters, many of which can cost tens of thousands of dollars, to repair! And after that blink, believe me, good workmanship is a crap shoot. Lamentably for your client’s home (as it has been for more then one in ever four new homes built in Arizona during 1998), the bones came up “snake eyes.” Your client loses and, when he finds out just how bad his predicament is and that no one is going to help him, he is coming back to you with a vengeance under the “Odd-Man-Out” theory.

SYSTEM FAILURE TWO: THE ARMY OF PEOPLE WHO BUILT YOUR CLIENT’S GOUSE ARE NOT REQUIRED TO HAVE A LICENSE OR EVEN ANY TRAINING AND SO….. THEY DON’T.

Believe it or not, ARS § 32-1104, the contractor’s licensing statue, does not require more than one man associated with the home to have any construction skills or knowledge, no matter how big the operation! All the licensing law requires is one man with a “class B” residential license, the “qualifying” builder, to be “around someplace” as it is built by the firm to which he is registered—and that place does not even have to be at the job site! The only qualification that the remaining 100 workers in the corporation must possess—the ones actually at the job site—is the pure guts it takes to show up every day for a job at which they have no demonstrable skills. Tony, the guy nailing up the wrong truss, was a barber. Bob, the guy over there trying to figure out which end of the pipe wrench to drive nails with, was bartendering. Bill, the big hairy fellow without shoes using the sledge to whack in the last shards of what used to be a fiberglass shower stall, just got out of Madison Street two weeks ago.

No one has a license or even serious training for this work, through some of them have a passing familiarity with tools. Burglar tools. This translates into the worst, all to often this follows: Unqualified, sometimes even nefarious people who want to set up a good scam in a market that can hire a shill “qualified builder” and pay him to simply shut up and step aside as they hire every vagrant they can find to toss up another hapless wreck. When it falls down, the “qualifying builder” takes another hit, they dump him and move on to set up another company and hire yet another stooge. This is that smiling “cast of conscientious experts” you saw lined up in the builder’s promo photo at the model?! No wonder they and people like them did it wrong 11,035 times (2,202 civil claims and 8,833 Registrar claims) in 1998!

Think of the millions and millions of dollars and the grief cost thousands of Arizona citizens caught in this trap—all resulting from new homes, allegedly the product of numerous overlapping regulatory systems that are paid for with hard-earned tax dollars to prevent precisely this disaster, Systems, which instead of protecting society, mislead the public by purveying an aura of close and forceful regulatory scrutiny, outrageous fibs which actually bate the trap for the crooks to loot the home buying public!

SYSTEM FAILURES THREE AND FOUR: THE REGISTRAR HAS NO LEGAL AUTHORITY TO APPLY MORE THAN THE MINIMUM QUALITY STANDARDS AND NONE WHATSOEVER TO PROSECUTE VIOLATIONS OR FORCE THE BUILDER TO REMEDIATE!

No Kidding! The Registrar is NOT mandated to enforce high standards, but rather to audit to meet the LOWEST standards in construction! The Registrar is NOT empowered to prosecute the offender if those paltry minimums are not met or ever to make the offender repair the damage if he will not do it voluntarily! The only thing this cop can do while the crooks wreak havoc is shine his whistle, making one wonder whim the Registrar is actually there “to protect and serve.” More specifically:

The Registrar’s “Enforcement of Quality” Myth: Under ARS § 32-1155, 1154 and R4-9-108 and the Seventh Edition of the Registrars text, “Handling a Dispute in Residential Construction,” after building codes which are very general, the Registrar looks to see that MINIMUM standards for workmanship are met, not the maximum or even the average in the industry. In addition, the Registrar will only look at the narrow and specific items the consumer identifies as being sub-code or sub-minimum standard, not the whole construction job at the site! ARS § 32-1155. One might wonder: If the consumer knew what the codes and standards were and what to look for in order to complain about it, he obviously would not have needed a licensed builder, a city building inspector or a Registrar. He could simply have built the house, himself!

The Registrar’s “Prosecution” Myth: The Registrar, even if it agrees with the complaining consumer, only has the power to do just that: “Agree.” Not to do anything serious about it. R4-9-108. If the Registrar agrees with the consumer but the builder refuses to voluntarily make the repair, (get this) the Registrar withdraws and it is the CONSUMER that has to implement the hearing process, be the prosecutor, who puts on the whole hearing, pays for the prosecution fees connected with it, and go up against the contractor, personally, with the Registrar meekly hiding in the corner….whistle-shining, I guess! Handling a Dispute in Residential Construction, ARS § 41-1064(C) and 41-1092.07. The Registrar does NOTHING! If the consumer wins, all he gets is another request from the Registrar to the builder to “pretty, pretty please” make the repair (is that not what he got the first time when the Registrar inspected and asked the builder to make the repair—and look how much impact that had?). The builder can ignore this letter, too(and usually does). Instead, start a long and expensive appeal process through the Courts in a usually-successful effort to burn out the complainant with costs and hassle. The Registrar has no poser to do anything to the builder, not even require him to pay the consumer’s damages or litigation costs when he wins! ARS § 32-1166 and R4-9-131. In a worst case scenario, he can revoke the “qualifying builder,” but then the company folds, the consumer is beat out entirely and the people behind the company find yet another stooge and start yet another company. Heads the builder wins, tails you lose!

How can it be that the cops cannot even prosecute the crooks they are hired to catch? How is it that you, the victim, have to handle the arrest, trial and conviction at your cost or else the crook is set free by the Registrar to victimize again! Let’s face it: The Registrar’s office is truly the class is Keystone Kop and the builder knows it. That opinion is squarely on their mind as they chuckle their way to their out-of-state bank.

SYSTEM FAILURE FIVE: THE CONSTRUCTION LOBBY HAS BECOME SO POWERFUL IN THIS STATE THAT IT REGULATES THE REGULATORS.

The construction lobby and its allies is the most powerful clique in the state legislature. It has vast influence over legislators and governors—in some cases going as far as becoming active, big-money players in re-election campaigns. After having “breakfasts” as big as that, it can have Registrar and Commissioners as quick snacks, so obviously there will be no resistance to any of its potential rapacities from those corners.

But, to be fair, this vast consumer loss and misery has not gone “entirely” unheeded by this lobby. Last, year after great deal of communing with it’s Higher Civic Spirit to determine how these complaints about standards and damages could be reduced, the lobby made a hard decision and really bit the bullet: It elected to mount a massive legislature campaign to pass laws to reduce quality standards even further and to peremptorily bar legitimate claims against it. Operation: “Shoot the Messenger and Hide the Body.”

Thank God this lobby is hobbled by a few alert consumer groups who watch it carefully and raise the cry when it is so richly deserved! Add to that commendable clan recently the Realtor lobby, normally an ally of the construction industry in its more scrupulous ideas, which in 1998 found the contractors’ ever increasingly anti-consumer legislation simply and finally to obnoxious to support. The Realtors have stood, to the industry credit, squarely against the worst home builder abuses.

THE TRAGIC NET EFFECT:

This toothless Arizona regulatory system coupled this market can make very bad builders rich and they do not become so by giving the consumers more for less. They also cannot become rich by building each home as though it was their personal residence/ It’s all production.. all net. When “minimum criterion” for safety and longevity becomes “The Standard,” as it has, good builders cannot compete with the Corner-Cutters and have to become corner-cutters themselves or perish. Unenforced standards finally spawn none at all.

Bad builders have no fear of the current regulation system because it poses no real risk to them. Here’s a bewildered consumer with a pocket full of money in an economic alleyway which the builder knows well enough that the copy never patrol. In the darkness, he pounces. Any ripe pickings like this not only breed this kind of local bushwhacker, but attracts them from afar. Bad builders are currently flooding into this state to escape from adjacent states which have more normal tough licensing, construction review and enforcement systems.. the kind that billions of dollars in state-wide citizen residential investment should have as its watchdog. The kind we don’t have.

So the word is out on Arizona in home building: When you can’t legally do it where you come from, do it here and get rich.

SO WHAT NOW?

Now your client had made the complete atrocity loop: Through the builder who laughed at him and ignored him, through the building inspection department who disclaimed jurisdiction and through the Registrar who carefully explained that it’s job was to stamp its little feet, hold its little breath and write letters to the builder that say “please: and “thank you” a lot while the home shrinks into the earth like in Poltergeist I. Months and months of aggravation, calling disinterested people and taking time off from work to show the home to endless apathetic “investigators” finally came to this. Your client feels double-bamboozled—once on the home and once in the supposed remedies—and he is angry as hell. What now? It’s too late for any good news at this very belated point except to find your lawyer. It could have been a better story.

The fact that we should have protected this client and ourselves from the beginning! That means we listen to our colleges for their experience with a given builder or subdivision and keep them out of the clutches of the bad or unreasonable ones, we check out the contractor’s record with the Registrar or Contractors to see if he has a license and how many complaints he has. It means we call some of that builder’s recorded complaints and see how they were treated in their own disputes. It means we encourage the clients to hire an independent licensed contractor or qualified home inspector to watch over each stage of the project and stay on the builder’s and city or county inspector’s case from ground-breaking on up! It means we work to get the builder’s almost conspiratorial blanket quality and fitness disclaimers out of this boilerplate contract and back to what to what he new home warranty law directs. It manes we put all of that advice in writing to the client before he makes the purchase commitment. It means that when, in spite of every precaution, a bad product still gets a certificate of occupancy, we don’t waste our time running the clients through this antagonizing and useless regulatory gamut—we bypass this dead end and send them off to a good lawyer for some legal action, right now. Yes, it has actually gotten to that in defense against Regulatory Hooverville.

CIRCILING THE WAGONS

Until the legislature wakes up and contemplates the millions of dollars of needless and almost anti-social consumer predation they are permitting, until they foresee what it’s going to cost the economic structure of this state within ten years as these defective properties and neighborhoods become shabby and unsightly decades before their time, until they change all of that by letting the cops who are hired to stop it carry loaded regulatory guns—and use them: The citizens of this state, our clients, and we, are left to circle the wagons and fend off these construction frauds virtually on our own. In the interests of out clients, our profession and the quality of out product, our own lobbies needed, RIGHT NOW, to make a very loud political noise about this kind of abandonment!

This article reprinted from the column in the January 1999 edition of The Arizona Journal of Real Estate and Business, written by J. Robert Eckley. Mr. Eckley is a multi-state real estate and construction lawyer. His Phoenix Office can be reached at (602) 952-1177.