Arizona Contractor License Exam — All Questions

Which body licenses and regulates contractors in Arizona?

• a.County building departments acting alone
• b.The federal OSHA regional office
• c.The Arizona Department of Motor Vehicles
• d.The Arizona Registrar of Contractors (ROC)✓

Contractors in Arizona are licensed and regulated statewide by the Arizona Registrar of Contractors (ROC) under A.R.S. Title 32, Chapter 10. The ROC sets qualification standards, administers the Statutes and Rules Exam, issues licenses, and disciplines contractors.A.R.S. Title 32, Ch. 10 (§32-1101 et seq.)

Under Arizona's handyman (casual or minor work) exemption, a person may perform certain small jobs without a contractor license only when the total contract price, including labor and materials, is less than what amount?

• a.$1,000✓
• b.$500
• c.$10,000
• d.$5,000

Arizona's handyman exemption applies only when the aggregate contract price, including labor and materials, is less than $1,000. Above that figure a contractor license is required, and the exemption has additional conditions beyond the dollar limit.A.R.S. §32-1121 (handyman / casual-or-minor-work exemption)

Besides the dollar limit, the Arizona handyman exemption applies only when:

• a.The work is casual or minor, does not require a building permit, and the person does not advertise or imply that they are a licensed contractor✓
• b.The homeowner signs a waiver of all legal rights
• c.The person holds a city business license
• d.The work is performed only on a weekend

The exemption requires that the work be casual or minor, that it not require a building permit, and that the person not hold themselves out as a licensed contractor. Advertising as licensed or splitting a larger job to stay under $1,000 defeats the exemption.A.R.S. §32-1121 (conditions of the exemption)

Arizona contractor licenses are organized into which scopes?

• a.Commercial, Residential, and Dual (a license covering both commercial and residential)✓
• b.Union and non-union
• c.Federal and state only
• d.Residential only

Arizona organizes licenses into Commercial, Residential, and Dual scopes, with general and specialty classifications under each. Choosing the correct scope and classification is essential, because working outside the license is a violation.A.R.S. §32-1102 (license scopes)

An applicant passes the NASCLA Accredited Commercial General Building examination for an Arizona commercial 'B' license. What else must the applicant generally complete?

• a.Nothing, because NASCLA is not accepted in Arizona
• b.A separate Business Management exam that Arizona administers apart from the SRE
• c.Nothing further; passing NASCLA alone licenses the contractor in Arizona
• d.The Arizona Statutes and Rules Exam (SRE); NASCLA is accepted for the trade portion but does not replace the SRE✓

Arizona accepts the NASCLA exam for the trade portion, but the applicant must still pass the Arizona Statutes and Rules Exam (SRE). Arizona does not give a separate Business Management exam - business content is folded into the SRE.A.R.S. Title 32, Ch. 10; NASCLA acceptance policy

Arizona's Statutes and Rules Exam (SRE) is an open-book examination covering which body of law?

• a.The Uniform Commercial Code exclusively
• b.The federal Internal Revenue Code only
• c.Local municipal zoning ordinances only
• d.Arizona Revised Statutes Title 32, Chapter 10 and Arizona Administrative Code Title 4, Chapter 9✓

The open-book SRE tests the contractor-licensing law in A.R.S. Title 32, Chapter 10 and the Registrar's rules in A.A.C. Title 4, Chapter 9. Because it is open book, knowing how to find answers in those statutes and rules is the key skill.Arizona SRE (A.R.S. Title 32, Ch. 10; A.A.C. Title 4, Ch. 9)

How does Arizona test a contractor applicant's business-management knowledge?

• a.It is not tested at all in Arizona
• b.Through an oral interview only
• c.Through a separate 100-question business examination
• d.It is folded into the Statutes and Rules Exam (SRE); Arizona does not administer a stand-alone Business Management exam✓

Unlike states that give a separate business-and-law exam, Arizona folds the business content into the SRE. There is no stand-alone Business Management examination, so applicants prepare for business topics as part of the statutes-and-rules material.Arizona SRE (business content folded into the SRE)

When is an Arizona applicant generally NOT required to take the SRE?

• a.When the applicant is over 40 years old
• b.The SRE can never be waived under any circumstances
• c.When the applicant has been a qualifying party on an Arizona contractor license within the previous five years✓
• d.When the applicant pays a double application fee

The SRE is generally required unless the applicant has been a qualifying party on an Arizona contractor license within the previous five years. Recent, demonstrated familiarity with Arizona's licensing law is what allows the exam to be waived.Arizona SRE waiver (qualifying party within the previous five years)

Every Arizona contractor license must have a 'qualifying party.' What is that person's role?

• a.The company's outside attorney of record
• b.A state employee assigned to oversee the firm
• c.An individual regularly involved in the contracting business whose experience and examination qualify the license✓
• d.Any customer who vouches for the contractor

The qualifying party is an individual who is actively and regularly involved in the contracting business and whose experience and passing exam results qualify the license. The license depends on that person; if they leave, the license can be affected.A.R.S. §32-1127 (qualifying party)

Before an Arizona contractor license is issued, the applicant must post what financial security for the benefit of persons who may be damaged?

• a.A life insurance policy on the business owner
• b.A flat $1,000,000 cash payment to the state
• c.A contractor's license bond (or an approved cash deposit) in an amount set by the Registrar✓
• d.Nothing is required before the license issues

Arizona requires a contractor's license bond (or an approved cash deposit) before a license issues, in an amount set by the Registrar based on the license class and the contractor's volume of work. The bond protects those who may be damaged by the contractor.A.R.S. §32-1152 (contractor's license bond)

What is the purpose of the Arizona contractor's license bond?

• a.To pay the contractor's income taxes
• b.To cover the Registrar's operating budget
• c.To guarantee the contractor a minimum profit on each job
• d.To provide a source of recovery for persons damaged by the contractor's violation of the licensing law or of a construction contract✓

The license bond gives injured parties - owners, workers, or suppliers - a source of recovery when a contractor violates the licensing statutes or breaches a contract. It is a consumer-protection device, not a guarantee of the contractor's profit.A.R.S. §32-1152 (purpose of the license bond)

An Arizona applicant's financial statement shows total assets of $250,000 and total liabilities of $160,000. What is the applicant's net worth (owner's equity)?

• a.$250,000
• b.$160,000
• c.$410,000
• d.$90,000✓

Net worth = total assets - total liabilities = $250,000 - $160,000 = $90,000. Net worth (owner's equity) is what the financial statement demonstrates about the contractor's underlying financial strength.Accounting: net worth = total assets - total liabilities

The Arizona Residential Contractors' Recovery Fund can compensate an owner only when the owner:

• a.Is a commercial property owner on a large project
• b.Simply changed their mind about the project
• c.Contracted with a LICENSED residential contractor and was damaged by that contractor's failure to perform or a violation of the licensing law✓
• d.Is any homeowner, even one who hired an unlicensed handyman

The Residential Contractors' Recovery Fund reimburses an owner of a residential structure who was damaged by a licensed residential contractor's failure to perform or violation, when the owner cannot otherwise collect. It applies only to owners who used a licensed contractor.A.R.S. §32-1131 et seq. (Residential Contractors' Recovery Fund)

A homeowner hires an UNLICENSED person who takes a deposit and abandons the job. Can the homeowner recover from the Residential Contractors' Recovery Fund?

• a.Yes; the fund covers all contractors, licensed or not
• b.No; the Recovery Fund protects only owners who hired a licensed residential contractor✓
• c.Yes; the fund even doubles the award when the work was done unlicensed
• d.Only if the unlicensed person held a city business license

The Recovery Fund is funded by and tied to licensed contractors, so it does not cover work performed by an unlicensed person. This is a key reason Arizona urges owners to confirm a contractor's ROC license before hiring.A.R.S. §32-1132 (eligibility requires a licensed contractor)

How is the Arizona Residential Contractors' Recovery Fund financed?

• a.By assessments and fees paid by licensed residential contractors✓
• b.By a state sales tax on lumber and building materials
• c.By homeowners' association dues
• d.By federal construction grants

The fund is financed through assessments and fees paid by licensed residential contractors as part of licensure. Because the contractors themselves fund it, only owners who dealt with a licensed residential contractor can draw on it.A.R.S. §32-1132 (assessments funding the Recovery Fund)

In Arizona, engaging in contracting without a required license is generally classified as what for a first offense?

• a.A class 2 felony automatically
• b.A non-punishable civil matter
• c.Not an offense at all in Arizona
• d.A class 1 misdemeanor✓

A first offense of contracting without a required license in Arizona is a class 1 misdemeanor, the most serious misdemeanor class. Repeat offenses and certain aggravating facts can raise the exposure, and the ROC can also pursue civil enforcement.A.R.S. §32-1164 (unlicensed contracting)

Which of the following is a ground on which the Registrar may suspend or revoke an Arizona contractor's license?

• a.Carrying more insurance than the minimum required
• b.Choosing to work only on weekdays
• c.Hiring properly licensed subcontractors
• d.Abandonment of a contract without legal excuse, or a willful departure from the approved plans and specifications✓

A.R.S. §32-1154 lists grounds for discipline, including abandoning a contract without legal excuse and willfully departing from or disregarding plans or specifications without the owner's consent. Ordinary, lawful business choices are not grounds for discipline.A.R.S. §32-1154 (grounds for suspension or revocation)

A homeowner who wants the Registrar to investigate a licensed contractor generally must file the written complaint within what period after the alleged violation or the last documented work?

• a.Ten years
• b.Two years✓
• c.There is no deadline
• d.Ten days

Under A.R.S. §32-1155, a complaint against a licensed contractor generally must be filed within two years after the commission of the alleged act or the last documented work on the project. Waiting too long can bar the Registrar from acting.A.R.S. §32-1155 (time to file a complaint)

Arizona rules require a licensed contractor's advertising to include what?

• a.Nothing about the license at all
• b.A photograph of the qualifying party
• c.The owner's home address
• d.The contractor's license (ROC) number✓

Arizona requires a licensed contractor's advertising to display the contractor's ROC license number. This lets consumers verify the license and helps the Registrar identify unlicensed advertisers, so omitting it is itself a violation.A.A.C. R4-9-108 (advertising requirements)

Which elements must be present for a construction contract to be legally enforceable?

• a.Notarization and a witness on every contract
• b.A minimum length of five pages
• c.Prior approval by the Registrar of Contractors
• d.Offer, acceptance, consideration, competent parties, and a lawful purpose✓

An enforceable contract requires an offer, acceptance, and consideration (value exchanged), between parties competent to contract, for a lawful purpose. Notarization, a set page count, and Registrar pre-approval are not general requirements.Contract law (essential elements)

When an Arizona owner requests work beyond the original contract scope, the change should be documented by:

• a.A written change order signed by the parties, describing the added work, cost, and time✓
• b.Submitting a recovery-fund claim
• c.A verbal agreement on the jobsite only
• d.Filing a new license application with the Registrar

Added or changed scope should be authorized by a written change order signed by both parties, setting out the added work, its price, and any schedule impact. Verbal changes are a leading cause of disputes over unpaid extra work.Construction contract administration (change orders)

To preserve mechanic's-lien rights on most Arizona projects, a contractor or supplier must serve which document, typically within 20 days after first furnishing labor or materials?

• a.A recovery-fund claim
• b.A notice of completion
• c.A certificate of occupancy
• d.A preliminary twenty-day notice✓

Arizona requires a preliminary twenty-day notice, served on the owner and others generally within 20 days after first furnishing labor or materials, to preserve lien rights on most projects. Note that owner-occupied dwellings have separate rules that can limit lien rights.A.R.S. §33-992.01 (preliminary twenty-day notice)