Arizona Contractor License Bond Guide

What is an Arizona Contractor License Bond?

In Arizona, contractors must show evidence of a Contractor License Bond to get their state license. The bond ensures contractors adequately provide construction work that abides by Arizona contractor laws. It also compensates Arizona public members should they encounter a contractor that causes them financial harm by doing improper work. 

Who Regulates Licensing for Contractors in Arizona?

The Arizona Registrar of Contractors manages and enforces licensing and bonding requirements. You can reach them at (602) 542-1525.

Do I need to get an Arizona Contractor License Bond?

Any business that does contracting work must be licensed by The Arizona Registrar of Contractors. The Arizona Registrar of Contractors issues separate licenses for commercial and residential work in addition to a dual-use license that covers both commercial and residential. The Arizona contractor licenses also cover a particular construction trade or field.

Anything that "builds" is considered to be contracting. A "contractor business" is legally defined as any business that offers to build, repair, alter, add to, subtract from, improve, move, wreck, or demolish any building, highway, road, railroad, excavation, or other structure, development or improvement, or to do any part of the work. 

One thing to note is that Arizona provides a "Handyman Exemption" where a contractor license is only required for projects valued at more than $1,000. For projects valued at $1,000 or less, you don't need to get licensed and bonded. This requirement is documented in Arizona Code A.R.S. 32-1121.

How to Get an Arizona Contractor License Bond

You can purchase a bond from any surety dealer that is licensed to operate in Arizona (for reference, here is our Arizona license, you can usually look up their license via Sircon and NIPR). Generally speaking, surety brokers require the following information to get you a quote: 

• Contractor's business name and D.B.A., if applicable
• Business address
• Contractor's license number
• Contact number and email address
• Owner name and social security number

Arizona Contractor Classifications

There are six classifications a contractor can fall into: general commercial, specialty commercial, general residential, specialty residential, general dual, and specialty dual.

General Commercial (Includes General Engineering Contractors)

Allows the contractor to undertake projects of any size, ranging from large commercial projects to small home remodelling projects

Licensed as a general engineering contractor are allowed to construct or repair: 

• Streets
• Roads
• Power and Utility plants
• Dams
• Hydroelectric plants
• Sewage and waste disposal plants
• Bridges
• Tunnels
• Overpasses
• Public parks
• Public right-of-ways.

Specialty Commercial

Specialty commercial contractors carry out work related to: 

• Electrical
• Plumbing
• Air conditioning systems
• Boilers
• Swimming pools
• Spas
• Water wells 

It is important to note that the above tasks must be subcontracted appropriately.

General Residential

This classification refers to construction on residential properties such as:

• Houses
• Townhouses
• Condos
• Apartment buildings with four or fewer units

Being a general residential contractor also covers working on any structures within property lines, utility connections, meters, and services for residential buildings. 

Specialty Residential

This is similar to specialty commercial licensing, but for residential projects. Any specialized tasks such as electrical, plumbing, HVAC, swimming pools, and others must be subcontracted to appropriately licensed professionals.

General Dual

Encompasses both commercial and residential aspects within a specific trade or field of the construction profession.

Specialty Dual

This license includes the scopes of work allowed by both the general commercial license and general residential license.

Above are the six main categories that contractors in Arizona can fall into, but each of these categories has its own classifications. For instance, the specialty residential contractor category has 70 different classifications. It's crucial to know and understand which contractor type you are classified as in Arizona. You can refer to the Arizona Registrar of Contractors website to learn more about what each classification code represent.

What are the bond amounts? How much does it cost?

The bond amount depends on depends on the volume of work and classification of the contractor. Dual license amounts are calculated by combining the amount required for residential and commercial. For example, let’s say electrical contractor John wants a dual electrical license. John would require a bond with an amount of $6,750 ($4,50 due to the residential contractor license, $2,500 due to the commercial license). This information can be found in the table below.

Residential General Contractors

• Less than $750,000: $9,000 bond starting at $81
• $750,000 or more: $15,000 bond starting at $102

Residential Specialty Contractors

• Less than $375,000: $4,250 bond starting at $45
• $375,000 or more: $7,500 bond starting at $68

Commercial General Contractors (Includes General Engineering Contractors)

• $150,000 or less: $5,000 bond starting at $45
• Above $150,000 but not more than $500,000: $15,000 bond starting at $90
• Above $500,000 but not more than one million: $25,000 bond starting at $135
• Above one million but not more than five million: $50,000 bond starting at $270
• Above five million but not more than ten million: $75,000 bond starting at $320
• Over ten million: $100,000 bond starting at $540

Commercial Specialty Contractors

• $150,000 or less: $2,500
• Above $150,000 but not more than $500,000: $7,000
• Above $500,000 but not more than one million: $17,500
• Above one million but not more than five million: $25,000
• Above five million but not more than ten million: $37,500
• Over ten million: $50,000

How to Get a Contractor License in Arizona

Here are the steps to obtain a contractor license from the Arizona Registrar of Contractors. The Registrar also offers free virtual Applicant Education Seminars, where applicants can learn about the application and get their questions answered. You can also find some short videos explaining common mistakes that delay the approval of applications. We encourage you to view the videos before starting your application.

1. Identify a qualifying party

• To obtain the license, the applicant must designate a Qualifying Party who meets the criteria outlined in  A.R.S. § 32-1122(E). A Qualifying Party refers to an individual who is regularly employed and possesses the requisite expertise. In most cases, the qualifying party is usually the applicant.

1. Pass a Specific trade exam

• To fulfill this requirements, the Qualifying Party must have a minimum score of 70% in the required examinations and submit the exam results. 
• You must successfully complete the AZ Statutes and Rules Training Course and Exam (S.R.E.). 
• The qualifying party may be eligible for a waiver in place of the trade exam for review
• For guidance on the necessary examinations for a particular license classification, please refer to the License Classification Requirements.

1. Complete a Background Check

• As part of the license application, everyone listed on the application must undergo a criminal background check. You can complete this check conveniently online through AccusourceHR at Licensing Background Checks. For any inquiries or issues with the background check, contact AccusourceHR's customer support at customersuccessdev@accusourceHR.com or call (888) 545-3133.
• You will receive a Background check receipt only after the background check process is finished. Once the background check is complete, AccusourceHR will send you an email with your completed report. 
• A.R.S. § 32-1122 grants the Registrar of Contractors (ROC) the authority to conduct criminal record checks for license issuance or renewal. When you complete the criminal background check online, the results will be automatically forwarded to the ROC for processing.

1. Form a Legal Entity

• In Arizona, contractors need to form a legal entity to operate their business, as required by the Registrar of Contractors. This rule is in place to maintain industry integrity, protect both contractors and consumers, and ensure compliance with state regulations. It also creates a more transparent and accountable business environment.
• LLCs and corporations are required to register with the Arizona Corporation Commission. Partnerships are required to register with the Arizona Secretary of State.
• In Arizona, a license may be issued to a sole proprietorship (individual), a partnership, a limited liability company, or a corporation. To learn more about creating the appropriate entity for you and obtain the required documentation, visit the Arizona Corporation Commission's eCorp website for additional information.

1. Purchase and file an Arizona Contractor License Bond

• The applicant will need to obtain and submit proof of a Arizona contractor license bond along with their application. 
• The bond must be filed with the Arizona Registrar of Contractors. This is usually done by the broker that you get your bond through. 

1. Pay fees

• Include the required fees and assessments with your License Application Form
• A.R.S. § 32-1126, A.R.S. § 32-1126(G), and R4-9-130 are bylaws describing licensing fees. The specific fees for a contractor's license vary based on the type and class for which the applicant is applying. Also, the license fees shown below are for a two-year license.
• *Special Note: As per A.R.S. § 32-1152(C), residential and dual contractors must provide an extra $200,000 for consumer protection. This safeguard can be accomplished by (a) presenting a $200,000 surety bond or cash deposit or (b) making the necessary payment to participate in the Recovery Fund.

1. Provide government-issued identification

• The qualifying party in this License Application must submit a copy of their government-issued identification with the application.
• Acceptable forms of identification include a valid driver's license or passport.

1. Complete and Submit an Application

• Complete and submit a License Application Form to the Registrar using one of the following methods:

1. Use the Online Customer Portal to fill out and submit the application
2. Mail the application to: Registrar of Contractors, P.O. Box 6748, Phoenix, AZ 85005-6748
3. Wait for Approval of Application

• Upon submitting your application, you will receive a receipt with a unique pending number assigned to it. This number serves as a reference to track the status of your application. 
• If your application is approved, the Arizona Registrar of Contractors will send you a notice via mail, and one of their Licensing Representatives will reach out to you via phone. However, if, for any reason, your application cannot be approved, you will also be notified by the Arizona Registrar of Contractors

How much does it cost to get an Arizona contractor license? 

The cost of an Arizona contractor license depends on the type of license you are looking to get. There is a difference in application fee depending if it’s a new licensed application or a renewal license application. The new license application can range from $480 to $1,050. The renewal license application can range from $480 to $750.

New License Application

General Commercial 

• Application fee: $200
• License fee: $580
• Recovery Fund Assessment: $0
• Total: $780

Specialty Commercial 

• Application fee: $100
• License fee: $480
• Recovery Fund Assessment:$0
• Total: $580

General Residential 

• Application fee: $180
• License fee: $320
• Recovery Fund Assessment: $370
• Total: $870

Specialty Residential 

• Application fee: $80
• License fee: $270
• Recovery Fund Assessment: $370
• Total: $850

General Dual 

• Application fee: $200
• License fee: $480
• Recovery Fund Assessment: $370
• Total: $1,050

Specialty Dual 

• Application fee: $100
• License fee: $380
• Recovery Fund Assessment: $370
• Total: $850

Renewal License Application

General Commercial

• License fee: $580
• Recovery Fund Assessment: $0
• Total: $580

Specialty Commercial 

• License fee: $480
• Recovery Fund Assessment: $0
• Total: $480

General Residential 

• License fee: $320
• Recovery Fund Assessment: $270
• Total: $590

Specialty Residential 

• License fee: $270
• Recovery Fund Assessment: $270
• Total: $540

General Dual 

• License fee: $480
• Recovery Fund Assessment: $270
• Total: $750

Specialty Dual 

• License fee: $380
• Recovery Fund Assessment: $270
• Total: $650

FAQs

How long is an Arizona bond valid?

The Arizona bond is continuous, which means it has no termination date. However, you will need to pay periodic premiums to the insurance company to maintain the bond's validity. If you miss payments, the bonding company may cancel the bond, but they must provide a 30-day notice to both you and the Arizona Registrar of Contractors before the cancellation date. Failure to replace the bond will result in the suspension of your license.

In the case of a cash bond, the agency will retain the bond until two years after the license has expired. If no claims are made against the bond during that time, you can apply to have the bond released to you.

Can the Arizona bond be increased?

The Arizona contractor bond can increase. The bond amounts in Arizona are determined by the Arizona Registrar of Contractors, taking into account the type of license required and the contractor's annual volume of completed work. If a contractor expects to handle a higher volume of work during the year, the bond amount will be adjusted accordingly to reflect the increased workload. 

It’s important to note that while the bond amount can be increased, it can only be reduced during the renewal period for the upcoming fiscal year for a surety bond or cash deposit of the bond.

When will the Arizona bond be effective?

Surety bonds or cash deposits are effective once filed with the Registrar's Office. If the effective date shown on the bond is after the date of filing with the Registrar, then that date shown on the bond becomes the controlling date for when the bond becomes effective. This means that the bond's coverage or validity period starts from the date mentioned on the bond, which may be different from the date it was filed with the Registrar's Office.

Can I get the bond with bad credit?

A credit score under 650 is considered "bad credit." Bad credit makes getting a bond difficult, but you will have a good chance with us. We partner with several insurance companies specializing in providing bonds to low-credit individuals. Give us a call or fill out our form, and we'll shop around to get you the lowest possible quote.

How can I avoid claims on my Arizona Contractor License Bond?

If a contractor fails to fulfill its obligations, their customers can make a claim against the bond. In other words, to avoid claims on your Arizona Contractor License bond, you must operate to the guidelines set forth on your license and make good promises to customers.  

To avoid claims on a contractor's license bond, let's look at the most common reasons for such claims:

• Abandoning an unfinished project
• Neglecting to address faulty workmanship
• Delayed payment to employees or vendors

To prevent claims on your contractor license bond, we recommend following these guidelines:

• Complete all jobs as per the contract, focusing on customer satisfaction. Consider withholding a portion of payment until the project is fully done as proof of fulfillment.
• Address any issues from previous jobs promptly.
• Make timely payments to vendors and employees to avoid potential claims on your bond due to payment delays.