ALJDEC decisions subject to certification as final

2022A-04441-CPA-ROC · Registrar of Contractors · 2023-02-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Arizona Registrar of Contractors,

COMPLAINANT,

John Samuel Schroeder,

RESPONDENT.

No. 2022A-04441-CPA-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: January 18, 2023

APPEARANCES: Assistant Attorney General Seth Hargraves represented the Arizona Registrar of Contractors. Investigator Cliff Corlett appeared as a witness for the Arizona Registrar of Contractors. Respondent John Schroeder appeared on his own behalf.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

FINDINGS OF FACT

On or about February 1, 2022, Arizona Registrar of Contractors (“Registrar”) Investigator Cliff Corlett was in the field investigating a complaint for the Registrar, when he drove past a new home under construction, located at 2907 Janet Drive, in Lake Havasu City, with signage indicating that the home was for sale.

Respondent John Schroeder was previously the Qualifying Party for S S Framing and Construction, Inc., doing business as Schroeder Homes, License Number 177015, a General Dual KB-2 Dual Residential and Small Commercial license classification. Investigator Corlett recognized Mr. Schroeder and spoke with him at that time regarding the Registrar’s owner/builder requirements and the governing State statutes. Mr. Schroeder stated that he was the owner of the property and was therefore exempt from licensing requirements as he was acting in the capacity of owner/builder.

On or about May 31, 2022, Investigator Corlett received an email from Lake Havasu City’s Permit Technician that provided the following information:

We received a report that the house located at 2907 Janet Drive, which is currently under construction and has not received a CO, is for sale. This permit was pulled as an Owner/Builder project and the owner completed the Owner/Builder form. The permit and certification is attached.

Here is one of the links to the active listing that was shared with us

2907 Janet Dr, Lake Havasu City, AZ 86404 | MLS #1021657 | Zillow

I told the reporting party that I would pass the information along to the ROC. Thank you!

Attached to the above-referenced email was the permit application submitted and signed by Mr. Schroeder dated September 7, 2021, that indicates that Mr. Schroeder filed the permit application as an owner/builder, and that Mr. Schroeder “understand[s] that [he] must own the home for a period of one (1) year following completion prior to renting, selling, or leasing the residence. . . .”

Mr. Schroeder had notarized a signed Owner/Builder Certification dated October 15, 2021, whereby he swore and affirmed that he “understand[s] that pursuant to Arizona Revised Statute §32 1-1121, article A, Part 5, this structure is intended for MY OCCUPANCY ONLY, I cannot offer for sale, rent or lease this structure for one year after the issuance of a Certificate of Occupancy. And further, that if I offer for sale, sell, rent or lease the structure within the one year period, I will lose the owner/builder exemption and that I may be cited for contracting without a license.”

The permit issued to Mr. Schroeder on October 15, 2021, indicates that the contractor is the owner/builder.

Investigator Corlett testified at hearing regarding the real estate signage he observed at the property, first on February 1, 2022, and then again on June 16, 2022.

Investigator Corlett further testified that on June 16, 2022, he searched online for the real estate listing for the property and took screenshots of the listing illustrating that the home was for sale by owner/builder.

Thereafter, Investigator Corlett opened a case against Mr. Schroeder for contracting without a license. On June 21, 2022, the Registrar issued a Cease & Desist Order and a civil citation for violating Ariz. Rev. Stat. § 32-1151, assessing a civil penalty in the amount of $2,500.00 for the violation.

Mr. Schroeder requested a hearing on the charged violation. Consequently, the Registrar referred the matter to the Office of Administrative Hearings, an independent State agency, for an evidentiary hearing.

Investigator Corlett testified that Mr. Schroeder attested that he would abide by the owner/builder statutory requirements, and then violated those requirements by listing the home for sale prior to its completion. Further, as a previously licensed contractor, Mr. Schroeder should have been aware of the State’s licensing requirements and exceptions thereto,

Mr. Schroeder testified that he sold his home just before the COVID-19 pandemic started and began construction of the home located at 2907 Janet Drive, which he had planned to become his “retirement/dream home,” and therefore would have been his primary residence.

Mr. Schroeder testified that after he obtained the building permit in October 2021, building costs “skyrocketed” and he could no longer afford to maintain the construction of the home and decided to list it for sale. However, the COVID-19 pandemic began in March 2020, and therefore, Mr. Schroeder obtained the building permit approximately a year and a half into the pandemic and presumably was aware of the resultant cost increases.

Mr. Schroeder testified that he read an article online that indicated due to the “COVID emergency,” which was considered an extenuating circumstance, an owner/builder could list a home for sale within the first year. Mr. Schroeder testified that he contacted the Registrar on February 7, 2022, and had a nine minute phone call with an individual named Jeff, who confirmed that due to the COVID emergency, it would be “no problem” to list the home for sale. Mr. Schroeder further testified that his realtor stated that he could do so as well. The article referenced by Mr. Schroeder was dated January 5, 2016, predating COVID.

Mr. Schroeder testified that he feels “misinformed” and was “not trying to do anything underhanded,” again, asserting that the home was intended to be his primary residence until it cost twice as much to construct due to the increased costs caused by COVID.

Investigator Corlett testified that he was unaware of any exceptions to the owner/builder requirements due to extenuating circumstances or COVID.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

The Registrar bears the burden of proof to establish Mr. Schroeder’s statutory violation by a preponderance of the evidence. Mr. Schroeder bears the burden to establish affirmative defenses and factors in mitigation of the penalty by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Ariz. Rev. Stat. § 32-1151 prohibits contracting without a license, providing in relevant part:

It is unlawful for any person, firm, partnership, corporation, association or other organization, or a combination of any of them, to engage in the business of, submit a bid or respond to a request for qualification or a request for proposals for construction services as, act or offer to act in the capacity of or purport to have the capacity of a contractor without having a contractor's license in good standing in the name of the person, firm, partnership, corporation, association or other organization as provided in this chapter, unless the person, firm, partnership, corporation, association or other organization is exempt as provided in this chapter.

Ariz. Rev. Stat. § 32-1121(A)(5) sets forth the “owner/builder” exception to licensure requirements and provides in relevant part:

Owners of property who improve such property or who build or improve structures or appurtenances on such property and who do the work themselves, with their own employees or with duly licensed contractors, if the structure, group of structures or appurtenances, including the improvements thereto, are intended for occupancy solely by the owner and are not intended for occupancy by members of the public as the owner's employees or business visitors and the structures or appurtenances are not intended for sale or for rent. In all actions brought under this chapter, except an action against an owner-occupant as defined in section 33-1002, proof of the sale or rent or the offering for sale or rent of any such structure by the owner-builder within one year after completion or issuance of a certificate of occupancy is prima facie evidence that such a project was undertaken for the purpose of sale or rent. For the purposes of this paragraph, "sale" or "rent" includes any arrangement by which the owner receives compensation in money, provisions, chattels or labor from the occupancy or the transfer of the property or the structures on the property.

Ariz. Rev. Stat. § 32-1166.01(A)(4) authorizes the Registrar to assess a civil penalty against a person who has been found to have contracted without a license in violation of Ariz. Rev. Stat. § 32-1151 of “at least $200 for each violation but not more than $2,500 for multiple violations committed on the same day.”

The credible, substantial, and probative evidence established that Mr. Schroeder violated Ariz. Rev. Stat. § 32-1151.

RECOMMENDED ORDER

Based on the foregoing,

it is recommended that the Registrar affirm the finding that Respondent John Schroeder violated Ariz. Rev. Stat. § 32-1151.

IT IS FURTHER RECOMMENDED that the Registrar affirm its decision to assess against Respondent John Schroeder a civil penalty of $2,500.00 for contracting without a license.

it is FURTHER recommended that the $2,500.00 civil penalty be paid by Mr. Schroeder in certified funds to the Registrar on or before the effective date of the Final Order in this matter.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order is forty (40) days after the date of that certification.

-54864001

001

-137160-45720000 Done this day, February 1, 2023.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

[email redacted]

Seth Hargraves

Assistant Attorney General

[email redacted]

Cliff Corlett

[email redacted]

John Schroeder

[email redacted]

By: OAH Staf-54864001

001

-137160-45720000f