ALJDEC - Licensing

2025A-05710-CHC-ROC · Registrar of Contractors · 2026-03-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Eman Alkhatib,

COMPLAINANT

v.

AZ Design & Build LLC,

License No. ROC 331539,

RESPONDENT

No. 2025A-05710-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 5, 2026 and January 13, 2026

APPEARANCES:

Complainant: Edward Hermes, Esq.

Shifa Alkhatib, Esq.

Eman Alkhatib

Respondent: Natalia Garrett, Esq.

Anthony Aizpuru

Michael Luzaich

Registrar of Contractors: Lisa Melton, Investigator

ADMINISTRATIVE LAW JUDGE: Nedra-Su Kawasaki

EXHIBITS ADMITTED INTO EVIDENCE: Administrative notice was taken of the Notice of Hearing Packet submitted by the Registrar of Contractors.

Respondent’s Exhibits 1, 4, 6, 7, 11, 12 (for limited purpose only).

_____________________________________________________________________

FINDINGS OF FACT

AZ Design & Build, LLC (Respondent) was the holder of License No. 331539 issued by the Arizona Registrar of Contractors (Registrar) on December 4, 2020.

On or about January 14, 2024, Eman Alkhatib (Complainant) entered into a contract with Respondent for, among other things, a custom new home build.

On or about June 9, 2025, Complainant filed a Licensed Complaint Form with the Registrar, claiming abandonment.

The Registrar assigned the complaint to Investigator Lisa Melton, who issued a Jobsite Inspection Notice on June 23, 2025, scheduling the inspection for July 31, 2025.

Investigator Melton conducted the jobsite inspection on July 31, 2025, and Respondent was present. Following the inspection, Investigator Melton issued a Written Directive From the Registrar to Respondent on August 14, 2025, that provided as follows:

You are directed to remedy the following violations by the appropriate means:

Compliance Item 4: Cabinetry - including but not limited to the closets

Investigator’s Observation: Closet cabinetry has been completed. No other cabinetry has been installed. Respondent’s scope includes cabinetry throughout new build. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 5: Countertops

Investigator’s Observation: Respondent acknowledge that their scope includes countertops throughout. None have been installed except for closets. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 6: Interior Lighting Fixtures

Investigator’s Observation: Many can lights have been installed throughout. Respondent performed rough in for the can lights, however, the trim work was performed by other than Respondent. No other interior light fixtures have been installed. Respondent’s scope for interior light fixtures includes the following: • Kitchen – identified as 2 or 3 pendant lights • Dining room - fan or chandelier (implies lighting) • Covered Patio - fan (no disclaimer about light) • Garage - 4 led light bard w/switch • Single Garage - 2 led light w/switch Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 7: Exterior Lighting Fixtures

Investigator’s Observation: None are complete. Scope identifies the following: • Single Car Garage – Exterior porch lights • Single Car Carport – Exterior porch lights • Covered Patio Rear of Home – Exterior porch lights Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 8: Plumbing Trims - including toilets

Investigator’s Observation: No plumbing trim has been installed; no sinks, no toilets, no shower enclosures, no glass shower doors or hardware, showerheads, no faucets or controls. Tub is onsite but also has not been installed. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 9: electrical - can lights, plugs and switches

Investigator’s Observation: Can lights are addressed in Item #6. Plugs and switches allegation is primarily relative to trim. Respondent acknowledge that electrical trim was part of their scope. At this time, trim is missing on switches and plugs. Additionally, parties agree that plugs at location of water heaters are required and only 1 of 3 have been installed. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 10: Makeup exterior panel with breakers.

Investigator’s Observation: Exterior panel is not complete. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 11: Conduit to electrical panel and get temporary power

Investigator’s Observation: Conduit to panel has not been installed. Insufficient evidence to substantiate that Respondent’s scope included the installation of temporary power. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 12: interior paint

Investigator’s Observation: Respondent stated at the inspection that they have primed interior but have not painted. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 13: complete exterior paint and stucco repairs

Investigator’s Observation: Exterior paint and stucco are not complete. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 14: interior mirrors in bathrooms

Investigator’s Observation: No interior mirrors have been installed. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 16: Epoxy garage floor

Investigator’s Observation: Epoxy garage floor is not complete. Respondent acknowledged that this is part of their scope. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 17: Landscape and hard scape specifications and finish schedule

Investigator’s Observation: Landscape is not complete. Respondent acknowledged that this is part of their scope. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 18: Interior Fireplaces

Investigator’s Observation: Contract reflects two fireplaces 1) living room and 2) owners bedroom. Fireplaces have not been installed. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

Compliance Item 19: Exterior masonry walls per site plan

Investigator’s Observation: Wall identified as “new block fence installation...” in contract has not been constructed. Respondent should complete their scope of work by appropriate methods and in accordance with estimate/contract, executed change orders, building code, manufacturer recommendations, industry and workmanship standards.

The Written Directive required Respondent to notify Investigator Melton of Respondent’s compliance with the directive prior to 5:00 p.m. on September 12, 2025.

On September 22, 2025, Complainant informed Investigator Melton that no corrective work had been performed on the project.

On September 24, 2025, the Registrar issued a Citation against Respondent, finding cause to charge Respondent with violations of A.R.S. § 32-1154(A)(1) and A.R.S. § 32-1154(A)(22).

Respondent submitted an Answer to the Citation on October 9, 2025. Respondent’s Answer asserted a general denial.

The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

On October 23, 2025, the Registrar issued a Notice of Hearing on Contested Case setting the hearing for November 24, 2025.

On or about November 18, 2025, Respondent requested that the hearing be continued due to having finally retained Counsel who required additional time to prepare.

On or about November 21, 2025, the parties were notified the hearing was continued to January 5, 2026. The order granting the continuance from the Office of Administrative Hearings advised the parties of how to connect to the hearing via Google Meet.

The hearing was held via Google Meet on January 5, 2026, with further hearing on January 13, 2026.

The contract central to this matter provides the following payment schedule:

Down Payment has been made of $46,000.00 and will be discounted from the total.

15% at plans completed and have the exact sq. ft. being built with the approved home design by providing their initials on a hardcopy plans. Payment will be due upon signing 2nd contract and approving the set of plans. This payment will be a total of $250,000.00 minus the deposit of $46,000.00 leaving with a final total of $204,000.00.

20% will be due once the grading, back fill and compact lot for grading and drainage, forms, trench for foundation, and all underground plumbing, run underground plumbing, back fill plumbing trenches, install all rebar and be ready to our cement. Payment will be due prior to pouring cement. This process should take about a month and half. This payment total will be a total of $250,000.00.

20% due after concrete is poured and finished on the home, along with the framing structure to be completed. This should take about a month and half. This payment total will be a total of $250,000.00.

20% after all rough electrical, rough plumbing, rough HVAC, roofing to be sealed and ready for concrete tile to install, Note: the concrete tile will sit on the roof for a bit for the weight to settle on the structure, insulation, drywall install, exterior lath is ready for stucco. This should take about a month and half. This payment total will be a total of $250,000.00.

10% will be after interior door, flooring, tile showers, trim, exterior stucco, cabinetry is installed. This should take about a month and half. This payment total will be a total of $125,000.00.

Will be upon full completion and when the final inspection is approved by the City of Phoenix. The final steps with exterior should take about a month and half to two months. This payment total will be a total of $125,000.00.

Additional Evidence

Based on the contract timeline, structural framing should have been completed around mid-July to mid-August 2024. However, the evidence revealed that as late as January 9, 2025, work typically completed during the framing phase of construction was still being completed.

Based on the contract timeline, the rough-in phase, which included insulation and drywall, should have been completed around early September to early October 2024. However, on January 17, 2025, Mr. Aizpuru communicated to Complainant that before he could begin spraying foam insulation and installing drywall, a re-inspection was required and had been scheduled for January 20, 2025. On February 14, 2025, Mr. Aizpuru advised Complainant that “all drywall is installed and we passed inspection just now.”

Mr. Aizpuru repeatedly advised Complainant that specific work items were either scheduled or expected to be completed on or by a certain date but were not in fact scheduled or completed as assured.

In October 2024, in a message to Mr. Aizpuru, Complainant noted that Respondent had committed to a December move-in date, but she had not observed any consistent work performance. Additionally, on several occasions Mr. Aizpuru had scheduled a meeting to discuss progress and then postponed without notice. She further stated it was essential to schedule a meeting soon to review the timeline for the remaining phases and to finalize choices for the kitchen cabinets and countertops.

On October 29, 2024, Complainant communicated to Mr. Aizpuru that although she had been told many things would have already been completed, they were not; she had been told crews would work weekends, but they were not even working on weekdays; one month prior she had been told the roof would be installed, but it was not; and told that no work could be done inside until the doors and windows were installed, which were not. The doors and windows did not have changes made and could have already been done. Complainant then advised Mr. Aizpuru that at their meeting the next day she wanted him to provide a schedule of completion for the remaining work.

Mr. Aizpuru did not provide a schedule anytime thereafter, despite Complainant’s repeated requests. Mr. Aizpuru only continued to promise he was working on a schedule and would provide it once completed.

Investigator Melton testified in support of her jobsite inspection findings, the Written Directive, and the Citation. Specifically, no compliance inspection was performed because Respondent had not attempted to perform any corrective action. On questioning, Investigator Melton testified that at the jobsite inspection, Mr. Aizpuru stated that Respondent would complete their work. Investigator Melton further testified that there was no mention to her about the contract being terminated and she “was surprised to hear that during opening statements.” However, in such a case, after considering and finding evidence that a contractor had been fired, a directive would not be ordered. Additionally, Investigator Melton stated that when a contractor specifically acknowledges a work item, she will document it in the Written Directive as evidence. She further testified that if a dispute between the parties was purely financial in nature, she would not proceed with an investigation. Investigator Melton noted that if Respondent had a legal excuse for failure to complete the contract, it needed to be presented. Finally, Investigator Melton testified that she did not receive evidence of any change orders from Respondent.

Complainant testified that she did not cancel the contract, and after the payment made in October 2024, Respondent never requested another payment, nor did she receive any communication that the lack of performance was due to money owed. On questioning, Complainant testified that she was not advised that Respondent had failed inspections. Complainant clarified that when she referenced another “contract” in her messages, she was referring to the schedule of completion that Respondent refused to provide.

Jay Wright testified on behalf of Complainant that he was asked to help her in the capacity of an unpaid construction consultant due to her frustration with the lack of progress. Mr. Wright testified that at the time he became involved, in early 2025, the house was still at the framing stage, nothing else had really been done, though electrical, HVAC, the fire sprinkler, and gas lines had been started. The house was “literally raw” and the interior was wide open to rain. Mr. Wright testified that at that time, the house was about 35% complete and Mr. Aizpuru told him he was going to do the work. Mr. Wright stated that after he came onboard, over the next approximately 60 days, Mr. Aizpuru completed some of the rough electrical, finished the rough mechanical, passed the strap and shear inspection, spray foam insulated the interior, and hung sheetrock. After Complainant left the country, Mr. Aizpuru started to put the rough inspection items together to pass the strap and shear and then frame inspection. Mr. Wright testified that after Complainant returned, Mr. Aizpuru had a pattern of starting work on an item and not completing it then starting on a different item and not completing it. He would make promises, give dates, and then just not come back. Mr. Wright testified that when Complainant left the country, all selections had been made, and Respondent was not waiting for Complainant. Additionally, at the time Mr. Wright became involved, the house was still at the rough stage. The work required only standard building per the approved blueprints. Mr. Wright further testified that he saw a proposal Mr. Aizpuru had drafted stating he was going to vacate the contract, but it was only a draft and there was never a formal discussion. Mr. Wright testified that at no time did he agree to allow Respondent to vacate the contract. During the directive period, Respondent communicated with Mr. Wright at least 24 times, indicating that he was going to come back and do the work.

Michael Luzaich, Qualifying Party for Respondent, testified that he was an employee of Respondent and supplied the license. He believed Michelle Millan was the office manager with whom he spoke frequently, and Mr. Aizpuru was the project manager. He stated he was not sure what other projects Respondent may have been working on because he did not always get the details. On questioning, Mr. Luzaich testified that he did not know any of the parties in this matter, had not seen the project, and did not supervise the work. Mr. Luzaich stated that he was not sure that he had a responsibility to supervise the licensee.

Anthony Aizpuru, Project Manager, testified on behalf of Respondent that the contract was not abandoned, evidenced by Respondent’s gate and temporary toilets remaining on Complainant’s property. He testified that the construction permit was issued in June 2024, and the expected completion date was March 2025. Regarding the electrical panel, Mr. Aizpuru stated the contract budgeted for overhead, so the change to underground required a change order which was never completed. He testified that at the time he met Mr. Wright, the shell of the house was completed. Mr. Aizpuru asserted he did not initiate termination of the contract, rather Mr. Wright told him Complainant wanted to finish the house herself. Mr. Aizpuru testified that Mr. Wright did not communicate to him that the house had to be completed by April. He further testified that his concern was that he would not be paid, so he “expressly let everyone know” he wanted a meeting to discuss the budget. On questioning, Mr. Aizpuru testified that he did not invoice Complainant in 2025, and no amount was owed as of the date of the hearing.

Administrative notice was taken of Respondent’s prior License record on January 13, 2026. According to that record, Respondent’s License No. 331539 was Active; and there was one open complaint (instant matter), one disciplined case, and two resolved/settled complaints against Respondent’s license.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Complainant bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. Respondent bears the burden of proof to establish an affirmative defense by a preponderance of the evidence.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”

Abandonment means to give up on, withdraw from, or cease or surrender involvement in the project and contract. A respondent’s actions, or inaction, must be so severe that a reasonable person could infer Respondent’s intent to abandon the project, incurring the consequences of that abandonment. Mere untimeliness or inefficiency does not amount to abandonment.

After a prolonged period of failing to work on a project, a contractor cannot overcome a claim of abandonment by accomplishing a minimal task on the project.

The issues in the instant matter are whether, without legal excuse, Respondent abandoned the contract signed with Complainant and whether Respondent then failed to comply with the Registrar’s Written Directive.

Abandonment is the relinquishing of a right or interest with the intention of never reclaiming it. In this case, Respondent contracted to construct a custom new home for Complainant within eight months after a construction permit was obtained. The permit was obtained in or around May 2024. Thus, the latest Complainant’s home was expected to be completed was March 2025. Ms. Garrett argued that Respondent did not abandon the contract but rather exercised the right to demand adequate assurances of due performance and reasonably suspend any performance for which there had not already been exchange until such assurances were received. Specifically, after receiving a Notice of Breach of Contract and Demand to Cure and Finish Home from Complainant’s Counsel, dated May 23, 2025, referencing deductions, Respondent requested an accounting of the contract budget.

A dispositive determination regarding the underlying financial dispute in this matter is neither within the jurisdiction of the Office of Administrative Hearings, nor necessary to decide the administrative issues before the Tribunal. There was no dispute that Complainant paid Respondent $1,000,000.00, per the contract, for the first five of seven scheduled payments. Respondent could not suspend or refuse to perform work for which it had already been paid. It was Respondent’s contention that all work required in the first five payments was completed. Even if, arguendo, Respondent had a legal excuse to suspend performance, it would only apply to work for which compensation had not yet been received. Therefore, this decision is limited only to consideration of the performance required per the contract, through the first five payments.

Regarding the issue of abandonment, the contract estimated that each phase of construction would be completed within one and half months. Yet, framing work was still being completed five months after expected phase completion. Further, it is unclear to which inspection Mr. Aizpuru referred in his February 14, 2025, message; however, drywall completion on or about February 14, 2025, demonstrates that the rough-in phase was completed no earlier than February 2025, four months after Complainant made payment. This significantly supports Complainant’s testimony and argument that Respondent simply continued to push the timeline without real and tangible progress.

Several times, Complainant expressed, to Mr. Aizpuru, her concern and frustration with the lack of construction progress. Despite repeated assurances, Respondent continued to demonstrate a pattern of delaying performance without justification and only perform minimal work when confronted. Respondent received the benefit of five progress payments without completing the required performance.

The preponderance of the evidence established that Respondent abandoned the project or refused to perform work without a legal excuse in violation of A.R.S. § 32-1154(A)(1).

The preponderance of the evidence established that Respondent failed to take appropriate corrective action following a written directive from the Registrar in violation of A.R.S. § 32-1154(A)(22).

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the Order, the Registrar shall revoke Respondent’s License No. 331539.

It is further recommended that the Registrar require Respondent to pay the sum of $500.00 as a civil penalty pursuant to A.R.S. § 32-1154(E).

Pursuant to A.R.S. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

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 will be forty (40) days from the date of that certification.

Done this day, March 16, 2026.

/s/ Nedra-Su Kawasaki

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Tom Cole, Director

Registrar of Contractors

Natalia A. Garrett

VEDU PLC

[email redacted]

[email redacted]

Eman Alkhatib

[email redacted]

Lisa Melton, Investigator

Registrar of Contractors

[email redacted]

Edward Hermes, Esq.

Snell & Willmer LLP

[email redacted]

SHIFA ALKHATIB

HKM Employment Attorneys LLP

[email redacted]

AZ Design & Build LLC

[email redacted]

By: OAH Staff