Arizona Passes Law Affecting Payment Schedules for Pool/Spa Projects

Following intense industry lobbying, the Arizona legislature decided against eliminating a progress payment schedule law from the books.

Instead, it has changed the amount that pool and spa contractors can collect at various stages.

The legislation was signed by Arizona Governor Doug Ducey.

Earlier in the year, Senate Bill 1116 was introduced as part of Ducey’s efforts to reduce government oversight, especially with regards to business. It sought to completely remove progress payment schedule, which actually had been advocated by the industry 15 years ago as a way to rein in contractors who were frontloading their contracts and abandoning the projects of homeowners who had paid most or all of the price.

SB 1116, written without industry input, met with immediate industry opposition. In addition to protecting consumers, builders felt, the regulated payment schedule would benefit them by helping keep the industry in good standing with the public, and by requiring that homeowners make their final payments before the interior surface was applied.

Local industry leaders met with state legislators in hopes of eliminating the bill. Instead, the state assembly and senate chose to rebalance the payment schedule. Before, the law would only allow contractors to take deposits of $1,000 or less. With the new law in effect, builders can take up to 15% of the total contract price. However, subsequent installments collected after excavation, shotcrete and deck construction go down from 30% to 25% of the contract price. Before plaster, the remainder of the contract price plus change orders must be paid by the homeowner.

The new law also makes it illegal for the Arizona Registrar of Contractors to release personal information – including home address, telephone number or email address – of license holders to consumers, if that information is different than it is for the business.

Additionally, the legislation repealed a law that allowed the Registrar of Contractors to suspend the license of builders found not to have workers compensation coverage.

Industry professionals and a hired lobbyist met with legislators to inform them why many pool and spa companies see the schedule law as beneficial. For one thing, senators and assembly members believed the payment schedule prevented proper cash flow, thinking that pool and spa contractors had to pay their subcontractors before they could collect for work done, said Tom Burba, general manager of PoolCorp’s Mountain Division, who played a key role in the effort.

In fact, Burba said, builders’ ability to manage cash flow has improved with the legally imposed payment schedule. “We were able to explain that the write-offs that we have on bad debt are negligible in Arizona,” he said. “I quite frankly think [the mandated schedule] is part of the reason why we have very few bad debt write-offs for the pool industry.”