(a) Violation. It shall be a civil infraction and punishable as provided in this section if in bad faith: a) an owner fails to pay for work performed by a general contractor or contractor, or b) a general contractor fails to pay for work performed by a subcontractor, or c) a subcontractor fails to pay for labor or materials provided, within fourteen (14) days or within the time otherwise agreed upon between the parties following the completion of the work or labor or delivery of materials, and delivery of an initial written request for payment evidenced by an affidavit of service or return receipt of certified mail.
A separate violation may be charged for each segment of completed work, or labor or delivery of materials for which payment is not made. Each day for which payment is not made may be charged as a separate violation after the violation accrues.
Bad faith may be established by the conduct between the parties or other means as allowed by the court but shall at a minimum be evidenced by two subsequent written requests for payment delivered not sooner than two weeks after the initial request and at least two weeks apart and testimony that payment in full has not been made and there is no reasonable basis to delay payment which together shall constitute prima facie evidence of bad faith. A party who acts in compliance with applicable contract provisions shall not be deemed to act in bad faith under this section.
(b) Definitions. As used in this section:
Completion of work or labor means, unless otherwise agreed upon between the parties, the date upon which the work or labor for which payment is requested has been completed, or if an inspection is required by the city for the work or labor, the date such work or labor passed inspection.
Contractor includes any person, firm, entity, partnership, corporation, association, or other organization licensed under Title 32 of the Arizona Statutes and that undertakes to perform work directly for an owner.
General contractor is synonymous with the terms "commercial contractor" and "contractor" as used in A.R.S. § 32-1101(A) and includes any person, firm, entity, partnership, corporation, association, or other organization or any combination thereof that uses subcontractors and engages in construction, repair or alteration.
Owner means the person, firm, entity, partnership, corporation, association or other organization or combination thereof possessing either a fee or lesser interest that enters into a contract, arrangement or agreement with a general contractor or contractor for the construction, repair or alteration of a structure. Owner includes all assigns and successors in interest of the owner.
Subcontractor means any person, firm, entity, partnership, corporation, association or other organization or any combination thereof that undertakes to perform work for a general contractor and has a direct contractual relationship with the general contractor.
(c) Penalty. A violation of this section shall result in a fine of not less than two hundred fifty dollars ($250.00) for the first offense and not less than five hundred dollars ($500.00) for the second offense.
(d) Scheduling of hearing. A violation charged under this section shall be heard by the construction special magistrate not more than sixty (60) days after the violations set forth in the complaint have been answered. For good cause shown, the construction special magistrate may continue the hearing.
(e) Defenses. Justification is a defense to a prosecution under this section. Justification means money is unavailable to make payment due to nonpayment by an owner, general contractor, contractor or subcontractor, bankruptcy, force majure, operation of a stop notice or bonded stop notice or a prima facie showing that any claim for moneys due for work completed, labor performed or materials provided is subject to a legal or equitable defense.
Unavailability of money due to nonpayment is not a defense unless the party asserting nonpayment: a) files an action in a court of competent jurisdiction seeking payment or enters arbitration seeking payment unless to do so would be a futile act in that it would not likely result in the recovery of funds to provide payment, or b) initiates or seeks to initiate an action under this section.
Nonpayment based upon poor quality of work may not be asserted as a defense where there is an agency with jurisdiction over quality issues and a written complaint has not been filed with that agency.
(f) Limitation on action. No violation chargeable under this section may be filed more than one (1) year after the violation accrues. A violation accrues under this section on the date of delivery of the last request for payment required by this section. No action may be brought on behalf of any person, firm, corporation or entity that does not hold a license if a license is required by Title 32 of the Arizona Statutes.
(Ord. No. 9158, § 2, 11-9-98)