The Customer Who Wants No Permit, No Contract, and Cash
You are the qualifying party for an Arizona air conditioning contracting business. A homeowner wants two 3-ton changeouts at $18,400 total. He asks you to skip the city permit "since it's just a swap," to take $6,000 cash up front with a handshake instead of a written contract, and to let your helper - three years of field experience, not licensed, not on payroll, paid by the day - do the line-voltage wiring and final connections "so we save." He also mentions he could pull an owner-builder permit in his own name if that makes it cheaper. The sale was made at the kitchen table.
1. How do you handle the permit request and the owner-builder suggestion?
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Permits are issued by the local authority having jurisdiction - city or county - and Arizona does not preempt local code enforcement. A changeout that involves new equipment, line-voltage connections, condensate, and gas or electrical work will generally require a mechanical permit and often an electrical permit. Verify the specific requirements with the AHJ for that address before you commit to a schedule, and price the permit and inspection into the bid.
Skipping the permit is a bad trade for the customer and a license risk for you: no inspection, no record of the installation for a future sale or insurance claim, possible stop-work orders and re-inspection costs, and a paper trail that supports a Registrar of Contractors complaint for work not performed per code.
The owner-builder permit is not a workaround. It exists for an owner doing work on their own property, generally for their own use and occupancy, not for a licensed contractor to perform permitted work under the owner's name. Performing work under someone else's owner-builder permit exposes you to unpermitted-work findings and discipline. Decline both requests in writing and explain why in plain language.
2. What must be in place before work starts on the contract, payment, and the helper? Address the cash request specifically.
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Contract: a written, signed contract before any work - scope of work for both systems, equipment make/model and efficiency rating, permit responsibility, price and payment schedule, start and completion dates, warranty terms, exclusions, and the required Registrar of Contractors information and complaint notice. Because the sale was solicited at the residence, confirm whether any home-solicitation cancellation right applies and honor it if it does.
Payment: taking cash is legal, but the transaction must still be documented - receipt, invoice, deposit into the business account, and reported income. What you do not do is accept a large cash deposit with no contract and no paper trail. Keep the deposit reasonable relative to mobilization and equipment cost; a schedule tied to milestones (equipment delivery, rough-in complete, final inspection) protects both sides.
The helper: he cannot be an off-the-books day-rate person doing regulated work. He must be a documented employee - payroll, W-2, workers' compensation coverage - or a properly licensed subcontractor with his own license and insurance. Paying an unlicensed individual to do the electrical connections on your job is unlicensed contracting exposure for the entity and for you personally as qualifying party. Either put him on payroll with supervision and documented training, or keep him off the electrical work.
Insurance and posting: confirm general liability and workers' comp are current, and that the license number appears on the truck, ads, and contract as required.
3. What do you tell the homeowner in writing, and what is your own exposure if you go along with the original plan?
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Tell him, in a short written summary he signs:
- The permit is required by the city/county for this work; it is included in the price and protects his inspection record and resale.
- A written contract is required, and it protects him as much as you - scope, equipment model numbers, price, dates, warranty.
- The owner-builder permit is not available for work performed by a licensed contractor.
- All workers on the job are covered by workers' compensation and are either employees or properly licensed subcontractors. Unlicensed day labor will not be used on electrical or refrigerant work.
- If he wants to reduce cost, here are the legitimate levers: equipment tier, staging the two systems, or deferring accessory work - not removing permits, contracts, or insurance.
Your exposure if you go along: discipline against the license (including possible suspension or revocation), complaints through the Registrar of Contractors, unpermitted work that fails inspection, an uninsured injury on your job with no workers' comp defense, a lien or payment dispute with no contract to rely on, and personal liability as qualifying party. The $18,400 job is not worth the license - and losing the license ends the business.