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SPONSOR: |
Rawson |
DATE TYPED: |
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HB |
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SHORT TITLE: |
Actions Against Construction Professionals |
SB |
445 |
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ANALYST: |
Maloy |
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Revenue
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Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
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|
|
Unknown |
|
Unknown |
Recurring |
General
Fund |
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|
No
Response Received From
The
Construction Industries Division, Regulation and Licensing Department
SUMMARY
Synopsis of Bill
Senate Bill 445
creates a new Act, the Construction Defect Claims Act. This act establishes the civil process
through which residential construction disputes may be addressed in the courts.
PROCESS
/ PROCEDURES:
·
This new act requires that in every
potential action against a construction professional, a homeowner shall serve
written notice of claim no later than 45 days before filing an action in court,
stating that the homeowner asserts the existence of a construction defect.
·
Within 14 days of receipt of the notice
of claim of construction defect from the homeowner, the construction professional
shall submit a written response to the homeowner which states:
1.
an offer to inspect the residence within
a specified time frame, and dependent upon the outcome of the inspection, a
statement of intent to remedy the defect, compromise the claim by payment, or
dispute the claim; or
2.
an offer to compromise and settle the
claim without inspection through monetary payment, or purchase of the residence
that is the subject of the claim plus payment of the homeowner’s reasonable
relocation costs; or
3.
a statement that the construction
professional disputes the claim and will neither remedy the alleged
construction defect nor compromise and settle the claim.
·
If a construction professional disputes
the legitimacy of a claim, or does not respond to a homeowner’s notice of claim
within the statutory time frame (14 days), the homeowner may proceed with
initiating a civil action without further notice to the construction
professional.
·
If the construction professional offers
to inspect and correct, or a monetary or repurchase settlement, but the homeowner
rejects the offer or proposal , the homeowner should serve written
notice of his or her rejection. However,
regardless of whether a homeowner provides such written notice, the homeowner
retains the right to proceed with a civil action.
·
If within 30 days of receipt of the
construction professional’s response, the construction professional has not received the notice of the
homeowner’s acceptance or rejection, the construction professional may
terminate the offer / proposal by serving written notice on the homeowner, and the homeowner may, thereafter, proceed
with a civil action.
·
If, pursuant to an offer to inspect and
correct and/or settle monetarily, the homeowner elects to allow the
construction professional to inspect the residence, the homeowner must allow reasonable
access to inspect the premises.
Thereafter, within 14 days of the inspection, the construction
professional must serve the homeowner with his written proposal for correction
of the defect, or offer for compromise through monetary compensation or
repurchase, or a written statement that the alleged defect is challenged.
·
If the homeowner wishes to accept
the construction professional’s proposal or offer, the homeowner must provide
written notice to that effect within 30 days of receipt of the construction
professional’s proposal or offer. The
homeowner must allow reasonable access to the premises for the construction
professional to carry out the commitments in the proposal or offer within the
timelines stated in the proposal or offer.
·
If the construction professional does not
meet the stated proposal or offer obligations, nothing shall prohibit the
homeowner from proceeding with the right to pursue a civil action.
·
Any action pursued by a homeowner after
first complying with the Construction Defect claims Act shall be dismissed
without prejudice, and shall not (re)commence until the homeowner has complied
with the Act.
·
Both prior to initiation of an action,
and/or after the dismissal of an action without prejudice, if the homeowner
seeks to amend the notice of claim to include new construction defects
discovered after services of the original claim, the homeowner may do so. However, the homeowner must still comply with
all elements of the Construction Defects Act claims for the newly identified
defects.
·
Similarly, claims for defects discovered
after initiation of an action may be added to the action only after providing
notice of the defect to the construction professional and allowing for a
response as required under the Construction Defect Claims Act.
INITIAL
CONTRACTING NOTICE REQUIREMENTS:
·
Upon entering into a contract for sale,
construction or remodel, a construction professional shall provide written
notice to each homeowner of the construction professional’s right to offer to
cure a defect before a homeowner may initiate an action. This notice shall be conspicuous, and shall
be included in the underlying contract document.
·
A failure to provide this notice to the
homeowner will result in the Construction Defect Claims Act being inapplicable
to the agreement and claims arising out of it.
Yet,
concerns remain on how the two Acts will work together:
For
instance, a construction professional can monetarily pay-off a homeowner and
avoid civil liability (but leave a defect /code violation /unsafe condition
existing). In such instance, is the
compensation to the homeowner, as permitted under the Construction Defect
Claims Act, intended to be the end of
the matter? Or, should the homeowner be
able to (having been made economically whole) turn around and file a “code
violation” complaint with the Construction Industries Division. The result of such a complaint could possibly
be revocation or suspension of the construction professional’s license, ordered
corrective action, or more fines and penalties.
Seemingly, the homeowner could double-dip. The homeowner may receive full monetary
compensation from a construction professional for any needed corrective action
to cure a defect, but then go to CID and, pursuant to division policy, force
the construction professional to take corrective action.
It
is the policy of CID that the payment of defect costs does not alleviate the
code jurisdiction of the division and the requirement that it use a
contractor’s licensure status to force corrective action and ensure safety for
the current, or future owner.
Should
a homeowner have such extensive, two-fold remedies against the construction
professional?
What
if the construction professional repurchases the house with the defect from the
homeowner under the Construction Defect Claims Act. . . is the homeowner, now lacking ownership
interest, barred from action against the construction professional through
CID?
What
if the construction professional turns around and resells a home that he repurchased
from a homeowner because of a defect, does not correct the defect, and the
secondary owner is unaware of the defect?
This is a real safety concern for secondary buyers.
The bill will likely
result in an increase in filed and litigated cases. This may mean more in revenue to the general
fund through court fees. This may also
mean additional administrative impact on already overburdened courts.
Depending on the
interpretation regarding how the Construction Defect Claims Act works with the
Construction Industries Licensing Act, there may be a reduction in revenue to
the general fund through CID.
TECHNICAL ISSUES
It is not clear how
Section 6 (c), p.9, lines 5-8, supports the intent of the bill. Does this section not allow the construction
professional á mechanism to avoid the intended process?
SJM/njw