What Homebuyers, Contractors and “Sellers” Need to Know
On July 3, 2015 substantial amendments to Arizona’s construction defect statutes will become effective. The following is a summary and analysis of the most notable amendments contained in House Bill 2578.
House Bill 2578 defines “Construction Defect” as a “Material Deficiency” in the design, construction, etc. of the home resulting from one or more of the following:
(a) the violation of applicable building codes;
(b) use of defective materials, products, etc.; or
(c) failure to meet the “generally accepted workmanship standards” within the community.
“Material Deficiency” is then defined as a “deficiency that actually impairs [emphasis added] the structural integrity, the functionality or the appearance of the dwelling at the time of the claim or is reasonably likely to actually impair the structural integrity, the functionality or the appearance of the dwelling in the foreseeable future if not repaired or replaced.”
Questions: What standard will be used to determine if a deficiency “actually impairs” the structural integrity, functionality, or appearance of a dwelling? Who will make that determination? Will it be necessary to go to court to have that decided?
“Seller” has been expanded to include any person or entity engaged in the business of designing, constructing or selling dwellings, including any “Construction Professional,” which is defined as any “architect, contractor, subcontractor, developer, builder, builder vendor, supplier, engineer or inspector.”
Questions: Must the homeowner give each of these entities notice of the claimed Construction Defect since they fall under the definition of “Seller”? Who has the right to make and the liability for the repairs and replacements? Who must be included as a party in any lawsuit?
Prior to filing a construction defect lawsuit; the homeowner must first give the “Seller” written notice of the alleged Construction Defect. Upon receipt of the notice, Seller then has a “reasonable opportunity” to repair or replace the claimed Construction Defect. The Homeowner then has the right to request repairs or replacements be made by another licensed construction professional. The Seller, with consent of the homeowner, has the right to choose the alternate licensed construction professional.
Questions: Who is the Seller for these purposes? Do all of the “Seller” entities have a say in choosing the alternate construction professional? Since “inspectors” are included in the definition of Seller, will the homeowner be required to file a statutory notice of claim with any governmental agency that inspected the dwelling?
The “Conduct of the Parties” during the repair process, as well as any “any repair or replacement efforts undertaken by the Seller,” will now be admissible as evidence in any lawsuit.
Questions: Will this amendment have a chilling effect on the willingness of the Seller entities to repair or replace the claimed defects prior to any litigation? Will the admissibility of the Conduct of the Parties promote or discourage pre-litigation cooperation between the parties?
Finally, the House Bill 2578 eliminates the requirement that the court award attorney’s fees and expert fees to the successful party; however, original purchasers may still be able to recover such fees under normal contract theories.
According to the sponsors of House Bill 2578, the newly adopted amendments were intended to discourage construction defects litigation. The volume of questions raised by the amendments suggests that they may actually have the opposite effect. In any event, homeowners and each “Seller” involved in the construction or renovation of a dwelling should establish procedures and documentation to assure compliance with the new requirements. Each party must also be mindful of their conduct and communications throughout any repair process, since they are now admissible in any construction defects lawsuit.