In the last 2 weeks, I’ve had 4 conversations that landed on discussions around SB800 and the related legal issues from other states. We’ve been having homebuilder discussions for over 2 years now and have now and then heard about lawsuits, but nothing that was out of the ordinary. I was surprised to see legislation that started 20+ years ago surfacing in conversations so close together; I did more digging for on why, why now & what you need to know to understand about what is going on. This is basic understanding; I’m not a lawyer, I don’t play one on TV!Despite a positive market outlook, homebuilders are facing increased litigation. Here are four reasons I keep hearing, here is some data to back it up.
- High Demand for New Homes: With low existing home inventory, many buyers are turning to new constructions. This surge in demand increases the chance of encountering construction defects (Fast Company) (Marketplace).
- Affordability Challenges: Rising construction costs and high mortgage rates are pushing builders to find ways to cut costs. This can sometimes lead to quality issues and subsequent disputes (Marketplace).
- Increased Legal Awareness: Buyers are more informed about their rights, especially under laws like SB 800, leading to more legal actions when defects are found (Marketplace).
- Targeting Lower-Cost Housing: Builders are focusing on affordable homes for first-time buyers. While this expands the market, it can also lead to compromises in construction quality, increasing the risk of litigation (Marketplace).
- Arizona: Arizona Revised Statutes § 12-1361 requires homeowners to provide written notice of defects and allows builders the opportunity to repair.
- Florida: Chapter 558, Florida Statutes, outlines a pre-suit process for notifying builders of defects and providing an opportunity for inspection and repair.
- Texas: The Texas Residential Construction Liability Act (RCLA) mandates a similar notice and ‘opportunity to repair’ process.
- Nevada: Nevada Revised Statutes Chapter 40 provides a detailed procedure for handling construction defect claims, including notice and repair opportunities.
- Colorado: Colorado Construction Defect Action Reform Act (CDARA) requires homeowners to notify builders of defects and allows for repair before litigation.
- Oregon: Oregon Revised Statutes Chapter 701 requires notice of construction defects and offers builders a chance to correct them.
- Construction Standards: SB 800 establishes minimum performance standards for various components of a home, such as foundations, roofs, plumbing, and electrical systems. These standards serve as a benchmark for identifying defects. NAHB does a better job with standards; SB 800 leaves a lot to the imagination. It seems vague enough to create litigation vs. eliminate it.
- Builder's Right to Repair: Before homeowners can file a lawsuit, they must notify the builder of any defects and allow the builder the opportunity to repair them.
- Statute of Limitations: The law sets specific time limits for filing claims, ranging from one year for smaller issues to ten years for structural defects. I do like the timelines they identify.
- Pre-Litigation Process: Homeowners must follow a pre-litigation process, which includes notifying the builder, allowing for inspection, and providing an opportunity for repair.
- Exclusions and Limitations: SB 800 also outlines what is not covered under the warranty, such as homeowner negligence or normal wear and tear.
- Notification and Acknowledgment: Homeowners must provide written notice of the alleged defects to the builder. The builder must acknowledge receipt of the claim within 14 days (Wolff Law) (Primerus) (SB 800).
- Inspection and Testing: The builder has 14 days from acknowledgment to inspect the claimed defects. A second inspection may occur within an additional 40 days if necessary (Wolff Law) (Primerus) (SB 800).
- Offer to Repair or Settlement: After completing inspections, the builder has 30 days to offer to repair the defects, set a reasonable completion date, or provide a monetary settlement (Wolff Law) (Primerus) (SB 800)..
- Homeowner's Response: The homeowner has 30 days to accept the repair offer, request the names of three additional contractors to conduct the repair, or request mediation (Primerus (SB 800).
- Commencement of Repairs: Repairs must commence within 14 days of acceptance by the homeowner and be completed with diligence, with an effort to finish within 120 days (Primerus) (SB 800)..
- Mediation: If mediation is requested, it must occur within 15 days and is limited to four hours unless mutually agreed otherwise (Primerus) (SB 800)..
- Prompt and Detailed Response: Acknowledge receipt of defect claims within the required timeframe and thoroughly document all communications and inspections.
- Proactive Inspections: Conduct thorough inspections of the alleged defects and document findings with photos and detailed reports. Consider a second inspection if necessary.
- Offer Timely and Adequate Repairs: Make clear and timely repair offers, specifying the scope, method, and timeline for completion. Ensure repairs meet quality standards and comply with the Act's timelines.
- Consider Mediation: Offer mediation as an alternative to litigation, which can help resolve disputes amicably and minimize legal costs.
- Compliance with Procedures: Strictly adhere to the statutory procedures and timelines to prevent homeowners from bypassing the pre-litigation process and proceeding directly to court.
- Alternative Procedures: Builders may elect to use alternative non-adversarial procedures but must clearly notify homeowners at the time of the sale agreement (Wolff Law) (Wolff Law) (Primerus).
- Limited Timeframes for Claims: Homeowners must be aware of the statute of limitations for different types of defects. Missing these deadlines can result in losing the right to make a claim.
- Potential for Inadequate Repairs: Accepting repairs that do not fully resolve the issue can be a risk. Homeowners should carefully review repair offers and ensure quality work is done.
- Exclusions from Coverage: Understanding what is not covered under the warranty is essential, as issues like homeowner negligence or normal wear and tear are often excluded.
- Legal Complexities: Navigating the pre-litigation process and understanding the legal requirements may necessitate professional legal representation.
- Legal and Financial Liabilities: Builders face the risk of being held liable for defects and associated repair costs, which can impact their reputation and future business.
- Cost of Repairs: Repairing defects can be costly, especially if they are widespread or severe.
- Compliance with Construction Standards: Builders must ensure their work meets established standards to avoid disputes and potential legal action.
- Pre-Litigation Process Challenges: The negotiation and settlement process with homeowners can be complex, with the risk of disputes escalating to litigation if not properly managed.
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