Construction Defect Law: Effective April 2003

You think you have a construction defect and you want to sue now? New law requires notice process.

On April 25, 2003, Governor Owens signed House Bill 03-1161 changing construction defect law. This article summarizes the new notice requirements before a lawsuit can be filed for defects in residential property. The article does not address how the law affects commercial properties or the limitations on what can be recovered from a lawsuit for defects. The term “home” will be used to describe the residential property and it encompasses single family homes, townhouses or condominiums. This article is not meant to be a “how to” guide on filing a notice of claim and readers are advised to seek legal counsel.

Notice of Claim

If you think a home may have a construction defect, you cannot immediately file a lawsuit. The new law requires a “Notice of Claim” to be sent at least 75 days before filing an action against a “Construction Professional.” A Construction Professional is defined as an architect, contractor, subcontractor, developer, builder, builder vendor, engineer or inspector performing or furnishing the design, supervision, inspection, construction, or observation of the construction of any improvement to real property. If your home has been damaged or you have been unable to live in it, a professional should be engaged early on to inspect the damage. However, you are not required to have an inspection or a report regarding the damage to the home at this stage.

It may be difficult to determine all responsible parties or the exact cause of the problem in new home without access to plans and other documents that are usually kept by the builder and not routinely maintained for long by building departments. A request can be made to the builder and/or developer for information, but there is no mandate that the builder has to give you this information prior to a lawsuit.

What do you do if you know the name of the builder or developer, but cannot obtain the names of other parties who may be responsible for the defect? You should prepare a Notice of Claim for each known responsible party. The notice does not need to be in a particular format but must be in writing and should be sent by certified mail or delivered by a process server to the construction professional’s last known address. The notice must describe the claim in reasonable detail, state the general nature of the defect, including the type and location of the defective construction, and must include any damages that have been caused by the defect.

What if your home has not suffered any damage yet but was not built to code? The new law does not allow negligence actions for building code violations that have not caused actual damage or loss of use of real or personal property, even if loss is likely to happen in the future. In the event of a building code violation that presents a safety issue, you should stop using the affected area of the home or stop living in the home and make a claim for loss of use. Prior to this change in the law, negligence actions could be asserted for violations of the building code or deviations from industry practice where damages or loss of use was “probable.” If a defect has not caused damages or restricted your use of the home, you should see if the problem can be fixed pursuant to an express warranty provided by the builder at purchase.

If your home is not a new home, the law still affects you. If you recently employed someone to perform renovations or repairs that you believe are defective, you need to follow the notice process before suing the contractor. If you had your home inspected prior to purchasing it and later discovered a defect, you need to follow the notice process before suing an inspector. Anyone performing or supervising any renovations, repairs or inspections falls under the new law. Beware of the broad inclusion under “Construction Professionals” of persons involved in the “supervision,” “inspection” or “observation” of the construction of any improvement to real property. Property managers should refrain from supervising or inspecting construction other than routine maintenance, leaving the job to a general contractor or other entity. Real estate agents should refrain from conducting, observing or supervising any inspections or work on a home.

Inspection Process

Following receipt of a notice of claim, the Construction Professional has 30 days to inspect the claimed defect.

Offer to Settle

After the inspection, the Construction Professional has another 30 days to make an offer to settle the claim, so it may be 60 days after you send a notice letter before you receive a response. The offer has to be delivered by certified mail or a process server. The offer can be a monetary offer to settle the claim or the offer can be an agreement to remedy the defect. A written offer to remedy the defect needs to include a report of the scope of the inspection conducted, the findings and results of the inspection, a description of the repairs, and a timetable for the completion of the repairs. You have 15 days to accept the offer in writing or it will be deemed to have been rejected.

What happens next?

If you reject a settlement offer, the Construction Professional fails to make an offer, the Construction Professional fails to pay the settlement amount, or the Construction Professional fails to remedy the defect in accordance with the timetable, the homeowner can then file a lawsuit. If the parties’ contract calls for mediation prior to filing suit, the homeowner must first follow the contract’s mediation procedure. If a homeowner jumps the gun and does not follow these detailed and time-consuming procedures before filing a lawsuit, the lawsuit will be stayed until the notice procedures have been followed. If a homeowner discovers additional defects not already identified in a previously sent notice of claim, a new notice of claim must be sent and the entire process starts over again. If a homeowner later learns of additional Construction Professionals responsible for the defects, the entire notice process must occur as to those Construction Professionals. A builder cannot alter these procedures through a form contract. The offer of settlement and the notice process plays a part in the damages that can be later awarded.

Conclusion

The new law was meant to provide builders with the opportunity to resolve a dispute prior to litigation. While many homeowners probably tried to resolve their problems with the builder before seeing a lawyer and filing a lawsuit in the past, these new procedures may cause a homeowner to see an attorney even earlier than usual. Builders may receive an onslaught of notice letters and amended notice letters that will need to be provided to their insurance carriers. The process may create burdens on the construction industry and their insurers that outweigh the benefits of a forewarning and attempt at settlement. Homeowners must jump through many more hoops now before they can have their day in court.

Cinthia M. Manzano is a shareholder with Frascona, Joiner, Goodman and Greenstein, P.C. Her practice areas include Construction Defect, Construction, Special Needs Education Law, Real Estate, Litigation, and Association Law. Contact Cinthia Manzano.

Disclaimer — Content is general information only. Information is not provided as advice for a specific matter, nor does its publication create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.

CINTHIA M. MANZANO