Arizona Legislature Reduces Threat of Construction Defect Lawsuits
New law removes homeowners' automatic entitlement to attorney fees, gives contractors opportunity to resolve defects in advance of a lawsuit.
Homebuilder-friendly amendments to Arizonas
construction defect statute were signed into law by Governor Ducey on March 23
and went into effect July 3.
The main focus of HB 2578 is the repeal of A.R.S. § 12-1364, which requires home sellers and contractors to pay
attorney fees and expert witness fees to successful plaintiffs in a construction
defect lawsuit (or contested dwelling action). Under the new law, the awarding
of such costs will be left to the courts on a case-by-case basis and will depend
on the language of the dwelling purchase contract.
The new law does not deprive homeowners of the right to
sue to force sellers or builders to correct defective construction. However, by
making the awarding of attorney fees less certain, the law seeks to curb
excessive lawsuits promoted by law firms that represent homeowners in
construction defect litigation.
The new law also establishes a sellers/builders right
to repair construction defects before a homeowner can file a lawsuit. The
process begins with the homeowner sending a certified letter to the
seller/builder, which has 60 days to respond. In its response, the
seller/builder can either dispute the need for corrective action or, in a
notice of intent to repair or replace, can agree to make any needed repairs or
replacements. The new law provides that, in the latter case:
The homeowner and the seller/builder will
coordinate repairs or replacements within 30 days after the seller/builders
notice of intent to repair or replace was sent.
The repair/replacement will be performed by
the seller/builder or, at the request of the homeowner, by another construction
professional selected by the seller/builder.
The seller/builder is required to make
reasonable efforts to begin repairs/replacements within 35 days after the
seller's notice of intent to repair or replace was sent.
All repairs/replacements are to be completed
using reasonable care under the circumstances and within a commercially
reasonable time frame considering the nature of the repair or replacement, any
access issues or unforeseen events that are not caused by the seller/builder.
At the conclusion of any repairs or replacements, the
homeowner may sue the seller/builder, as under the current law. However, as
noted above, if the homeowners lawsuit is successful, the seller/builder will
be liable for attorney fees and expert witness fees only if the court decides to
award those fees to the homeowner.
If the homeowner files a suit against the seller/builder
before the seller/builder can fulfill its obligations under its notice of intent
to repair or replace (per the steps outlined above), the suit may be dismissed.