3 Things you Need to Know About Construction Defect Law
Ray Hagar | RGJ
February 20, 2015
Altering Nevada’s construction defects law has been a hotly-debated topic during the first three weeks of the Legislature. The measure moved swiftly through the Assembly and state Senate as part of the “reform package” of Republicans, who have the majorities in both houses for the first time since 1985. After final passage Friday in the state Senate, the bill, AB 125, now moves on the the governor’s office for final signature and approval by Gov. Brian Sandoval.
Here are three things you need to know about the bill:
WHY BUILDERS WANT IT: Nevada’s builders feel they are getting fleeced by lawyers who organize class-action construction defects claims that hold too many people responsible for a single, specific problem, such as hauling the plumber into the lawsuit when the issue deals with the fireplace. The current law leads to law suits too quickly and does not give builders the opportunity to fix the problem before it goes to court.
“Chapter 40” of the Nevada law book has defined a construction “defect” too loosely, allowing many lawsuits outside the original intent of the law, according to a 2013 study by UNLV’s Center for Business and Economic Research. Between 2000 and 2012, when researchers expected lawsuits to decrease with the slowdown of building, they increased 355 percent. Since 2006, the number of claims per new home in Nevada is 38 times the national average, according to the study.
The Nevada Home Builders Association notes that lawyers are very aggressive in seeking out construction-defect clients. A recent survey of homeowners involved in construction defect cases, showed that only 2 percent of the homeowners sought out a lawyer themselves in a construction defect claim. The study was commissioned by the builders and done by LUCE Research. The study also showed that Nevada lawyers who specialize in Chapter 40 lawsuits have generated about $2 billion in judgments and settlements.
WHY DEMOCRATS CALL IT THE ‘HOMEOWNERS REJECTION ACT’: The bill’s name is the Homeowners Protection Act. Democrats call it something different. Democrats are alarmed that the bill reduces the statute of limitations to file suit against a home builder from 10 to six years. It also limits the definition of what is a construction defect and restricts homeowners on what they can claim as a defect, including violations of minimum building codes.
It also requires homeowners to list each defect in “specific detail” instead of “reasonable detail” under current law. It subjects homeowners to criminal penalties if they report problems that do not satisfy the proposed legal standards. Homeowners will also be forced to make claims on warranties for roofs, windows, walls and other parts of a home before they can make a claim to a builder. And for lawyers, it will repeal a provision that allows rewarding of attorneys fees and costs in a home defect judgment.
WHY CONSTRUCTION DEFECTS WILL BE AN ONGOING PROBLEM: Republicans only needed a simple majority to pass construction-defect reform, since it does not have a tax component. Gov. Brian Sandoval will most-likely sign the measure. In his State of the State speech, he called for changes in construction defects laws to revive the housing market. Yet Democrats warn that if they regain the majority in both houses in 2017, they will flip the reforms passed this session and return to a construction defect law that is more to their liking.
Then, if the GOP regains the majority, it will most likely undo what the Democrats did. Senate Minority Leader Aaron Ford, D-Las Vegas, said this will become an ongoing problem because the bill passed on strict party lines and offers no compromises proposed by Democrats. By compromising, Ford said lawmakers could come up with a construction-defect law that would have lasted more than a decade. Because of partisanship, the Legislature instead will probably continue to battle over construction defects for years to come.
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