SB1271 - 532R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 12-1363, Arizona Revised Statutes, is amended to read:

START_STATUTE12-1363. Notice and right to repair or replace; tolling of time limits; admissible evidence; definition

A. Before filing a dwelling action, the purchaser shall give written notice by certified mail, return receipt requested, to the seller specifying in reasonable detail the basis of the dwelling action. A seller who receives notice under this subsection shall forward a copy of the notice by certified mail, return receipt requested, to the last known address of each construction professional whom the seller reasonably believes is responsible for an alleged defect that is specified in the notice.

B. After receipt of the notice described in subsection A of this section, the seller may inspect the dwelling to determine the nature and cause of the alleged construction defects and the nature and extent of any repairs or replacements necessary to remedy the alleged construction defects. The purchaser shall ensure that the dwelling is made available for inspection no later than ten days after the purchaser receives the seller's request for an inspection. The seller shall provide reasonable notice to the purchaser before conducting the inspection. The inspection shall be conducted at a reasonable time. The seller may use reasonable measures, including testing, to determine the nature and cause of the alleged construction defects and the nature and extent of any repairs or replacements necessary to remedy the alleged construction defects. If the seller conducts testing pursuant to this subsection, the seller shall restore the dwelling to its condition before the testing.

C. Within sixty days after receipt of the notice described in subsection A of this section, the seller shall send to the purchaser a good faith written response to the purchaser's notice by certified mail, return receipt requested. The response may include the seller's notice of intent to repair or replace any alleged construction defects, to have the alleged construction defects repaired or replaced at the seller's expense or to provide monetary compensation to the purchaser. The written notice of intent to repair or replace shall describe in reasonable detail all repairs or replacements that the seller intends to make or provide to the dwelling and a reasonable estimate of the date by which the repairs or replacements will be made. This subsection does not prohibit the seller from offering monetary compensation or other consideration instead of or in addition to a repair or replacement. The purchaser may accept or reject an offer of monetary compensation or other consideration, other than repair or replacement and, if rejected, may proceed with a dwelling action on completion of any repairs or replacements the seller intends to make or provide. The parties may negotiate for a release if an offer involving monetary compensation or other consideration is accepted.

D. If the seller does not provide a written response to the purchaser's notice within sixty days, the purchaser may file a dwelling action.

E. If the response provided pursuant to subsection C of this section includes a notice of intent to repair or replace the alleged construction defects, the purchaser shall allow the seller a reasonable opportunity to repair or replace the alleged construction defects or cause the alleged construction defects to be repaired or replaced pursuant to the following:

1. The purchaser and the seller or the seller's construction professionals shall coordinate repairs or replacements within thirty days after the seller's notice of intent to repair or replace was sent pursuant to subsection C of this section. If requested by the purchaser, repair or replacement of alleged construction defects undertaken by the seller shall be performed by a construction professional selected by the seller and consented to by the purchaser, whose consent shall not be unreasonably withheld, that was not involved in the construction or design of the dwelling.

2. Repairs or replacements shall begin as agreed by the purchaser and the seller or the seller's construction professionals, with reasonable efforts to begin repairs or replacements within thirty-five days after the seller's notice of intent to repair or replace was sent pursuant to subsection C of this section. If a permit is required to perform the repair or replacement, reasonable efforts shall be made to begin repairs or replacements within ten days after receipt of the permit or thirty‑five days after the seller's notice of intent to repair or replace was sent pursuant to subsection C of this section, whichever is later.

3. All repairs or replacements shall 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 or the seller's construction professionals.

4. The purchaser shall provide reasonable access for the repairs or replacements.

5. The seller is not entitled to a release or waiver solely in exchange for any repair or replacement made pursuant to this subsection, except that the purchaser and seller may negotiate a release or waiver in exchange for monetary compensation or other consideration.

6. At the conclusion of any repairs or replacements, the purchaser may commence a dwelling action or, if the contract for the sale of the dwelling or the community documents contain a commercially reasonable alternative dispute resolution procedure that complies with section 12‑1366, subsection C, may initiate the dispute resolution process including any claim for inadequate repair or replacement.

F. During the notice and repair or replacement process, and for thirty days after substantial completion of the repair or replacement, the statute of limitations and statute of repose, including section 12‑552, applicable to the purchaser, including any construction professionals involved in the construction or design, are tolled as to the seller and the seller's construction professionals who were involved in the construction or design of the dwelling for all alleged construction defects described in reasonable detail in the written notice sent to the seller pursuant to subsection A of this section.

G. Both parties' conduct during the repair or replacement process prescribed in subsections B, C, D and E of this section may be introduced in any subsequent dwelling action. Any repair or replacement efforts undertaken by the seller are not considered settlement communications or offers of settlement and are admissible in evidence.

H. A purchaser may amend the notice provided pursuant to subsection A of this section to include alleged construction defects identified in good faith after submission of the original notice. The seller shall have a reasonable period of time to conduct an inspection, if requested, and thereafter the parties shall comply with the requirements of subsections B, C, D and E of this section for the additional alleged construction defects identified in reasonable detail in the notice.

I. Subject to Arizona rules of court, during the pendency of a dwelling action the purchaser may supplement the list of alleged construction defects to include additional alleged construction defects identified in good faith after filing of the original dwelling action that have been identified in reasonable detail as required by this section. The court shall provide the seller a reasonable amount of time to inspect the dwelling to determine the nature and cause of the additional alleged construction defects, and the nature and extent of any repairs or replacements necessary to remedy the additional alleged construction defects and, on request of the seller, sufficient time to repair or replace the additional alleged construction defects. The parties shall comply with the requirements of subsections B, C, D and E of this section for the additional alleged construction defects identified in reasonable detail in the notice.

J. The service of an amended notice identifying in reasonable detail the alleged construction defects during the pendency of a dwelling action shall relate back to the original notice of alleged construction defects for the purpose of tolling applicable statutes of limitations and statutes of repose, including section 12‑552.

K. By written agreement of the seller and purchaser, the time periods provided in this section may be extended.

L. For the sale of a dwelling that occurs within the statutory period set forth in section 12‑552, the escrow agent, as defined in section 6‑801, shall provide notice to the purchaser of the provisions of this section and sections 12‑1361 and 12‑1362. Nothing in this subsection creates a fiduciary duty or provides any person or entity with a private right or cause of action or administrative action.

M. If the seller does not comply with the requirements of this section and the failure is not due to any fault of the purchaser or as a result of an unforeseen condition, including an unforeseen weather condition or government delay, the purchaser may commence a dwelling action.

N. If the purchaser fails to comply with the requirements of this section before bringing a dwelling action, the dwelling action shall be dismissed. If the dwelling action is dismissed after the statute of limitations or statute of repose, including section 12-552, applicable to the purchaser, any subsequent dwelling action brought by the purchaser is time barred as to the seller and the seller's construction professionals involved in the construction or design of the dwelling.

O. For the purposes of this section, "reasonable detail" includes a detailed and itemized list that describes each alleged construction defect, the location that each alleged construction defect has been observed by the purchaser in each dwelling that is the subject of the notice and the impairment to the dwelling that has occurred as a result of each of the alleged construction defects or is reasonably likely to occur if the alleged construction defects are not repaired or replaced. END_STATUTE

Sec. 2. Construction liability apportionment study committee; membership; duties; delayed repeal

A. The construction liability apportionment study committee is established consisting of the following members:

1. Three members of the senate who are appointed by the president of the senate, not more than two of whom are members of the same political party. The president of the senate shall designate one of these members to serve as cochairperson of the committee.

2. Three members of the house of representatives who are appointed by the speaker of the house of representatives, not more than two of whom are members of the same political party. The speaker of the house of representatives shall designate one of these members to serve as cochairperson of the committee.

B. Committee members are not eligible to receive compensation, but are eligible for reimbursement of expenses pursuant to title 38, chapter 4, article 2, Arizona Revised Statutes.

C. The study committee shall research and make recommendations for the apportionment of liability in the construction industry, including:

1. The use of an indemnity provision in construction contracts.

2. The allocation of liability based on degrees of fault.

3. The assignment of financial responsibility to negligent parties.

4. The opportunity to address and remedy alleged construction defects prior to litigation.

5. The frequency of construction defect litigation.

6. The affordability of insurance costs associated with construction claims.

D. The study committee may hold hearings, conduct fact-finding tours and take testimony from witnesses who may assist the study committee in fulfilling its responsibilities. All hearings of the study committee shall be open to the public.

E. The legislature shall provide staff and support services to the study committee.

F. The study committee shall submit a report regarding its findings and recommendations on or before December 15, 2018, to the governor, the president of the senate and the speaker of the house of representatives and provide a copy of this report to the secretary of state.

G. This section is repealed from and after June 30, 2019.