ARIZONA
HOUSE OF REPRESENTATIVES
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SB 1271: purchaser dwelling actions; notice; complaints |
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PRIME SPONSOR: Senator Fann, LD 1 BILL STATUS: Caucus & COW |
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Modifies construction defect notification
and purchaser dwelling action procedures, and limits indemnity provisions in or
relating to construction contracts involving dwellings.
History
A purchaser of residential property may bring a dwelling action against a seller for any construction defects related to that seller's work, but only after following proper procedures (A.R.S. §§ 12-1361, 12-1362, 12-1363).
A seller is a designer, builder, or seller of the property, including any construction professionals (A.R.S. § 12-1361(10)). A construction professional is an architect, contractor, subcontractor, developer, builder, builder vendor, supplier, engineer, or inspector who performed or furnished the design, supervision, inspection, construction, or observation of the construction of any improvement to the property (A.R.S. § 12-1361(5)).
A construction defect is any material deficiency in the design, construction, manufacture, repair, alteration, remodeling, or landscaping that is the result of a construction code violation, use of defective materials, components, or equipment, or the failure to adhere to the community's generally accepted workmanship standards (A.R.S. § 12-1361(4)).
Unless the construction defect creates an immediate threat to safety, the purchaser must first notify the seller by certified mail, specifying in reasonable detail the basis for the dwelling action (A.R.S. §§ 12-1362(A), 12-1363(A)). The seller may then inspect the dwelling, and has 60 days from the date of notice to notify the purchaser of its intent to repair or replace, or to pay for the repair or replacement of, any of the alleged construction defects, describing in reasonable detail which defects it will repair or replace and the date by which the repairs and replacements will be made (A.R.S. §12-1363(B),(C)). If the seller does respond, the seller or the seller's construction professional has the later of 35 days, or 10 days after the receipt of any necessary building permits, to make the repair or replacement (A.R.S. § 12-1363(E)). The purchaser may request that someone other than the original construction professional conduct the repair or replacement.
The purchaser may bring the dwelling action either if the seller does not respond to the notice of defect within 60 days, or after the seller makes its intended repairs and replacements (A.R.S. § 12-1363(D),(E)). A purchaser may only bring a dwelling action against a party with which it has privity, and this typically prevents a purchaser from bringing an action directly against a subcontractor (Yanni v. Tucker Plumbing, Inc., 233 Ariz. 364, 367–68 (Ct. App. 2013)).
The purchaser must follow similar procedures even for construction defects identified after the original notice is sent or after commencing the dwelling action (A.R.S. § 12-1363(H),(I)).
The statutory time periods for inspection, notice, and repair may be extended by written agreement between the parties (A.R.S. § 12-1363(K)).
Provisions
Bifurcation of Purchaser Dwelling Actions (Sec. 1).
1. Requires the trier of fact in a dwelling action to first determine whether a construction defect exists and everyone who is responsible for the defect.
2. Requires that any nonparty construction professionals who the trier of fact determines are responsible for a construction defect must, if feasible, be joined to the action as third-party defendants.
3. Requires the trier of fact to thereafter determine, in a bifurcated proceeding, the relative degree of fault each defendant bears for the defect.
a. Permits the court to prevent bifurcation upon a good cause finding that bifurcation is not appropriate.
4. Requires the trier of fact to allocate pro-rata liability based upon relative degree of fault.
5. Contains a legislative finding and intent clause.
Right to Repair (Secs. 1–2)
6. Requires a seller who receives a notice of a construction defect to forward a copy to the last known address of each construction professional the seller reasonably believes is responsible for the alleged defect (Sec. 2).
a. Permits the seller to forward a copy of the notice by electronic means.
7. Requires a purchaser's notice of construction defect to include:
a. Sufficient detail to allow the seller or seller's construction professional to identify the alleged defect; and
b. The street address of each dwelling that is the subject of the notice (Sec. 2).
8. Grants a construction professional a right, but not an obligation, to repair or replace an alleged construction defect (Sec. 1).
9. Permits a construction professional notified by the seller to inspect and repair a construction defect in the same way and within the same time period as a seller notified by a purchaser (Sec. 2).
a. Requires the purchaser to make the dwelling available for inspection within 10 days of the construction professional's request for inspection.
b. Requires the construction professional to provide reasonable notice before the inspection, and to conduct it at a reasonable time.
c. Permits the construction professional to use reasonable measures to determine the nature and cause of the defects and nature and extent of any necessary repairs or replacements.
d. Requires the construction professional who conducts testing to restore the dwelling to its condition before testing.
e. Permits the seller to include in its response to the purchaser's notice a notice by the construction professional of its intent to repair or replace, or to pay for the repair or replacement of, an alleged defect.
f. Requires the construction professional's notice of intent to repair or replace to describe those repairs or replacements in reasonable detail and to provide a reasonable estimate of a date by which those repairs or replacements will be made.
g. Provides that a construction professional's repair or replacement efforts are admissible in evidence, and are not considered settlement communications or offers.
h. Grants construction professionals a reasonable time to inspect any additional defects alleged in an amended notice of defect provided to the purchaser before a dwelling action, or sufficient time to inspect additional defects alleged in a supplemental list provided during the pendency of a dwelling action, and thereafter grants construction professionals the same rights and provides the same procedures for inspecting, repairing, and replacing those defects as for the defects alleged in the original notice.
10. Provides that a substitute contractor or subcontractor not involved in the construction or design of the building but who performs a repair or replacement is only liable to the seller or purchaser for the contractor's or subcontractor's scope of work (Sec. 2).
11. Provides that a substitute contractor or subcontractor may be named in an amended notice of defect or in a corresponding dwelling action (Sec. 2).
Indemnity (Secs. 2–3)
12. Provides that any statute of limitations or statute of repose that applies to a seller's claim indemnity or contribution claim against a construction professional is tolled from the date the seller receives notice of the applicable construction defect until nine months after the purchaser serves the seller with a purchaser dwelling action complaint or arbitration demand (Sec. 2).
13. Applies the following indemnity restrictions and limitations to construction and architect-engineer professional service contracts involving a dwelling and entered into between private parties:
a. Voids as against public policy any provision in, collateral to, or affecting a construction or architect-engineer professional service contract involving a dwelling that indemnifies the promisee from liability for loss or damage resulting from the promisee's negligence, or the negligence of its indemnitees, employees, subcontractors, consultants, or agents other than the promisor.
b. Permits a contractor responsible for the performance of a construction contract to fully indemnify a person for whom the contract is not being performed and who enters into an agreement with the contractor allowing the contractor to enter on or adjacent to its property to perform the construction contract.
c. Provides that an additional insured endorsement issued pursuant to an agreement or collateral to a construction contract involving a dwelling does not obligate the insurer to indemnify the additional insured for that insured's percentage of fault.
i. Provides that this limitation does not limit an insurer's duty to defend pursuant to the terms and conditions of the endorsement.
d. Limits a provision in, collateral to, or affecting a construction or architect-engineer professional service contract that requires the promisor to defend the promisee to the defense of claims arising out of or related to the promisor's work (Sec. 3).
14. Exempts from these indemnity restrictions and limitations:
a. An agreement to which the state or a political subdivision is a party;
b. Certain agreements involving agricultural improvement districts;
c. An agreement for indemnification of a surety on a payment or performance bond by its principal or indemnitors;
d. An agreement between an insurer and its named insured under an insurance policy;
e. A provision in an agreement between an insurer and its additional insureds, that is in, collateral to, or affecting a construction or architect-engineer professional service contract and that requires the promisor to defend the promisee beyond claims arising out of or related to the promisor's work;
f. A provision in an agreement between an insurer and its insureds under a single insurance policy or contract for a defined project or workplace that is in, collateral to, or affecting a construction contract and that requires the promisor to defend the promisee beyond claims arising out of or related to the promisor's work; and
g. A public service corporation rule, regulation, or tariff approved by the Arizona Corporation Commission (Sec. 3).
15. Defines, for the purpose of these indemnity provisions:
a. Architect-engineer professional service contract as an agreement relating to the survey, design, design-build, construction administration, study, evaluation, or other professional services furnished in connection with any actual or proposed construction, alteration, repair, maintenance, moving, demolition, or excavation of any structure, street or roadway, appurtenance, or other development or improvement to land;
b. Construction contract as an agreement relating to the actual or proposed construction, alteration, repair, maintenance, moving, demolition, or excavation of any structure, street roadway, appurtenance, or other development or improvement to land; and
c. Dwelling as a single or multifamily unit designed for residential use and common areas and improvements that are owned or maintained by an association or by members of an association, including the systems, other components, and improvements that are part of a single or multifamily unit at the time of construction.
Miscellaneous (Secs. 1–4)
16. Requires a purchaser who files a contested dwelling action to file an affidavit with the complaint stating, under penalty of perjury, that the purchaser has read the entire complaint, agrees with all the allegations and facts therein, and unless authorized by statute or rule is not receiving and has not been promised anything of value in exchange for filing the dwelling action (Sec. 2).
17. Extends the repeal date of the Construction Liability Apportionment Study Committee from July 1, 2019, to October 1, 2020 (Secs. 4–5).
18. Makes technical and conforming changes (Secs. 1–2).
Amendments
Committee on Judiciary
1. Permits a court to award the prevailing party with respect to a contested issue in a contested dwelling action reasonable attorney fees and taxable costs.
2. Provides that the prevailing party with respect to a contested issue is:
a. The purchaser if the relief obtained by the purchaser for that contested issue, exclusive of any fees and taxable costs, is more favorable than the repairs or replacements and offers made by the seller before the purchaser filed the dwelling action; and
b. The seller if the relief obtained by the purchaser for that contested issue, exclusive of any fees and taxable costs, is not more favorable than the repairs or replacements and offers made by the seller before the purchaser filed the dwelling action.
3. Limits attorney fees to the amount of fees actually and reasonably incurred with respect to the contested issue for which the party is deemed the prevailing party.
4. Requires the court, in determining whether the fees actually incurred with respect to a contested issue are reasonable, to consider:
a. The offer made by the seller before the purchaser filed the dwelling action;
b. The purchaser's response to the seller's offer;
c. The relation between the fees incurred over the duration of the dwelling action and the value of the relief obtained with respect to the contested issue; and
d. The amount of fees incurred in responding to any unsuccessful motions, claims, and defenses.
5. Permits the court to award the prevailing party with respect to a contested issue reasonable expert witness fees if the dwelling action involves only one purchaser and is not consolidated with any other dwelling action.
a. Requires the court to determine the reasonableness of expert witness fees using the same criteria as for attorney fees.
b. Provides that the expert witness fees are in addition to taxable costs.
6. Defines contested issue as an issue that relates to an alleged construction defect and that is contested by a purchaser following the conclusion of notice, repair, and replacement procedures.
7. Defines purchaser as any person or entity, including the current owner of the dwelling who files a dwelling action during the statutorily required time period.
8. Makes technical changes.
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12. Fifty-fourth Legislature SB 1271
13. First Regular Session Version 1: Caucus & COW
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