Arizona legislature reduces threat of construction defect lawuits

Contractor-friendly amendments to Arizona’s Purchaser Dwelling Act were signed into law by Governor Ducey on March 23, 2015, 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 seller’s/builder’s 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/builder’s 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 homeowner’s 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.