BY ROBERT P. MADER
Of CONTRACTOR’s staff
PHOENIX — Arizona subcontractors scored a major victory when Gov. Jane Dee Hull signed HB2620 this past summer, a law designed to bring construction defect lawsuits under control. The law was passed to combat construction defect suits, such as those plaguing Nevada, that have made it next to impossible for contractors to buy liability insurance (August, pg. 1).
The Arizona SubContractors Coalition, along with home builders, spearheaded a drive to get the bill passed, said Mark Giebelhaus of Marlin Mechanical in Phoenix and a past president of Plumbing-Heating-Cooling Contractors - National Association.
The ASCC was formed in 1997, Giebelhaus said, to fight utility competition and later successfully worked on a state prompt-pay law. The subcontractors hooked up with the builders’ Arizona Lawsuit Abuse Watch to write the law on construction defect suits and sign up co-sponsors in the legislature.
Lobbyists for the subcontractors group and builders found 22 representatives and seven senators to co-sponsor the bill, Giebelhaus said. The most important aspect of the law for subcontractors, he noted, is the right to remedy before a lawsuit is filed.
“We used to just get a lawsuit in the mail and never knew there was a problem with the project,” Giebelhaus said.
The suits would sometimes allege defects on aspects of a project that Marlin Mechanical didn’t work on or claim nebulous defects “to be listed later,” he said. He even read one lawsuit that claimed there were leaking second-floor balconies on a single-story building.
In the year 2000 alone, 5,959 construction complaints were filed, and these suits cost contractors millions of dollars in settlement fees, according to the ASCC. As of April 2002, more than 3,000 lawsuits relating to defects in homes were pending in the Maricopa County Superior Court.
Giebelhaus said he’s heard that some trial lawyers have intimidated homeowners’ association boards by implying that they will be sued for violating their fiduciary responsibility unless they file a construction defect suit.
The new law requires a dissatisfied homebuyer to notify the builder and subcontractors by certified mail and give them 90 days to respond. The builder either can offer to fix the problem or compensate the homeowner.
The homeowner’s notice must describe the alleged defect and the reasoning for the intended lawsuit. After receiving this notice, the builder or contractor has 60 days to respond to the buyer via a good faith, written response. If the builder does not respond within 60 days, the purchaser is free to file suit. If the builder or contractor responds within 60 days with an offer of repair, the buyer must respond within 20 days to this offer via certified mail. If the buyer makes a counter offer, the builder or contractor has to reply with his final offer in 10 days.
The law also gives builders and contractors the right to inspect the premises and conduct tests for defects, and it mandates that the buyer let them in for the inspection. If the parties can’t reach agreement after following these procedures, then the buyer can sue.
If a suit is filed, the losing party has to pay the winner’s attorney’s fees, costs and expert witness fees. The law does not apply to personal injury or death claims or to common law fraud claims.
“The industry needs to know that we can stand up to the trial lawyers and get laws passed that protect both the consumer and the contractor from frivolous lawsuits,” Giebelhaus said.