Overview of Repair Statutes in Arizona, California, Nevada, Oregon and Texas

Thirty-two states currently have legislation enacted or pending to allow builders an opportunity to inspect, respond to and repair, if desired, any alleged construction deficiencies in original residential construction. Generally, these statutes provide for a specific process for homeowners to follow prior to filing a lawsuit against a home builder for construction defects. The process is intended to put the builder on notice of potential claims and provide an opportunity to resolve any issues via repair and/or monetary settlement before the litigation process is commenced. While the repair statutes enacted in the various states are all similar, there are differences from state to state. This article will focus on the unique provisions and requirements of the repair statutes in Arizona, California, Nevada, Oregon and Texas.

Each of the five states require that notice of the alleged defects be provided by the owner of the residence to the builder. While Arizona and California merely require that the alleged defects be described in reasonable detail, Texas additionally provides that, upon request of the contractor, the owner must provide actual evidence of the alleged defects. Nevada requires an expert opinion be attached to the notice if the notice is sent in reference to multiple owners in a single development with similar alleged defects. Oregon requires that the initial notice include any report or evidence documenting the alleged defects.

While the statutes in all of the five states allow for inspection of the home by the builder, only California allows for a second inspection if requested by the builder within three days of the first inspection. California, Nevada and Oregon statutes also make specific reference to subcontractors, suppliers and design professionals and all three states require that the builder notify any such entities that may be responsible for the alleged defects.

Code of Civil Procedure §410.42 Renders Out-of-State Mediation Requirements Unenforceable in Construction Contracts.

Templeton Development Corporation et al., v. Superior Court, 2006 C.D.O.S. 10590

California Code of Civil Procedure §410.42 provides that a provision in a construction contract which purports to require any dispute between the parties to be litigated, arbitrated, or otherwise determined outside this state shall be void and unenforceable.

In Templeton, the California Third Appellate District ruled that §410.42 applies not only to litigation and arbitration provisions in construction contracts, but also to contractual clauses requiring that mediation take place outside of California.

Dick Emard Electric, Inc. (Emard), an electrical contractor, entered into a subcontract agreement with Templeton Development Corporation (Templeton), a general contractor based in Nevada, for work at an apartment complex located in Sacramento, California. The subcontract between Emard and Templeton provided that any dispute between Emard and Templeton shall be submitted to mediation administered by the American Arbitration Association before resorting to arbitration or litigation. In addition, the subcontract stated that any mediation or arbitration shall be held in Las Vegas, Nevada.

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Courts Cannot Force Litigants to Attend and Pay for Mediation

Jeld-Wen, Inc. v. Superior Court of San Diego County, 2007 C.D.O.S. 156

The California Court of Appeal, Fourth Appellate District, held that trial courts do not have the authority to order parties in a complex civil action to attend and pay for private mediation.

Jeld-Wen, Inc. was an uninsured cross-defendant in a multi-party construction defect action. The trial court issued a case management order that deemed the matter complex and appointed a "Mediator and/or Mandatory Settlement Conference ("MSC") Judge" under California Code of Civil Procedure § 187 to mediate and conduct settlement conferences for a minimum of 100 hours at the hourly rate of $500. The order required all parties to appear at each mediation with insurance representatives or other individuals with settlement authority. Jeld-Wen objected to the mediation provisions of the order as being inconsistent with case law and in violation of California Rules of Court, Rule 3.1380, which allows a court to set only one MSC. The trial court overruled the objection and issued the order.

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As of January 1, 2007, Type I indemnity agreements in public contracts with design professionals are prohibited. Public agencies include cities, counties, schools, special districts. Design professional include architects, landscape architects, engineers, and land surveyors. (Assembly Bill 573)
• As of January 1, 2008, all architect firms organized as LLP's with five (5) or fewer licensees must have $1 million in Errors and Omissions insurance coverage and $100,000 for each additional licensed architect, with a maximum requirement of $5 million. (Assembly Bill 2914)
• Architects must report settlements of greater than $5,000 to the California Architects Board and can be fined between $100-$1,000 for failure to notify and up to $20,000 if failure is intentional. (Assembly Bill 2256)

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Sandy Kaplan will be speaking at the California State Bar's Real Property Law Section 26th Annual Retreat on April 27-29, 2007 on the topic, "Advantages and Disadvantages of OCIP and CCIP Wrap Insurance Products in Residential Development Projects", at the Silverado Resort in Napa, CA.

Ken Strong and Ernie Isola co-authored a chapter in a new comprehensive legal treatise pertaining to design professionals and construction managers, entitled Design Professional and Construction Manager Law, published by the American Bar Association Forum on the Construction Industry. The chapter is entitled "Special Topics in Litigation of Disputes Involving Design Professionals or Construction Managers."