This bill modifies legal procedures and protections in construction defect lawsuits by changing disclosure requirements, legal rights in real estate contracts, and how claims are handled in court. Here’s a breakdown:
1. Increased Transparency from Construction Professionals (Section 2)
In a lawsuit against a construction professional, they must provide the claimant (or their lawyer) with:
Plans, specifications, soil reports, and engineering calculations.
Maintenance recommendations for the property.
List of other construction professionals involved in the project (names, addresses, and their role).
Copies of insurance policies they held at the time.
Failure to disclose this information means the construction professional cannot blame unnamed parties in court.
They can charge reasonable copying fees for these documents.
2. Increased Financial Protections for Homeowners (Sections 3 & 5)
8% Prejudgment Interest (Section 3):
If a homeowner wins a lawsuit for construction defects in a residential property, they automatically get 8% interest added to their damages.
Limits on Waivers in Real Estate Contracts (Section 5):
Any contract clause that prohibits group lawsuits against construction professionals is void.
Any clause that adds extra legal barriers beyond the law’s requirements is also void.
3. Changes to the Legal Timeline for Construction Defect Claims (Section 6)
Under current law, the clock for statute of limitations and statute of repose starts when a defect is discovered.
The bill expands this to include both:
When physical damage appears (e.g., cracks in walls, water damage).
When the cause of the defect is discovered (e.g., poor foundation, faulty materials).
This means homeowners may have more time to sue if the cause of a defect isn't immediately clear.
4. Expanded Rights for Homeowners' Associations in Construction Defect Cases (Section 7)
Currently, homeowner associations (HOAs) can file lawsuits only if their community’s declarations allow it.
The bill removes this restriction for lawsuits involving construction defects, meaning HOAs can sue directly without needing approval from their community’s governing documents.
5. Oversight of Construction Liability Insurance Rates (Section 8)
The Department of Regulatory Agencies (DORA) must now include data in its SMART Act report about:
Construction liability insurance coverage.
The basis for insurance rate pricing (to track how defect claims impact premiums).
Summary:
This bill strengthens protections for homeowners and consumers in construction defect cases by:
Requiring full disclosure of project documents from builders.
Making it harder for builders to deflect blame onto unnamed parties.
Providing an 8% financial incentive for successful claims.
Voiding contract clauses that limit group lawsuits or add unnecessary barriers.
Giving homeowners more time to file claims.
Expanding HOA rights to sue over defects.
Requiring government tracking of construction insurance rates.
Summary
In an action against a construction professional, section 2 of the
bill requires the construction professional to provide the claimant or the claimant's legal representative with:
•
Copies of all plans, specifications, soils reports, and available engineering calculations;
•
Any maintenance and preventive maintenance recommendations;
•
The name, last-known address, and scope of work of each construction professional that performed work or services; and
•
Copies of all insurance policies held by the construction professional during the appropriate time.
The construction professional may charge reasonable copying costs for the documents. Failure to provide the identifying information of the other construction professionals bars the construction professional from designating the unidentified construction professionals as nonparties at fault in any subsequent action. Section 3 requires a court to award prejudgement interest of 8%
to a prevailing claimant who alleges defects in a residential property construction. Section 5 voids a provision in a real estate contract that: •
Prohibits group lawsuits against a construction professional; or
•
Imposes different or additional requirements than the statutory requirements to bring or join a legal action. Section 6 changes the time when a claim of relief arises, for the
purposes of the statute of limitation and repose, to include both the discovery of the physical manifestation and the cause of the defect.
Current law authorizes, subject to the requirements of the common
interest community's (community) declarations, a community to engage in certain actions, such as instituting, defending, or intervening in litigation or administrative proceedings on matters affecting the community. Section 7 exempts an association's authority to institute, defend, or intervene in litigation proceedings concerning construction defects from the requirement that the action be subject to the declaration. Section 8 requires the department of regulatory agencies to include
in its SMART Act report information concerning construction liability insurance and the basis for rates.
