The Notice and Opportunity to Repair Act has been heralded by many within the residential homebuilding community as common sense legislation that will decrease litigation and benefit the people of Idaho. While the jury is still out whether it will ever have either of these effects, the Act is nonetheless noteworthy for at least two reasons. This statute shields residential contractors against claims for personal property damages in construction defect cases. It also dramatically expands the construction industry’s liability for an opposing party’s attorney’s fees.
The Notice and Opportunity to Repair is triggered by any construction defect in a new or substantially remodeled single-family house, duplex, triplex, quadraplex, townhome, condominium or cooperative. It essentially requires homeowners to notify their construction professional and give them an opportunity to repair any construction defect before filing a lawsuit.
The homeowner must notify the responsible contractor in writing and must describe the alleged defect sufficiently for the construction professional to identify the nature of the defect. Under this statute, the courts should dismiss any lawsuit that is initiated before the appropriate construction professional is notified and given an opportunity to repair a construction defect. The term “construction professional” is broadly defined to include all architects, builders, vendors, contractors, subcontractors, engineers, and inspectors.
Once the homeowner notifies their construction professional, said professional has twenty-one (21) days to respond. This response must be in writing and must: (a) propose to inspect the residence within a specified time frame; (b) offer to settle the claim without inspection; or (c) dispute the claim and refuse to undertake any repair work or settle the claim. The homeowner may initiate litigation once the construction professional has been notified. Litigation may commence if the homeowner rejects a timely request to inspect or settlement offer, or if the homeowner determines that the post inspection repair work was inadequate to correct the defect. Finally, the homeowner may bring a lawsuit if the construction professional denies that the defect exists or if the construction professional fails to respond to the homeowner’s notification within twenty-one (21) days.
Homeowners who file suit after granting an inspection or the opportunity to repair a defect are limited to damage claims for: (a) the reasonable costs of repairing the defect; (b) any reasonable temporary housing costs incurred during the repair work; (c) any reduction in market value due to structural failure; and (d) reasonable and necessary attorney’s fees. Similarly, homeowners who refuse to allow an inspection, or unreasonably reject a settlement offer or an offer to repair, are limited to damage claims for: (a) the reasonable and necessary attorney’s fees and costs that were incurred before the refusal or rejection; and either (b) the reasonable costs of repairing defects that the construction professional is responsible for; or (c) the amount of any reasonable settlement offer.
The Act’s greatest benefit to the construction industry is the limit of the economic damages that are available to homeowners in construction defect cases. So long as a construction professional timely responds to a homeowner’s notice of defect, the Act prohibits homeowners from recovering any damages to personal property resulting from the defect. “Personal property”, as opposed to real estate or “real property”, means all of the tangible moveable property that everyone has in their homes, garages and basements such as wall coverings, floor coverings, home electronics, furniture, automobiles, collectibles, jewelry, photo albums, etc.
In many construction-defect cases the damage(s) to personal property can easily dwarf the costs to repair the defect. A burst water mainline is an obvious example of a common construction defect in which the damages to personal property in the vicinity of defect may be far more expensive than the repair costs. These limitations apply only if the construction professional has fully complied with the Act. Because the damage limitation is significant, all construction professionals should religiously comply with the response provisions of the Act.
The legislature did not grant construction professionals this protection against liability from personal property damages without some tradeoffs. Prior to the enactment of the Act, Idaho’s construction professionals were only liable for a homeowner’s attorney’s fees in the rarest of construction defect cases. Most of the time, a contractor could not be held liable for the homeowner’s legal fees even if the homeowner prevailed in their lawsuit.
Today construction professionals still cannot recover attorney’s fees in most construction defect cases even when they prevail. However, construction professionals are now liable for the homeowner’s attorney’s fees if the homeowner prevails.
Given the skyrocketing costs of modern litigation, the decision whether or not to contest any construction defect claim should weigh heavily upon every construction professional. Spending some money to correct a minor construction defect in the short term may be much cheaper than having to pay for your own and the opposing party’s legal fees in long term.
Richard Stacey is an attorney with the law firm McConnell Wagner Sykes + Stacey PLLC practicing in the areas of complex business litigation and construction law. He is a member of the Association of Trial Lawyers of America, and he serves on the Executive Committee of the Board of Directors of the Boise State Alumni Association.
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