ARIZONA STATE SENATE
Phoenix, Arizona
construction
defects; liability
Purpose
Establishes a cause of action that provides for the
recovery of damages suffered by a homeowner or a homeowner association against
a contractor or a contractor’s agents, employees, subcontractors or design
professionals who performed defective construction.
Background
Under current law, homeowners may sue homebuilders for construction defects. Concern has been raised that the causes of action recognized by Arizona courts do not provide adequate remedies to homeowners who suffer economic losses associated with defective construction. For instance, a homeowner may recover under a contractor’s breach of implied warranty of habitability and workmanship, but recovery under this breach is usually limited to economic losses and only if there is privity of contract. In addition, concern has been raised that a cause of action based on implied warranty does not extend to subcontractors who performed the defective construction because a contractual relationship only exists between the homeowner and contractor, not the subcontractor.
A homeowner may also file a negligence claim in which homeowners can sue limited general contractors and subcontractors with which they have no contractual relationship, but a homeowner’s recovery under a negligence claim is limited to personal injury damages or damages caused to other property. Concern has been raised that a cause of action based on negligence does not include the recovery of economic losses caused by the negligence of a contractor or subcontractor.
S.B. 1225 establishes a cause of action that provides for the recovery of any damages suffered by an individual homeowner or a homeowner association against any responsible contractor or a contractor’s agents, employees, subcontractors or design professionals who performed the defective construction work.
There is no anticipated fiscal impact to the state general fund associated with this bill.
Provisions
1. Prohibits a contract for the construction or sale of a dwelling unit from requiring a purchaser to agree to do any of the following and renders unenforceable such a provision in a contract:
a) waive or forego rights or remedies under the construction defects law.
b) pay the contractor’s attorney fees, except that a written agreement may provide for the awarding of attorney fees to the prevailing party in an action.
c) exculpate or limit any liability of the contractor that arises under law or to indemnify the contractor for that liability or the costs connected with that liability.
2. Renders unenforceable any provision in the governing documents, CC&R’s, bylaws or articles of incorporation of an association that limits a claimant’s rights under the construction defects law or that restricts a claimant’s ability to pursue a claim.
3. Specifies that a violation of claimants’ rights with respect to contracts for construction or sale does not limit or bar any other remedies or claims provided by law.
4. Stipulates a contractor is liable for any loss that is caused by the defective construction work performed by the contractor or the contractor’s agents, employees, subcontractors or design professionals on a dwelling unit or appurtenance.
5. Stipulates that the limitation on liability for third parties of a limited liability company is not a defense against liability that arises from the defective construction claims on a contractor’s members, managers, employees, officers or agents.
6. Entitles a claimant in a construction defects action to recover certain losses caused by the defective construction, including the loss of use of the residence or appurtenance, repair costs, temporary housing expenses, loss in market value of the residence, personal injuries, reasonable attorney fees, any additional costs reasonably incurred by the claimant and any other damages allowed by law.
7. Establishes a statute of limitation for construction defects actions, stating that such actions must commence within six years after the date of discovery of the specific defective construction by the claimant.
8. Specifies that after a construction defects action is commenced, all other applicable statutes of limitations are tolled as they apply to third party contractors, whether or not a third party is required to appear in the proceedings or has actual notice of the proceedings.
9. Contains a severability clause.
10. Contains a declaration of policy.
11. Prescribes definitions.
12. Provides for a general effective date.
Prepared by Senate Staff
February 18, 2002