House Bill 2578, which amends the Purchaser Dwelling Act (“Act”),
was signed into law by Governor Ducey on Monday, March 23, 2015. The Purchaser
Dwelling Act sets forth a procedure for bringing claims for construction
defects against the sellers of residential construction. The amended Act
contains the following changes:
- Gives the seller the right
(but not the responsibility) to repair or replace alleged construction
defects at the home. Previously, the seller could offer repair but the
purchaser could reject the offer. The seller need not repair all
conditions described in the purchaser’s notice to the seller. The seller
may also offer monetary compensation in addition to or in lieu of repair.
The purchaser is not required to accept a monetary offer.
- The seller is required to make
a good faith effort to begin any repairs within thirty-five (35) days of
advising the purchaser of the intent to repair or within ten (10) days of the
issuance of a permit necessary to make the repairs. The purchaser may ask
the seller to have the repairs made by a third party to which both parties
agree. The purchaser is not required to sign a release if repairs are
made, but a release can be negotiated if a payment is made.
- Defines the term “construction
defect” to mean a material deficiency in the design or construction of
home that violates construction codes, provides defective materials or
equipment and/or fails to comply with workmanship standards. The amendment
also defines “material deficiency” to only include deficiencies that “actually
impair” the structural integrity, functionality or appearance of the home,
or are reasonably like to do so in the foreseeable future.
- Repeals A.R.S. § 12-1364, which allowed for an
award of attorneys’ fees and expert costs to the prevailing party.
- Precludes the filing of a
lawsuit until the repairs are completed, unless the seller does not respond
to the initial notice within the sixty days allowed.
- If the claim is subject to
arbitration, and the seller has agreed to make repairs, the purchaser may
only make a demand for arbitration after the repair/replacement process
has been completed.
- Tolls the statute of
repose and/or limitations until thirty (30) days after substantial
completion of the repairs. Tolling also applies to other construction
professionals who were involved in the original construction.
- Requires a court to
dismiss lawsuits filed by purchasers who do not comply with the Act. If
the statute of repose or limitations expires while the dismissed lawsuit
is pending, further claims are barred.
- If the claims are raised
by a homeowners’ association, the association must notify its members of
the anticipated cost of litigation and the impact on home values prior to
filing the lawsuit.
These amendments are very favorable to homebuilders, because
they now have the ability to make necessary repairs; they can no longer be sued
for minor issues; and, in many circumstances, are not at risk of an award of
attorneys’ fees and costs that far exceed the value of the claim.
These amendments will become effective ninety-one (91) days
after the legislature adjourns, which is expected to be in early April, making
the effective date sometime in July 2015. The amendments are not retroactive.
We will be writing further on the anticipated impact of this
new legislation.