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NV Tightens Construction Defect Law

Monday, March 2, 2015

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Nevada has become the first U.S. state to overhaul its construction defects law to reduce the number of homeowner lawsuits brought against builders.

The Homeowner Protections Act of 2015, Assembly Bill 125 overhauls the state’s 20-year-old construction defects law.

Nevada Gov. Brian Sandoval signed the bill into law Tuesday (Feb. 24). The state’s Republican-controlled legislature approved the legislation Feb. 20.

Legislative Building
www.leg.state.nv.us

Lawmakers in Nevada have passed a law remaking the state's 20-year-old construction defects law. Supporters say the changes will help revive the housing market and discourage frivolous lawsuits. Opponents say the law will make it more difficult for homeowners to sue for shoddy construction.

The measure, effective immediately, will strengthen the rebounding housing market and boost construction jobs, according to Sandoval.

Critics say the law, despite its name, will actually make it more difficult for homeowners with legitimate claims to sue for shoddy construction. Democrats in the state Senate have renamed the measure the “Homeowner Rejection Act.”

Similar bills attempting to curb construction defect litigation are pending in other states, including Colorado, Florida, Washington and Arizona, according to the Wall Street Journal.

The construction defect law in Colorado has prompted at least one municipality to enact an ordinance to change the way the 2001 law works there.

What's Changing

Nevada’s new law makes homeowners exhaust other options, such as the builder’s warranty and seeking resolution through the Nevada State Contractors Board, before pursuing a lawsuit.

The legislation also restricts the definition of  “a home defect” and requires specific descriptions of defects.

homes in Las Vegas
© iStock.com / SolielC

Builders say the lawsuit risks have stopped them from taking on new projects.

The measure also prohibits a homeowners’ association from pursuing an action for a construction defect “unless the action pertains exclusively to the common elements of the association.”

Takes Away Incentive

Perhaps the most significant change is a new requirement that parties pay their own legal fees—removing a financial incentive for attorneys to file suit.

The state’s original law, enacted in 1995, required that the losing side pay the winner’s legal costs.

That law is responsible for some 828 construction defect lawsuits since 2006, the Wall Street Journal reports, citing court records.

Those lawsuits have reaped multimillion-dollar victories for homeowners and homeowner associations while raising the cost of builder insurance and driving many builders and developers out of homebuilding in Nevada entirely, reports say, citing testimony.

Builders say the new law will make litigation a last resort.

Governor Backed Bill

During his Jan. 15 "State of the State” address, Sandoval challenged the Legislature to pass “reasonable” construction defect reform to restore housing construction to pre-recession levels.

Governor Brian Sandoval
Official photo

Nevada Gov. Brian Sandoval says the legislation will revive the housing market and boost construction jobs.

“They have met that challenge with the Homeowner Protections Act, which discourages frivolous litigation and strengthens Nevada’s rebounding housing market,” Sandoval said in a statement.

The second-term Republican applauded Assemblyman Ira Hansen (R) for leading the push to pass the legislation. Hansen is a licensed master plumber and a contractor.

Builders: 1, Homeowners: 0

Unhappy Senate Democrats say the bill was “rammed through” the legislative process.

The law will “restrict the rights of homeowners to recover when their homes are defective,” according to a recap provided on www.nvsenatedems.com.

An attempt by Sen. Ruben Kihuen (D) to amend the bill to make it more “homeowner friendly” was rejected, they report.

“Rather than craft moderate reforms, AB 125 is an extreme piece of legislation filled with special-interest giveaways,” the senators said.

   

Tagged categories: Business matters; Concrete defects; Construction; Laws and litigation; Lawsuits; Residential Construction; Residential contractors

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