Excerpt from article by Curtis Ekland, Esq.
During the past few years, Arizona has seen an unprecedented building boom. A tremendous number of new homes have been built in a very short period of time. During this time, a shortage of skilled labor has made it very difficult for builders to find and keep quality workers. The result has been an epidemic of construction defects throughout the valley.
If an association is considering filing suit as a result of construction defects, the association needs to be aware of several new laws. The failure to comply with these laws could jeopardize an otherwise meritorious claim.
First, the board must provide a full disclosure in writing to all members providing the material information relating to the action. The material information must include a statement that describes the manner in which the action will be funded and a statement describing any demands, notices, offers to settle, or responses to the offers to settle made by either the association or the developer. Second, an association must hold a meeting of its members to discuss the action.
An association must also provide a written notice specifying in reasonable detail the basis for the suit at the time the association serves a construction defect suite upon a defendant. Except for life and safety issues or a showing of good cause, the court will put the suit on hold in order to allow the defendant to conduct an inspection and make a settlement offer. Within 60 days after being served, the defendant must send the association a good faith written response.
During this time, defendant may conduct inspections and perform testing in order to verify the defects as long as they provide reasonable notice and perform the inspections at a reasonable time. If the defendant fails to respond within 60 days, the court’s stay is lifted and the association may proceed with the litigation.
This new law applies to every case filed after August 22, 2002. However, the new law does not apply to the following: (1) If a contract for the sale of a dwelling or an association’s community documents contain commercially reasonable alternative dispute resolution procedures set forth in the contract in bold and capital letters; (2) To personal injury claims; (3) To death claims; (4) To claims for damaged property other than a dwelling; (4) To common law fraud claims (6) To proceedings brought pursuant to Title 32, Chapter 10 relating to contractors; and (7) To claims solely seeking recovery of monies expended for repairs to alleged defects that have been repaired by the association.
Finally, Rule 16(g) of the Arizona Rules of Civil Procedure now require that the parties to a lawsuit meet no later than 90 days after the appearance by the defendant to discuss alternative dispute resolution.
The new laws mentioned above now impose a few more hurdles that an association must jump over in order to successfully complete a construction defect litigation case. Since the construction defect case may be the association’s only opportunity to recover enough money to make necessary repairs, it is crucial that the association comply with these new laws.