ARIZONA PURCHASER DWELLING ACTIONS
By Stephanie M. Wilson
STOOPS, DENIOUS, WILSON & MURRAY, P.L.C.
Many homeowners may not be aware of the Purchaser Dwelling Actions which establishes requirements for a purchaser prior to filing a lawsuit relating to defects in a residence. This article addresses the main points in the Act, and a purchaser’s obligations under the Act.
II. SUMMARY OF PURCHASER DWELLING ACTIONS PROVISIONS
Prior to filing an action in court, a homeowner must first comply with the preliminary notice requirements of a “purchaser dwelling action” (the “Act”). The Act applies to “any action brought by a purchaser against the seller of a dwelling arising out of or related to the design, construction, condition or sale of the dwelling.” A.R.S. § 12-1361(4). A seller is defined as “any person, firm, partnership, corporation, association or other organization that is engaged in the business of designing, constructing or selling dwellings, including a person, firm, partnership, corporation, association or organization licensed pursuant to Title 32, Chapter 20.” A.R.S. § 12-1361(7). Seller does not include a real estate broker or real estate sales person as defined in title 32, chapter 20 who provides services in connection with the resale of a dwelling following its initial sale.
A.R.S. § 12-1361(3) defines a dwelling to mean a “single or multifamily unit designed for residential use and common areas and improvements that are owned or maintained by an association or by members of an association. A dwelling includes the systems, other components and improvements that are part of a single or multifamily unit at the time of construction.” This definition applies the Act to resales as well as new homes.
It should also be noted that in addition to a consumer filing a purchaser dwelling action, a homeowners’ association may bring a dwelling action. A.R.S. § 33-2001, et seq. A homeowners’ association dwelling action is any action filed by a homeowners’ association against a seller of a dwelling arising out of or related to the design, construction, condition or sale of the dwelling. A.R.S. § 33-2001. A homeowners’ association can either be a condominium or a planned community. A.R.S. § 33-2001. A homeowners’ association dwelling action is subject to the act in A.R.S. § 12-1363 et seq., but also the special requirements set forth in A.R.S. § 33-2002. A.R.S. § 33-2002 specifies that a homeowners’ association dwelling action can only be filed after several other actions have occurred, including that the Board of Directors has provided full disclosure in writing to all members of the association of all material information relating to the filing of the action, the association had held a meeting of its members and Board of Directors for which reasonable and adequate notice was provided, and the Board of Directors authorizes the filing of the action. A.R.S. § 33-2002.
A. Notice and Good Faith Responses.
A.R.S. § 12-1363 provides that ninety (90) days before filing a dwelling action, a purchaser must give written notice by certified mail, return receipt requested, to the seller, which specifies in reasonable detail the basis of the purchaser’s dwelling action. After receipt of the notice, the seller has an opportunity to inspect the dwelling to determine the nature and cause of the alleged defects, as well as the nature and extent of any repairs or replacements necessary to remedy the alleged defects. The purchaser has an obligation to ensure the property is made available for inspection, and the seller may use reasonable measures, including testing, to determine the nature and cause of the alleged defects if the seller and the nature and extent of any repairs or replacements necessary to remedy the alleged defects. If the seller does destructive testing, the seller must restore the dwelling to its condition before testing.
Within sixty (60) days after receipt of the notice from the purchaser, the seller shall respond to the purchaser with a good-faith written response by certified mail, return receipt requested. The seller’s response may include an offer to repair or replace the alleged defects, to have the alleged defects repaired or replaced at the seller’s expense, or to provide monetary compensation to the purchaser. The purchaser, within twenty (20) days of receipt of the seller’s offer, shall provide a good faith written response. If the purchaser rejects the seller’s offer, the response shall include the basis for the purchaser’s rejection and may include a counteroffer. If the purchaser submits a counteroffer, the seller has ten (10) days after receipt of the response and counteroffer to make a “best and final” offer.
A purchaser’s good-faith notice, a seller’s good-faith response or offer, the purchaser’s good-faith response or counteroffer, and the seller’s best and final offer are not admissible in any ensuing litigation. However, the failure of a purchaser to provide a good-faith notice, or allow a reasonable inspection or provide a good-faith written response to a seller’s offer, as well as a seller’s failure to respond, are admissible in a dwelling action litigation. In addition, if a purchaser files a dwelling action without first complying with the Act, a party to the action may file with the Court a motion to stay the action for ninety (90) days to allow the parties to comply with the Act.
B. Attorneys’ Fees, Costs and Expert Witness Fees.
One of the more interesting facets of the legislation is A.R.S. § 12-1364, which provides for attorneys’ fees, expert witness fees and costs to the successful party in a dwelling action. The statute defines a successful party as a seller who prevails at a trial, or where the judgment obtained is less than or less favorable to the purchaser than the seller’s offer or best and final offer. In the case of the purchaser, if the judgment obtained is more favorable then the seller’s offer or best and final offer, then the purchaser is the successful party.
This provision can be significant since expert witness fees are generally not recoverable. In a dwelling action there can be numerous and serious defects which would require the purchaser and/or the seller to hire multiple experts. Therefore, the amount spent on expert witnesses can be substantial. If this is taken into account, it might encourage parties to resolve the dispute prior to litigation.
C. Limitations of the Applicability of the Act.
The applicability of the Act is limited. The Act does not apply to purchase contracts containing commercially reasonable alternative dispute resolution procedures, personal injury claims, death claims, claims for damage to property other than a dwelling, common law fraud claims, proceedings brought against a contractor with the Registrar of Contractors and claims solely seeking recovery of monies expended for repairs to alleged defects that have been repaired by the purchaser.
Purchasers need to ensure that they comply with the Act and, in return, sellers, receiving written notice from a purchaser must take steps within sixty (60) days to inspect the property and provide a good-faith written response. Sellers should use this opportunity to try to resolve potential disputes and repair alleged defects during this period of time to avoid litigation of items that can be corrected.