Navigating Construction Defects

Kristin E. Rosan

Partner, Madison & Rosan, LLP Attorneys at Law

In 2015, Arizona enacted legislation to address construction defect claims of a purchaser against a seller for construction defects. The law doesn’t just apply to new home construction, but remodeling and repairs. Additionally, the law contains a broad definition of who is considered a “seller” affording purchasers the ability to sue those responsible for the defects, even if they are not a contractor. Last, the law specifies that potential defendants have a right of notice and opportunity to cure the defect prior to litigation.

A “construction defect” is defined as a “material deficiency” in the design, construction, manufacture, repair, alteration, remodeling or landscaping of a dwelling that is the result of one of the following:

1. violation of construction codes applicable to the construction of the dwelling;

2. the use of defective materials, products, components or equipment in the design construction, manufacture, repair, alteration, remodeling or landscaping of the dwelling; or

3. the failure to adhere to generally accepted workmanship standards in the

A “material deficiency” means a deficiency that actually impairs the structural integrity, the functionality or the appearance of the dwelling at the time of the claim, or is reasonably likely to actually impair the structural integrity, the functionality or the appearance of the dwelling in the foreseeable future if not repaired or replaced.

A purchaser’s claim for a construction defect can be levied against the seller. This is important because the seller is defined very broadly in the law. The “seller” incudes any person or entity that is engaged in the business of designing, constructing or selling dwellings, including “construction professionals.” Under the law, architects, contractors, subcontractors, developers, builders, builder vendors, suppliers, engineers or inspectors, who perform or furnish the design, inspection, or observation of the construction of any improvement to real property, are considered “construction professionals” and thus a “seller.” Licensed real estate brokers and salespersons and not included in the definition of “seller.”

Before filing a construction defect action, a purchaser must file a written notice of claim with the seller. The notice must be given by certified mail, return receipt requested and specify in reasonable detail the basis for the construction defect action. Remember a seller can be any person or entity that is defined above. Upon receipt of the notice, the seller may inspect the dwelling to determine the nature and cause of the alleged construction defects and the nature and extent of any repairs or replacements necessary to remedy the alleged construction defects. The seller has sixty days from receipt of the purchaser’s notice to (i) conduct any inspections and (ii) send the purchaser a good faith written response to the purchaser’s notice by certified mail. If the seller intends to repair or replace the alleged construction defects, the purchaser must allow the seller a reasonable opportunity to repair or replace the alleged construction defect.

Purchasers are limited to eight years after substantial completion of the improvement to real property, to bring their construction defect action. The limitation is extended to nine years, if the claim is discovered in the eighth year.

One policy reason behind this law change was to reduce the number of civil cases brought to address property defects. Because the law is still relatively new, Court will decide the full scope and impact of the new law.