Construction Defects & Middle Market Housing

For construction of middle market housing multifamily, attached housing of 2 or more units , section 3 of the bill requires a person filing a construction defect action against an architect or engineer to file with the complaint an affidavit of a third-party licensed professional indicating the negligence or other action, error, or omission of the construction professional. Section 3 also establishes a rebuttable presumption that a property does not have a construction defect when a state agency or local government has issued a certificate of occupancy for the property. creates the multifamily construction incentive program (program). A builder may chose to participate in the program by:

• Providing a warranty that covers any defect and damage at no cost to the homeowner for specified periods;
• Having a third-party inspection performed on the property; and
• Recording a notice of election to participate in the program in the chain of title in the real property records.

For construction defects claims brought for the construction of housing for which the builder is a participant in the program, the bill:

• Requires a claimant to file a certificate of review with the complaint, if the complaint is against an architect or engineer;
• Limits actions to claims that have resulted in: Damage that substantially affects the functionality of a system or the safety of real or personal property, other than a condition that has not caused any substantial physical change; actual loss of the use of real or personal property; actual bodily injury or wrongful death; an unreasonable reduction in the capability of, or an actual failure of, a building component to perform an intended function or purpose; or an unreasonable risk of bodily injury or death to, or a threat to the life, health, or safety of, the occupants of the residential property;
• Establishes the statute of limitations at 8 years after the substantial completion of the improvement or deficiency or 6 years if the construction professional has provided a written warranty (professionals other than architects and engineers) or performed with reasonable care (architects and engineers); and
• Requires that a construction professional must send or deliver to the claimant an offer to settle the claim or a written response that identifies the standards that apply to the claim and explains why the defect does not require repair.

Section 4: For all construction defect claims, the bill:

• Establishes a claimant's duty to mitigate an alleged construction defect and specifies how a claimant may satisfy this duty and the consequences to a claimant that fails to satisfy this duty;
• Requires that a construction professional must send or deliver to the claimant an offer to settle the claim or a written response that identifies the standards that apply to the claim and explains why the defect does not require repair; and
• Requires a construction professional who is the defendant in a construction defects action to submit specified information to the claimant;
• Prohibits an insurer from cancelling or denying a liability insurance policy issued to a construction professional based on the construction professional's offer to repair or settle a construction defect claim;
• Tolls the statute of limitations or repose during a claimant's mitigation of an alleged construction defect;

Section 5 updates the statute of limitations for construction defect claims to 10 years unless the construction professional provided the consumer with a warranty that meets the requirements of the bill, in which case the statute of limitations is 6 years. Section 6 tolls the statute of limitations or repose during a claimant's mitigation of an alleged construction defect claim brought for the construction of middle market housing. Section 7 allows a construction professional that meets specified requirements to use certain affirmative defenses in construction claims brought against the construction professional for the construction of middle market housing.

• Current law requires the Increases the amount of owners an executive board of a unit owners' association (executive board) to must obtain approval from a majority of owners before initiating a construction defect claim on behalf of the owners from a majority to 65%; Section 8 increases the approval amount to 65%. Section 8 also and
• Requires an executive board that is successful in a construction defect claim to first use monetary damages received as a result of the claim to repair the construction defect.

The bill requires a local government to establish a fast-track approval process for an application for for-sale, multifamily condominium projects in order to qualify for assistance from the state affordable housing fund.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)

(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)