Earlier this year, the Legislature enacted a statute making a number of changes to the Purchaser Dwelling Act (the “PDA”). The PDA governs construction defect litigation involving single-family and multi-family homes.
The new legislation becomes effective on August 27, 2019 and requires some changes to form construction and consulting agreements, and may also require changes to how homebuilders and sellers process construction defect claims.
Broadly, the legislation changes the PDA in the following ways:
Expanded Right of Repair: The PDA was initially enacted to give the “seller” an opportunity to repair any alleged construction defects before the homebuyer could file a lawsuit. The new legislation extends this same right of repair to all contractors and design consultants that may be responsible for the defect, and the home seller must forward the homebuyer’s notice of claim of defect to these parties. Contractors and consultants now have the same statutory right as the seller to inspect any alleged defects, conduct testing on the home, and repair or replace work that is alleged to be defective.
Indemnity Clauses: For construction or consulting contracts that involve work on a “dwelling,” the indemnity obligation must now be limited to the contractor’s or consultant’s negligence. A broader indemnity term is void and unenforceable—a seller may not, for example, require the contractor or consultant to indemnify the seller for any losses that are attributable to the seller’s own fault. This is the same rule that currently prevails for construction contracts on public projects. The new rule does not apply, however, to contracts that are executed before August 27.
Bifurcated Construction Defect Litigation: The new law bifurcates construction defect litigation involving residential dwellings into two phases. In the first phase, the fact finder determines whether a defect exists, the amount of damages caused by the defect, and all parties who are responsible for the defect. In the second phase, the fact finder allocates percentages of fault for each defect to all responsible parties, including the homebuilder.
Attorneys’ Fees: The Legislature reinserted a statute allowing for recovery of attorneys’ fees at the end of construction defect litigation. Under this statute, the court may award reasonable attorneys’ fees to the prevailing party on each contested issue in the case. The statute sets forth a number of factors that guide the court in determining which party prevailed on an issue and whether the requested fees are reasonable. The statute, however, does not alter or restrict any language in a homebuyer purchase agreement that addresses fee awards.
Our upcoming newsletter will include a more comprehensive analysis of the new PDA and its changes to the construction defect litigation process. Please contact us if you have questions about the new PDA or how it operates.
