Tuesday, May 20, 2003 | 11:09 a.m.
Attorneys and lobbyists for Nevada homeowners and home builders both say they achieved most of what they wanted in the construction defect debate and can live with the last-minute compromise they reached Friday.
Homeowners retained the right to sue and builders say they'll have an easier time making repairs and possibly avoiding costly class-action lawsuits.
Industry officials said the law will help good home builders -- those who make repairs on time. Builders will still be under the gun to make repairs in a timely fashion. Those who don't will still face the prospect of getting sued.
Construction defect legislation has been a hotly debated subject for months as the home-building group Coalition for Fairness in Construction lobbied for support from legislators and the public for changes in the current defect law. Homeowner groups and their attorneys fought to keep the status quo, saying changes home builders were asking for would only hurt consumers.
Some wondered if an agreement could be reached by Friday's deadline.
"Both sides felt it was important to get something accomplished," said Steve Hill, Coalition chairman. "The Assembly leadership turned the heat up and (mediated) a negotiated settlement."
After working for three days with little rest, officials representing home owners and builders came to an agreement on Senate Bill 241 in time for the Assembly Judiciary Committee to pass it unanimously by the midnight deadline.
Now the two groups have vowed to work together.
"We will stand arm-in-arm and defend the compromise deal against any and all unfriendly amendments," homeowner attorney and Nevada Trial Lawyers Association lobbyist Scott Canepa said.
A similar tune can also be heard from the construction industry.
"What we think we have in this new law will give builders and subcontractors the opportunity to get out there and solve problems," Hill said.
Legislative staffers will now draft the language of the amendments and the amended bill will be sent to the Assembly for a vote. If passed, it will go to the Senate for concurrence. If the Senate doesn't pass the Assembly bill, it will go to a conference committee to work out the differences.
But some Senators said the negotiated bill is a good compromise.
Sen. Randolph Townsend, R-Reno, chairman of the Senate Commerce and Labor Committee that processed the first bill, said the compromise "serves the public very well."
"We have got to try something. This will be positive for the good contractors and subcontractors," he said.
The negotiated bill will come to Townsend's committee.
Sen. Ann O'Connell, R-Las Vegas, is a member of the committee and she said she was "thrilled" with the compromise.
Senate Minority Leader Dina Titus, D-Las Vegas, who opposed the original version of SB 241 that passed the Senate in April, said she had hoped the two sides would negotiate a settlement.
"The consumer is still protected," she said. "It addresses a grave problem we could not put off for another session."
Under the negotiated terms of the bill, a homeowner must notify the builder or subcontractor of a problem in writing about a defect. The builder then has 30 days to respond to the homeowner's complaint.
The new version of the Assembly bill provides that the builder response and repairs must be made within 105 days in problems that occur in four homes or less.
For cases that involved five or more homes, the builder has 150 days to respond and make repairs.
If the builder does not respond within the time period, the homeowner can file a lawsuit.
One major addition -- which was not in the Senate version -- has to do with a notification provision in which groups of homeowners have experienced similar construction defects and want them corrected.
Under the amended version, if a group of homeowners in a homeowners' association complain to the builder about a construction defect and there is reason to believe that there may be similar problems in other homes, the builder must send a notice to the remaining homeowners in the association offering to inspect and fix defects, if they have them.
Those homeowners that were not part of the original complaint to the home builder have 45 days to respond in writing to the builder that they want their home inspected for defects and fixed as well. If those homeowners do not respond within 45 days -- even if they are out town on vacation -- they cannot have their defects repaired as part of the class action and also can't participate in a class action lawsuit if one is ultimately filed.
Those homeowners who did not respond within 45 days could still demand, singularly, that their defects be fixed within 105 days before a lawsuit could be filed.
The Senate version of SB 241 had a 150-day period to make repairs, regardless of the number of homes involved in the complaint. The Assembly version keeps the 150-day period when the complaint involves five or more homes. But in cases where there are four or fewer homes, repairs must be made within 105 days under the Assembly version before a lawsuit could be filed.
Under current law, construction defects involving five or more homes could result in immediate lawsuits before the builder has a chance to make repairs. Also under current law, in cases involving four or fewer homes, homeowners could file lawsuits only 60 days after filing complaints with the builder. And builders have only 45 days to make repairs if their offer is accepted by the homeowner.
Another difference in the version passed by the Assembly Judiciary Committee is it takes the Nevada State Contractors Board out of the process as a mediating body.
In the version of SB 241 passed by the Senate, the Contractors Board was named as a mediator that a homeowner and builder must go through before filing a lawsuit.
The negotiated version of the bill sticks with current law, in that homeowners and home builders must agree on a mediator before a lawsuit is filed. But if both sides agree not to use a mediator, a lawsuit can automatically be filed.
Canepa said homeowner attorneys were concerned that under the version of SB 241 passed by the Senate, where mediation by the State Contractors Board was a requirement before going to court, the process would be slowed down.
"From our standpoint, it was that the homeowner would get locked up in that bottleneck," he said.
Margi Grein, executive officer of the Contractors Board, said it is premature to comment on the negotiated settlement between the homeowner and builders.
When SB 241 first was introduced, the State Contractors Board had concerns about its role in mediating and issuing binding decisions.
Under the revised version of SB 241, homeowners and builders can go to the Contractors Board for an advisory opinion that is not admissible in court. Currently, the board investigates when a homeowner has lodged a complaint against a contractor with the board.
Another difference in the Assembly version has to do with what happens in court after a construction defect lawsuit is filed. The Senate version of the bill included certain requirements on how the case could be handled once it is in court. The Assembly version eliminates those requirements, leaving case management to the discretion of the courts.
Jim Wadhams, lobbyist for the Nevada Home Builders Association, said he was pleased with the Assembly version and believes that it will reduce the number of class action lawsuits filed against builders.
"If it's approved by the Legislature and signed by the governor, it will break the stranglehold litigation has had on home repair," Wadhams said. "That doesn't mean there won't be more lawsuits. But we think people will be able to get their homes fixed without waiting for years because of litigation and then finding out there is no money to make the repairs."
Since fall 2001, at least 200 defect lawsuits have been filed against builders and developers in Southern Nevada.
But the question many can't answer is whether the changes to existing law will make a difference in the current litigious climate that has driven insurance premiums up for home builders and subcontractors.
"It is too early to tell," said Mark Sektnan, assistant vice president of the American Insurance Association, a national trade association based in Sacramento. Sektnan also represented the insurance industry on Nevada's Construction Liability Insurance Task Force. "It will take some time to figure out what the impact is."
Sektnan said there must be a fundamental change in the industry before more insurers are willing to insure Nevada home builders and contractors. Now, home builders are insured by out of state and off shore companies that offer "surplus" insurance, a very expensive, limited product.
Hill said people may see a change sooner than later.
"I think rather quickly, lawsuits should diminish," he said. "And the ultimate effect is that insurance rates will go down."
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