Bill introduced to alter state’s construction defect law
February 18, 2013
A report released last week shows that construction defect claims per new home in Nevada is 38 times higher than the national average.
There are 1.35 construction defect claims per closing, according to the study conducted by the University of Nevada, Las Vegas. Out of all the other states, the next highest ratio was .0035 claims per closing.
Senate Republican leader Michael Roberson, R-Henderson, today introduced legislation to address the crisis caused by Nevada’s construction defect law.
Known today as “Chapter 40,” Nevada’s current construction defect law can be traced back to 1995 when the Nevada Legislature made changes to Chapter 40 of the Nevada Revised Statutes. While the intent of these changes was good – to make sure homeowners with construction problems could have their problems repaired swiftly, properly, and without having to hire an attorney – the changes to Chapter 40 have instead hurt homeowners, homebuilders, and the Nevada housing market at large.
Senate Bill 161, cosponsored by senators Kieckhefer and Hardy, strengthens the definition of a construction defect as a defect which presents an unreasonable risk of injury to a person or property or which results in physical damage in violation of accepted standards of quality. The bill also removes a unique entitlement to attorney’s fees, which exists nowhere else in the country, and has been the irresistible enticement for unscrupulous lawyers who have hijacked homeowners associations in order to steer construction defect cases to their offices. The bill also includes a disclosure requirement, to ensure that lawyers adequately inform homeowners that construction defect claims must be disclosed to future homebuyers. Finally, it reduces the statutes of repose to bring a construction defects case within a more reasonable period of time.
“This legislation is about protecting Nevada homeowners. It is about fixing a broken system so we can get people back to work,” stated Roberson. “The way Chapter 40 is set up incentivizes litigation over early resolution. This is bad for homeowners, builders and job-seekers alike, because it delays repairs and creates a barrier to future construction.”
Chapter 40 has had a devastating impact in Nevada. In the last six years Nevada has seen a 355 percent increase in the number of construction defects claims while enduring an 85 percent decrease in the new home sales. A new study, released last week and shows that Nevada’s construction defect claims per new home is 38 times higher than the national average.
The UNLV study also highlights that had the Nevada building industry performed just as well as the national average – not spectacularly, just as well as the national average – 54,000 Nevadans would be back to work. If you include the secondary and multiplier impact of that it could put another 52,000 people back to work. “I don’t know one person that doesn’t agree that Nevada would be better off if we had 100,000 fewer people out of work,” Roberson said.
“This is a Nevada issue, not a partisan issue,” Roberson continued. “In 2009, similar legislation passed 19-1 in the Senate. When people were being taken advantage of by predatory lending, Democrats and Republicans may have had different ideas of how to solve the problem, but no one wanted to protect those preying on Nevadans. Part of our job in the legislature is to create a fair playing field. Existing law under Chapter 40 skews that playing field in favor of a few that can manipulate the process.”