Rina Rai 2013-08-01 05:45:38
A.R.S. 12-1361, also known as the “Dwelling Action Statute” was legislatively enacted in August 2002. The purpose of the statute is to provide a mechanism to resolve actions brought by homeowners or associations and avoid complex, protracted and expensive litigation. While there is debate over its effectiveness, understanding its application is even more problematic. EFFECTIVENESS: A.R.S. 12-1361 et seq. provides a detailed process for the notification of alleged defects and a “Seller’s” opportunity to inspect the property and off er a response to the defects which may include an off er to pay, repair or deny the claim or claims. The clear goal of the statute is to avoid the time and expense of litigation. Many of those who practice in the construction defect arena would suggest the statute simply provides another hurdle for plaintiff ’s to overcome to get to the courthouse steps. On many (if not on most) occasions the process fails and no pre-suit resolution is reached. In these instances, both the time and expense of the case increase significantly creating the opposite of the intended effect of the statute. Many times the PDA process cannot be completed in the time frame provided by the statute creating the need to obtain extensions. This can add six months to a year to the life of the case, again, with limited success. Attorneys representing purchasers and associations, oft en report reasonable offers are rarely extended by the seller. Sellers, conversely, argue purchasers are rarely interested in repairs over monetary offers. APPLICABILITY: Another obstacle is getting subcontractors involved in the process. With new construction, the “Seller” is also the builder or developer of the home or community. A.R.S. 12-1361 is a process between the “Purchaser” (homeowner or community association) and the “Seller” (builder/vendor) only. The statute defines “Seller” as, “any person, firm, partnership, corporation, association or other organization that is engaged in the business of designing, constructing, or selling dwellings.” The statute expressly excludes real estate brokers and sales people as defined in title 32, chapter 20 who provide services in connections with the resale of any dwelling. Debate continues as to whether subcontractors are considered “Sellers” per the definition of the statute. Some recent superior courts have held that subcontractors, by virtue of their engagement in the business of constructing dwellings, render them “Sellers” under the statute. This application of the statute would then lead to a direct and private action between a homeowner or association and a subcontractor with whom there is no direct contractual relationship. Other courts have not read the statute so broadly and have held that unlike the builder/ vendor, subcontractors do not construct the entire dwelling. While holding that a subcontractor is not a “Seller” appears to be the legislatively intended reading of the statute, it does little to aid builders in their efforts to obtain subcontractor participation in offering and effectuating repairs to the alleged defects. Many in the building community maintain to the extent subcontractors have created the allegedly defective conditions, they are entitled to and should receive notice of the problems and an opportunity to off er repairs rather than face future indemnity claims from the builder/seller. In a later action, subcontractors will undoubtedly defend on the basis of insufficient notice, the defects were not caused by or related to their work and/or the repairs were unwarranted. The potential for future litigation and the difficulties associated with the same, make the success of any “right to repair” statute even more tenuous. Other application difficulties arise from the fact that the statute does not apply to arbitrations or other ADR processes. In the last decade, ADR processes in purchase contracts and association documents have become commonplace. Where these provisions are expressly provided, A.R.S. 12-1361 does not apply. See A.R.S. 12-1366. The statute provides that where ADR provisions are present in the contracts the procedures must conspicuously appear on the face of the contract in bold and 12 point font. Most contracts do not meet the stringent requirements related to placement of the ADR provision and the bold 12 point font print and, therefore, may lack the requirement for conspicuousness. What does it mean if 12-1366 is not specifically followed? Does the ADR provision become void or unenforceable? Does 12-1361 et seq. become applicable in an arbitration action? So far, these questions have remained largely unanswered. Over a decade ago the Arizona Legislature attempted to aid the community in addressing construction defect claims in the hopes of curbing costly and time consuming litigation. Perhaps the time has come for the legislature to amend the statute to achieve the desired result. Clarity regarding the applicability of the statute to subcontractors and in ADR proceedings is needed. In addition, perhaps greater penalties or “teeth” are needed to ensure good-faith participation on the process by all parties. Born in Birmingham, England and raised in California, rai attended the University of California at riverside where she received her Bachelor of Arts degree in liberal studies in 1993. rai attended Pepperdine University School of Law where she obtained her JD degree in 1996. While attending Pepperdine, she also obtained a certifi cate in alternative dispute resolution from the nationally recognized program. rai is admitted to practice in Arizona and California and is experienced in the areas of construction defect, insurance defense and civil litigation. Over the past 17 years, rai has devoted a signifi cant portion of her practice in the areas of construction defect litigation and general liability in both California and Arizona. rai has represented hundreds of contractors in complex litigation cases and has successfully taken cases to trial and negotiated settlements and dismissals for many of her clients. rai was one of the youngest members of the bar to chair AZ’s State Bar’s construction section. She also recently coauthored The Arizona Construction Law Manual, published by the State Bar of Arizona. www.raiBarone.com 602.476.7100
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