Nevada Legislators Hear Arguments on Chapter 40 and Statute of Repose

November 8, 2012

Following many years of debate over Nevada’s NRS Chapter 40, a bill passed in the middle of the 1990s as a process to resolve construction defect related disputes before litigation commenced between homeowners and builders of residential construction, the fight to change this law again has surfaced.

Many parties who are involved in construction defect claims in Nevada claim that Chapter 40 carries with it to many entitlements, making it to costly to build houses in Nevada, some say Chapter 40 is fine how it is.

But no matter whose side is being heard, one thing remains clear and that is a fierce dispute over the way the future of Nevada’s Chapter 40 will resolves homeowners’ claims of construction defects will be a hot issue before the Nevada legislature.

This past Wednesday a full hearing was held before a legislative committee which pit builders and subcontractors against attorneys for homeowners.

Builders and subcontractors say the bill, drafted with guidance from a special subcommittee led by state Sen. Terry Care, D-Las Vegas, is welcome relief. They say the current system is flooded with alleged bogus claims and exorbitant legal fees and often impedes home repairs. If passed, some say the legislation would tilt the system significantly toward builders and subcontractors, and plaintiff attorneys say it goes too far, imposing severe curbs on the rights of homeowners.

On the other hand, builders claim they are obligated to pay the homeowners’ costs of bringing lawsuits, provided homeowners agree to reasonable settlements. Builders and subcontractors say built-in attorney and expert fees create perverse incentives to bring Chapter 40 actions against them.

Subcontractors also claim that they are often innocent bystanders in construction defect claims and litigation in Nevada. For instance, window installers claim they are brought into lawsuits which are related to leaky roofs or defective drywall. Roofers and drywallers claim they are brought into cases with leaky windows. Subcontractors claim that they are only brought into suits by builders who wish to spread the cost, expense and exposure of the defective construction allegations amongst all parties who participated in the building of the home. Subcontractors’ claim their own insurance companies often advise them to settle, as it remains cheaper to settle rather than allow litigation costs to skyrocket.

The proposed legislation, Senate Bill 349, would more narrowly define a construction defect. To qualify as defective, a home would have to present “unreasonable risk of injury to a person or property.” Alternately, it would have to meet all of the following criteria: violate building codes, cause damage to the property and be built in a manner not “good and workmanlike” according to industry standards. Currently, just one of those criteria, including violating a building code, needs to exist to mark a home as defective and qualify it for the Chapter 40 process. The legislation would also eliminate a provision in the law that allows plaintiffs to collect “reasonable attorney’s fees.”

Homeowner lawyers claim the bill would leave homeowners, thousands of whom bought substandard houses during the building boom in Nevada, defenseless against builders, their insurance companies and builders lawyers. Homeowner counsel allege that current law necessarily requires nothing more than code violation to qualify as a construction defect.

The committee also heard legislation that would shorten the time a homeowner has to bring civil action against a builder. Senate Bill 337 is a revision to the Statutes of Repose and reduces the time action may be commenced from 10 years to 6 years.

The legislative battle over construction defects is expected to continue until the session’s scheduled end two months from now.


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