BY: Mary Thompson, Capstone Brokerage President, August 30, 2016

Many states have enacted legislation that requires claimed defects on homes built to be reported to the builder in an effort to try and reduce the amount of Defect Lawsuits. What is being called the “right to repair” allows a builder to address the homeowner’s claimed defects and then repair the defect rather than being brought to court. The “right to repair” provides an avenue to the homeowner to seek repair on their home without having to open a lawsuit.

In Nevada the governor signed a provision which modifies the states “right to repair” statutes. Under the new legislation, before a homeowner can commence an action or complaint, they must provide written notification to the contractor and any known party that may be responsible for the defect. In other words they must contact those companies that may be involved in the defect and allow them reasonable time to repair the defect prior to initiating a lawsuit. In the complaint there must be a signed statement from all named owners verifying the defect, damage or if an injury exists.

The first step a homeowner must take is to submit a claim under the home warranty program. If the claim is denied by the warranty, the homeowner may submit a claim to the contractor and/or subcontractors, allowing them a chance to rectify the situation either by repair, settlement or disclaimer of liability. The contractor/subcontractor may elect to repair the defect at that point. However, if they do elect to repair the defect it may not be conditional up release of liability. If the contractor/subcontractor elects to not repair, then the homeowner and or contractor may bring a cause of action for the defect.

“Right to repair” statutes may seem to be straightforward; however, the interpretation and application of the statutes often lead to litigation. The biggest misconception is whether “right to repair” procedures are mandatory or optional. This poses an issue for insurance carriers when writing policies. It needs to be clearly stated what is and is not covered. Furthermore, it is important to understand the obligations and the need for addressing the implications on policy underwriting.

Homeowners will more than likely be required to do a walk-through and/ or home inspection prior to the close of escrow. Making a punch-list of items that need to be addressed and corrected will help to lower the likelihood of repair issues. There may be items that will not be “seen” at that time. It is imperative to document any needed repairs and address them promptly.

Contractors, subcontractors and homeowners should have a thorough understanding of their rights when it comes to new home construction and construction defects. Having a knowledgeable insurance broker that specializes in construction type policies is key for contractors and subcontractors. As a homeowner, it is always helpful to know your rights. For more information about your coverage and protection, be sure to understand the timelines for reporting defects as well as your personal homeowner’s policy.