The Legal Process for Resolving Housing and Construction Defects

When builders use faulty materials, and these defects result in damage to property or injuries, the contractors can be held liable for breach of contract. But the claims must pass the test of proving damages, which include consequential losses.

Housing and construction defects lawyer assist clients with resolving contractual disputes or seeking financial settlements. The legal process typically involves compliance with right-to-repair statutes, various statutes of limitations, and arbitration.

Statute of Limitations

In most states, there is a Statute of Limitations on claims for construction defects. This is a period after which the claim can no longer be filed in court.

The clock starts to run when a problem should have been observed, such as a leaking gutter or crack in the wall. The law may also consider whether the problem caused damage, like water stains or mold. It may be a good idea to speak with an attorney after discovering a potential defect to learn more about the Statute of Limitations and how it relates to the specific situation.

As a design professional or contractor, you must know the statute of limitations and how they relate to your project. This will help you plan for the possibility of a lawsuit and ensure that any potential claims are filed promptly.

Arbitration

Arbitration is a dispute resolution process that allows parties to resolve their disagreements by an impartial third party (or, in some cases, a panel of neutrals). It can be legally binding or non-binding. The parties will have a hearing and present evidence like in a courtroom trial, but it is generally much quicker and less expensive than litigating the same issue in court. Homebuilders often include arbitration clauses in their contracts because they believe homeowners would be treated more fairly by an arbitrator familiar with the construction industry than by a jury or judge with little or no experience.

Arbitrators are typically attorneys and must have substantial legal knowledge. Unlike a judge or jury, there are few grounds to appeal an arbitrator’s decision. However, if you can prove that the arbitrator committed fraud, was unqualified or biased, or decided on issues outside the scope of the case, you may get a decision reversed by the courts.

The case length varies based on the party’s availability and flexibility. Still, a typical hearing lasts one to three days and is usually held in the same location as the trial or other proceedings. In addition, there are various expenses that both sides will incur in the course of resolving the case. In most cases, the arbitrator will apportion these costs.

Trial

With an ever-increasing number of new construction condominium projects, multi-family homes, and planned unit developments being built and sold, there has been a parallel increase in the number of residential construction defect cases making their way through the courts. The most common residential construction defect claim involves claims against developers and home builders for alleged design and construction defects.

The claims typically seek recovery for monetary damages by repairing the defects, restoring the property to the value promised in the construction contract, or compensatory and punitive damages for losses caused by the defects. These losses include decreased property value, increased utility bills, repair costs for water leaks, or damage to personal belongings.

As with all legal claims, a host of issues are involved in bringing or defending a construction defect case, these matters range from the statute of limitations and when it begins to run, or “accrue,” through issues of venue and the interaction between Rule 23 and the Right to Cure Construction Dwelling Defects Act and other state law provisions.

There is also the issue of the duty to preserve evidence, particularly electronic documents, and records, which is critical in the construction defect context. Lastly, there are the complex causation issues and the measure or proof of damages.

Damages

Some homeowners discover a construction defect after moving into their new homes. They may have a contractual warranty with the builder/developer or various types of professional insurance coverage that can be pursued. Unfortunately, many states have laws that can limit the amount of time an owner has to file a claim for damages.

Homeowners can recover damages for loss of use of their home, diminution in value, reimbursing expenses related to repairing the defective work, repairing and restoring other parts of their property affected by the defect, and attorney fees. Punitive damages may also be awarded in extraordinary cases involving fraud, willful conduct, or negligence inflicting emotional distress.

Typically, the measure of damages is the cost to correct the construction defect. However, the law allows for the recovery of compensatory damages if it can be demonstrated that correcting a defect would involve unreasonable economic waste. This test is known as the principle of least harm.

Moreover, there is a duty to mitigate damages. The homeowner must take reasonable steps to prevent additional damage. For example, if a foundation wall is damaged by water, the homeowner must move the water away from the wall. This could require landscaping and incurring expenses. Homeowners can seek these expenses as mitigation damages. In addition to the above, homeowners can claim other damages for various reasons, including inconvenience, annoyance, and emotional distress.