In May, 2002, Arizona's legislature passed House Bill 2620, entitled the "Builder's Protection Act ("BPA"). The governor signed the bill into law on May 21, 2002. The BPA became effective August 21, 2002. The BPA is an addition to Title 12 of the Arizona Revised Statutes in the form of a new Article 14, and we will refer to the BPA as "Article 14."
Arizona first enacted prelitigation statutes in 1999 in the form of Chapter 17 (subsequently re-titled as Chapter 18) to Title 33 as described in the main volume. The BPA steps are in addition to the requirements of Chapter 18, except that Arizona Revised Statute section 33-2003 has been amended to read:
33-2003 Applicability
A. This chapter applies only to homeowners' association dwelling actions. This chapter does not apply to:
1. Actions filed by individual members of a homeowners' association against a seller.
2. Claims for personal injury, death or damage to property other than a dwelling.
3. Common law fraud claims.
4. Proceedings brought pursuant to title 32, chapter 10, whether filed by a homeowners' association or an individual member of a homeowners' association.
B. A homeowners' association dwelling action is also subject to title 12, chapter 8, Article 14.
Unlike Chapter 18 before it, Article 14 applies to every new construction defect action filed in Arizona. However, as detailed in the next section, the steps to be taken depend upon whether the case is a "dwelling action" or a "multi-unit dwelling action."
[1] Definitions
Section 12-1361 of Article 14 contains definitions used in the Article as follows:
1. "Association" means either of the following:
(a) The unit owners' association organized under section 33-1241.
(b) A nonprofit corporation or unincorporated association of owners created pursuant to a declaration to own and operate portions of a planned community and which has the power under the declaration to assess association members to pay the costs and expenses incurred in the performance of the association's obligations under the declaration.
2. "Community Documents" means the declaration, bylaws, articles of incorporation, if any, and rules, if any.
3. "Dwelling" means a single or multifamily unit designed for residential use and common areas and improvements that are owned or maintained by an association or by members of an association. A dwelling includes the systems, other components and improvements that are part of a single or multifamily unit at the time of construction.
4. "Dwelling action" means any action brought by a purchaser against the seller of a dwelling arising out of or related to the design, construction, condition or sale of the dwelling.
5. "Multi-unit dwelling action" means a dwelling action brought by an association or by or on behalf of the owners of five or more individual dwelling units.
6. "Purchaser" means any person or entity who files a dwelling action.
7. "Seller" means any person, firm, partnership, corporation, association or other organization that is engaged in the business of designing, constructing or selling dwellings, including a person, firm, partnership, corporation, association or organization licensed pursuant to Title 32, Chapter 20.
[2] Stay Of Action For Failure To Comply With Article 14
Section 12-1362 of Article 14 provides for a stay under the following circumstances:
A. If a purchaser files a dwelling action without first complying with this Article, on application by a party to the action, the court may stay the action for ninety days to allow the parties to comply with this article.
B. Absent a showing of good cause, the court shall stay a multi-unit dwelling action for ninety days to comply with this Article.
C. Absent a showing of good cause, the court shall not stay a dwelling action with respect to claims for alleged defects involving an immediate threat to the life or safety of persons occupying or visiting the dwelling.
[3] Notice and Opportunity To Inspect
Section 12-1363 provides for significant new steps:
A. At least ninety days before filing a dwelling action, other than a multi-unit dwelling action, the purchaser shall give written notice by certified mail, return receipt requested, to the seller specifying in reasonable detail the basis of the dwelling action.
B. In a multi-unit dwelling action, the purchaser shall serve the seller, together with the complaint, a written notice specifying in reasonable detail the basis of the dwelling action. The notice in a multi-unit dwelling action involving alleged defects that are substantially similar in multiple residential units may comply with this section by providing a reasonably detailed description of the alleged defects in a fair and representative sample of the affected residential units.
C. After receipt of the notice described in subsection A or B of this section, the seller may inspect the dwelling to determine the nature and cause of the alleged defects and the nature and extent of any repairs or replacements necessary to remedy the alleged defects. The purchaser shall ensure that the dwelling is made available for inspection no later than ten days after the purchaser receives the seller's request for inspection. The seller shall provide reasonable notice to the purchaser before conducting the inspection. The inspection shall be conducted at a reasonable time. The seller may use reasonable measures, including testing, to determine the nature and cause of the alleged defects and the nature and extent of any repairs or replacements necessary to remedy the alleged defects. If the seller conducts testing pursuant to this subsection, the seller shall restore the dwelling to its original condition after the testing.
[4] Builder's Response Including Offer To Repair
Section12-1363(D) goes on to provide another new step:
Within sixty days after receipt of the notice described in subsection A, the seller shall send to the purchaser a good faith, written response to the purchaser's notice by certified mail, return receipt requested. The response may include an offer to repair or replace any alleged defects, to have the alleged defects repaired or replaced at the seller's expense or to provide monetary compensation to the purchaser. The offer shall describe in reasonable detail all repairs or replacements that the seller is offering to make or provide to the dwelling and a reasonable estimate of the date by which the repairs or replacements will be made or monetary compensation will be provided.
Under subsection E of section 12-1362, if the seller does not provide a written response to the purchaser's notice within sixty days, the purchaser may file a dwelling action without waiting for the expiration of ninety days as required by subsection A of this section or a stay, if entered, shall be lifted to allow the action to proceed.
[5] Homeowner's Response
Section 12-1362(F) then provides for the homeowner's response:
Within twenty days after receipt of the seller's offer made pursuant to subsection D of this section, the purchaser shall provide a good faith, written response. A purchaser who accepts the seller's offer made pursuant to subsection D of this section shall do so in writing by certified mail, return receipt requested. A purchaser who rejects the seller's offer made pursuant to subsection D of this section shall respond to the seller in writing by certified mail, return receipt requested. The response shall include the basis for the purchaser's rejection of the seller's offer and may include a counteroffer. Within ten days after receipt of the purchaser's response, the seller may make a best and final offer to the purchaser in writing by certified mail, requested receipt requested.
[6] Admissibility of Article 14 Evidence in Dwelling Actions
Section 12-1363 then goes on to detail special rules of evidence concerning the Article 14 process:
Under section 12-1363(G), the following are not admissible in any dwelling action:
1. A purchaser's good faith notice given to the seller pursuant to subsection A or B of this section.
2. A seller's good faith response or offer made pursuant to subsection D of this section.
3. A purchaser's good faith response made to a seller's offer pursuant to subsection F of this section.
4. A purchaser's good faith counteroffer to a seller's offer made pursuant to subsection F of this section.
5. A seller's good faith best and final offer made pursuant to subsection F of this section.
Under section 12-1363(H), the following are admissible in any dwelling action:
1. A purchaser's failure to provide a good faith notice to a seller as required by subsection A or B of this section.
2. A purchaser's failure to allow a reasonable inspection requested by a seller as required by subsection C of this section.
3. A purchaser's failure to provide a good faith, written response to a seller's offer as required by subsection F of this section.
4. A seller's failure to respond in good faith to the purchaser's notice as required by subsection D of this section.
[7] Amending Notices
Section 12-1363(I) addresses amending notices under Article 14 as follows:
A purchaser may amend the notice provided pursuant to subsection A or B of this section to include alleged defects identified in good faith after submission of the original notice during the ninety-day notice period. Seller shall have a reasonable period of time to conduct an inspection, if requested, and thereafter the parties shall comply with the requirements of subsections C, D and F of this section for the additional alleged defects.
[8] Tolling Statutes of Limitation
Section 12.1363(J) contains the following tolling provisions:
A purchaser's written notice made pursuant to subsection A of this section or an amended notice made pursuant to subsection I of this section tolls the applicable statute of limitations, including section 12-532, until ninety days after the seller receives the notice or for a reasonable period agreed to in writing by the purchaser and the seller.
[9] Supplementing Defect Lists During Defect Actions
Section 12-1363(K) goes on to address the supplementing of defect lists:
Subject to Arizona Rules of Court, during the pendency of a dwelling action the purchaser may supplement the list of alleged defects to include additional alleged defects identified in good faith after filing of the original dwelling action. The court shall provide the seller a reasonable amount of time to inspect the dwelling to determine the nature and cause of the additional alleged defects and the nature and extent of any repairs or replacements necessary to remedy the additional alleged defects. The parties shall comply with the requirements of subsections C, D and F of this section for the additional alleged defects.
Under section 12-1363(L), the service of an amended notice of alleged defects during the pendency of a dwelling action shall relate back to the original notice of alleged defects for the purpose of tolling applicable statutes of limitations, including section 12-552.
[10] Extending Time Limits
Section 12-1363(M) permits the parties to extend time limits in the Article in the following manner:
By written agreement of the seller and purchaser, the time periods provided in this section may be extended. By order of the court, the time periods provided for in subsections C, D and F may be extended.
[11] Disclosures Upon Sale of Property
Disclosure requirements are included in section 12-1363(N), which provides:
For the sale of a dwelling that occurs within the statutory period set forth in section 12-552, the escrow agent, as defined in section 6-801, shall provide notice to the purchaser of the provisions of this section and sections 12-1361.
[12] Fiduciary Duties
Under section 12-1362:
Nothing in this subsection creates a fiduciary duty or provides any person or entity with a private right or cause of action or administrative action.
[13] Attorneys' Fees, Costs and Expert Witness Fees
Section 12-1364 supplements existing law in Arizona on the awarding of attorneys' fees, costs and expert witness fees in dwelling actions as follows:
In any contested dwelling action, the court shall award the successful party reasonable attorney fees, reasonable expert witness fees and taxable costs. If the seller's offer, including any best and final offer, is rejected and the judgment finally obtained is less than or less favorable to the purchaser than the offer or best and final offer, the seller is deemed to be the successful party from the date of the offer or best and final offer. If the judgment finally obtained is more favorable to the purchaser than the seller's offer or best and final offer, the purchaser is deemed to be the successful party from the date of the offer or best and final offer. This section shall not be construed as altering, prohibiting or restricting present or future contracts or statutes that may provide for attorney fees.
[14] Right to File Complaint With Registrar of Contractors
Section 12-1365 provides a mechanism for filing complaints with the Arizona Registrar of Contractors as follows:
A. A written contract for the sale of a newly constructed dwelling between a buyer of a newly constructed dwelling and the seller responsible for the original construction of the dwelling shall contain, or provide separate notice of, the following provision:
Under Arizona Revised Statutes Section 32-1155, a buyer of a dwelling has the right to file a written complaint against the homebuilder with the Arizona Registrar of Contractors within two years of the commission of an act in violation of Arizona Revised Statutes Section 32-1154, subsection A.
B. The notice required in subsection A of this section shall be prominently displayed and appear in at least ten-point bold type.
C. The buyer of the dwelling is not deemed to have received the notice required pursuant to subsection A of this section, unless the buyer initials the notice provision.
[15] Applicability of Article 14
Under section 12-1366(A), Article 14 does not apply under the following circumstances:
1. If a contract for the sale of a dwelling or an association's community documents contain commercially reasonable alternative dispute resolution procedures. If the contract for the sale of a dwelling contains the procedures, the procedures shall be conspicuously printed on the face of the contract in bold and capital letters.
2. To personal injury claims.
3. To death claims.
4. To claims for damage to property other than a dwelling.
5. To proceedings brought pursuant to Title 32, Chapter 10.
7. To claims solely seeking recovery of monies expended for repairs to alleged defects that have been repaired by the purchaser.
Under section 12-1366(B), a dwelling action brought by an association is also subject to Title 33, Chapter 18.
For more legislation information, see the California Legislation Web Site at http://www.leginfo.ca.gov.
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