Friday, April 3, 1998 | 10:05 a.m.
Legislation governing home construction defect litigation in Nevada is a start, but it needs some fine-tuning.
That was the consensus Thursday as homebuilders were briefed on Nevada's 1995 construction defect law by attorney James Wadhams.
As Southern Nevada's housing industry has boomed in recent years, it has made the region ripe for lawsuits. Wadhams said lawyers from California, some of whom may not even be licensed in Nevada, have set their sights on capitalizing on defect litigation here.
"This is kind of like tobacco litigation," Wadhams said. "Where my profession sees an opportunity to make money, everyone wants to get in on it."
The 1995 defect law is aimed at preventing litigation by requiring mediation. It protects builders who want to repair problems in their work by requiring notification of problems so builders have a chance to fix them before lawsuits are filed. Once a builder receives written notification from an owner, a timetable begins with the builder having 35 days to inspect the defects and 45 days to offer to repair or pay for the repairs. The matter then goes to mediation and if no settlement is reached, a lawsuit can be filed.
But Wadhams said the law is still young and will need clarification by state Supreme Court interpretation. For starters, attorneys sending lists of supposed defects can often make the claims vague, making it difficult for homebuilders to know exactly what is wrong. For example, the attorney may say tiles are cracked, but won't specify which tiles and where. Courts will have to define precisely what is a defect and how specific a claim has to be.
"Ultimately, our courts are going to have to say, 'this is what this means,'" he said.
Leslie Bausher of American West Homes agreed with Wadhams' assessment. "I think it's a good first step, but it has some practical flaws," Bausher said.
Bausher has witnessed cases of lawyers soliciting homeowners' associations, including one case where an attorney held a meeting with owners at a nearby school. She said in some cases board members of the associations are pressured into pursuing litigation in fear they could be held liable for not pursuing it. Often the owners are not told that if they file a complaint and no repairs are made, they are required to disclose deficiencies when they try to sell the house, Bausher said.
Another problem is insurance companies often find it less expensive to settle than to go to court and win. However, that usually results in a builder's insurance premiums increasing, Wadhams said.
The best way for builders to combat being a target is to go on the offensive, according to Wadhams. He encouraged builders to write homeowners and assure them they are willing to repair problems when the builders hear of attorneys recruiting business. He also said it was important to document all attempts to fix problems.
"The problem we had before this law was that if a suit was filed, the attorney wouldn't let the builder go in and repair," Wadhams said. "Before someone can sue you (now), they've got to send you a notice in writing."
By following the law and responding to complaints and pursuing mediation, any monetary damages that arise should the case ultimately go to court would be limited to the cost of the repairs. Otherwise, builders leave themselves open to punitive damages.
Wadhams added that it is critical to anticipate problems before receiving a written notice, though.
"We have prospectors going through our community trying to find problems so they can file lawsuits," he said.
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