Legislature likely to spar again on home defects laws

Launce Rake and Diana Sahagun

Sunday, May 14, 2000 | 10:23 a.m.

The brawling in the 1999 Nevada legislative session over home construction defects is likely to be revisited in 2001.

The 1999 session produced a beefed-up state Contractors Board, but home builders and their legislative allies are still smarting from what they call a flood of construction-defect litigation.

Confusing the issue are two recent developments: A Nevada Supreme Court ruling in April that seemed to limit the amount homeowners could collect from building contractors in a lawsuit, and provisions added to home-buyer contracts that require homeowners to submit to binding arbitration, prohibiting lawsuits for home defects.

The Supreme Court issue is murky. Attorneys have asked the court to revisit the issue, particularly to clarify what it will mean for both developers and homeowners.

Nancy Quon, a trial lawyer, said the main effect of the ruling appeared to restrict insurance company payments to companies that have to repair a defective home. She said that will be bad for everybody -- construction companies will go bankrupt without insurance coverage, and homeowners can't get their dwellings repaired by bankrupt companies.

But the Nevada Trial Lawyers Association argues that the court ruling only affects homes built before 1995, when the Nevada Legislature enacted construction-defect laws.

The Southern Nevada Home Builders Association, in their monthly newsletter, cautiously said only that the ruling appeared to have some positive aspects, but the association's attorneys "are reviewing the opinion in detail for its impacts."

The "no-lawsuit" arbitration is now widespread in Southern Nevada, but Quon said she doesn't believe the clause will hold up to a court test. A contract can't require a party to void rights, she said.

Mark Ferrario, an attorney who represents home builders, countered that he sees nothing to challenge in the contracts. Arbitration is widely used in many industries as an alternative to lawsuits, he said.

The courts will have to decide whether the contract clause is legal. But the Legislature also is likely to get a crack at the issue in the 2001 session. State Sen. Randolph Townsend, R-Reno, said he sees the clauses as a tragedy for people who believed they still had normal court remedies.

The Legislature will have to address the issue, he said.

Sen. Dina Titus, D-Las Vegas, said she feels it is important to protect homeowners who expect their homes to be a safe investment for their life savings.

Sen. Mike Schneider, D-Las Vegas, joined Titus in working out the 1999 compromise, but he says lawsuits are driving affordable housing out of Southern Nevada.

Schneider and home builders point to increasing home costs -- up more than $25,000 in the last two years, to an average of $148,000.

The trial lawyers, critics charge, are trolling for cases among homeowners associations. Schneider now urges home builders to avoid setting up associations altogether because ultimately, he says, all homeowner associations will end up suing builders. The cities of Las Vegas and North Las Vegas require associations for large subdivisions.

Schneider said he will introduce legislation in the 2001 session to make it harder to sue builders and their subcontractors, revisiting some of the same issues that were so contentious in 1999.

Titus, who called Schneider's original 1999 proposals "the screw-the-homeowner law," said any law change in the next session must balance the rights of consumers to a good home with the needs of legitimate builders.

"I think a lot of construction-defect attorneys see a market here and that's made the situation worse," Titus said. "There's some blame on all sides."