Debate on home defect law heats up

Builders welcome proposed bill; lawyers for homeowners slam it

Thursday, April 2, 2009 | 2 a.m.

Nevada Statutes: Chapter 40

Union group accuses home builder of poor work conditions, shoddy construction (3-26-2009)
Foes under defects law unite to push for its change (3-24-2009)
Four homebuilders settle in plumbing lawsuit (3-18-2009)
Homebuilder accuses LV company of home inspection fraud (3-16-2009)
Homebuilders worry as lawmakers search for revenue (3-6-2009)
Builders hammer away for changes in defect law (5-2-2003)
Trapped by lawsuits, subcontractors seek relief (2-22-2009)
Should construction-defect laws be overhauled? (2-9-2001)

Archive of Sun politics stories

A fierce dispute over the way Nevada resolves homeowners’ claims of construction defects broke open for a full airing before a legislative committee Wednesday.

Legislation being considered by the committee pits builders and subcontractors against attorneys for plaintiffs. The two sides have engaged in a donnybrook this legislative session over changes in construction defect law, known as Chapter 40 for its place in Nevada statute.

Builders and subcontractors say the bill, drafted with guidance from a special subcommittee led by state Sen. Terry Care, D-Las Vegas, is welcome relief. They say the current system is flooded with bogus claims and exorbitant legal fees and often impedes home repairs.

The legislation would tilt the system significantly toward builders and subcontractors, and plaintiff attorneys say it goes too far, imposing severe curbs on the rights of homeowners.

Chapter 40 was a compromise passed in the middle of the 1990s building boom as a process to resolve disputes before litigation. As part of the compromise, homeowners who file lawsuits cannot claim noneconomic damages, such as emotional distress or punitive damages.

On the other hand, builders are obligated to pay the homeowners’ costs of bringing lawsuits, provided homeowners agree to reasonable settlements.

Builders and subcontractors say built-in attorney and expert fees create perverse incentives to bring Chapter 40 actions against them.

Subcontractors also say they are often innocent bystanders — window installers who get brought into lawsuits related to leaky roofs or defective drywall, for instance. Subcontractors are often brought into suits by builders who wish to spread the cost, and subcontractors’ insurance companies often advise them to settle, lest litigation costs skyrocket.

The proposed legislation, Senate Bill 349, would more narrowly define a construction defect. To qualify as defective, a home would have to present “unreasonable risk of injury to a person or property.” Alternately, it would have to meet all of the following criteria: violate building codes, cause damage to the property and be built in a manner not “good and workmanlike” according to industry standards.

Currently, just one of those criteria — including violating a building code — needs to exist to mark a home as defective and qualify it for the Chapter 40 process.

James Wadhams, a lobbyist representing the coalition of builders and subcontractors, said the proposal would eliminate cosmetic issues that often get caught up in expensive litigation, which in turn would help builders solve more substantive problems.

Wadhams said such cosmetic issues could be resolved outside the Chapter 40 process in regular legal channels.

The legislation would also eliminate a provision in the law that allows plaintiffs to collect “reasonable attorney’s fees.”

Builders and subcontractors had hoped at the beginning of the legislative session to eliminate Chapter 40 altogether and force homeowners into the court system. The current legislation achieves many of their goals, while leaving Chapter 40 in place.

A construction defect lawyer offered a withering attack on the legislation. Scott Canepa, who’s litigated hundreds of Chapter 40 cases since the law’s inception, said the bill would leave homeowners, thousands of whom bought substandard houses during the building boom, defenseless against builders and their insurance companies and lawyers.

Canepa said current law necessarily requires nothing more than code violation to qualify as a construction defect. “The code is the minimum standard to protect life, limb and property,” he said.

If Nevada were to change the law to require criteria in addition to a code violation, the state “would leave the door open for contractors to build houses that are riddled with construction defects, without recourse for the homeowners,” Canepa said.

As for attorney fees, Canepa noted that the mid-’90s compromise meant homeowners weren’t to receive punitive damages or money for emotional distress — what’s known as “general damages” in a personal injury case.

If payment of plaintiffs’ attorneys became the responsibility of homeowners, they would have to spend the entire settlement on fixing the house. Homeowners would have to pay attorneys fees out of pocket. In the end, homeowners would decide that bringing the case wasn’t worth it, Canepa said.

Though Care leads the Judiciary Committee that helped draft the Chapter 40 bill, he conducted the hearing without a tone of advocacy, asking neutral questions of both sides.

The committee also heard legislation that would shorten the time a homeowner has to bring civil action against a builder.

The legislative battle over construction defects is expected to continue until the session’s scheduled end two months from now.

Discussion: 15 comments so far…

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By Houstonjac

April 2, 2009

6:23 a.m.

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The proposed changes to Chapter 40 will turn homeowner's rights upside down. Obviously, the builder's lobby has scored some major points with the top legislator who is drafting the bill. This bill must not be allowed to pass. The one criterion for bringing suit should be that the construction does not meet code requirements. If the homeowners' position is upheld, the builder should be required to pay the homeowners'attorney's fees.
By redsoxwin

April 2, 2009

8:34 a.m.

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I'm kinda' mixed up about this bill. On one hand, my new house in 2001 has never had any problems except for a settlement crack that I had fixed while painting the house. And yet my subdivision in Henderson has been assaulted by lawyers with descriptions and pictures of construction defects, and asking us to join a lawsuit against the builder. None of my neighbors have had any problems, too. The houses were built by a local developer, not an out of town mega-builder. So I think that maybe we need some strong laws, because so many of the builders are from out of town, and have bailed out on Las Vegas. KB Homes, Pulte, Lennar, Richmond American, Ryland etc. are country wide, and leave on a whim when the economy tanks. So I don't like the ambulance chasers making up questionable lawsuits, but I also don't like the fact that out of state builders can run and hide at will. A conundrum...
By lastword

April 2, 2009

8:35 a.m.

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Let Chapter 40 stand as is. The builders need to start self policing their own subcontractors and take responsibility for shoddy construction. The city inspectors need to start doing their JOBS. If the builders don't stop crying wolf then we should reinstitute PUNITIVE damages.

Builders start doing a better job, hire reliable subcontractors and put in legitimate parts.
By redsoxwin

April 2, 2009

8:42 a.m.

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Oops, I just read another article in the Sun that says KB Homes is hanging in here in Vegas with some new construction. So kudos to KB.....
By mcmc_john

April 2, 2009

8:49 a.m.

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Unfortunately the word game has started between homeowner (plaintiff's) attorney's versus the builders attorney's. Now the discussion has plummeted to the point of was is "IS"

Who would define what; "unreasonable risk of injury to a person or property" IS.

Any builder or contractor could build a home under the belief that their interpretation met the definition of "unreasonable risk". How could any contractor bid competitively against their competition if the "IS Factor" is used and not code.

The other choice is "it would have to meet all of the following criteria:
1. violate building codes,
2. cause damage to the property
3. and be built in a manner not "good and workmanlike" according to industry standards.

In other words a homeowner could not protect themselves from problems like Kitec until the pipe breaks and the flowing water "cause damage to the property". Are they kidding.

A roof that did not meet code would not have to be repaired until the concrete tile blew or fell off the roof and caused "damage to the property" Under this stupid definition one could argue that a piece of tile that fell off the roof and hurt a person could not be considered an action to bring forth a lawsuit because it did not "cause damage to the property."

What happened to the good old days when you had to build to code or you would loose your license.

The word game continues ... and both subcontractors and homeowners will be violated if lawyers set the standards and not construction experts.

The easy solution is build to code or loose your license.
By mcmc_john

April 2, 2009

8:50 a.m.

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FYI... "industry standards" is used to push the industry to a higher quality of construction when a potential problem is brought to the attention of builders and contractors before code can be establish or changed. Take Kitec for example, the industry knew it was a problem before code could be changed. Responsible and honest contractors refused to bid jobs using this material. Shoddy and dishonest contractors had to step up their game or face potential lawsuits for failure to follow "industry standards." Without this cause of action being independent of the other cause of actions.... the industry will be led by bottom feeders of quality and honest contractors will be put out of business.
By willygigger

April 2, 2009

12:02 p.m.

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I'm confused. If these homes in fact do not meet code and are "defective" then wouldn't any good attorney take these cases on a normal (American Law) contingency basis. Why should there fees be guaranteed? Another words they get paid regardless of the quality of their work?? I would like a job like that!
By missmaui

April 2, 2009

1:42 p.m.

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I would like to know how stupid Canepa thinks the general public is. He brought a homeowner who claimed to have soil problems which caused cracking drywall. I want to know why no one in our state sennate even asked her a simple question and that would be what exactially did you spend and what procedures did you have done to solve your soil problem. My guess is she did nothing but buy clothes with her settelment. I bet she doesn't even know that every subcontractors insurance helped to pay her attorney huge amouts of money. I bet she has not been told that she needs to disclose her construction defect when she sells her home.
I realize there are some valid claims but I ask the question why does every subcontractor and supplier have to foot the bill if there is only a soil problem. The truth is that the American public and our state leaders surcume to trial attorneys and they are the only ones who win. Every homeowner and or future homeowner foots the bill. Does the public really think that the huge costs of insurance is not passed on to the consumer? One more comment. When there is really a true construction deffect the homeowner rearly recieves enough money to correct the defect. The cost's of distructive testing and the huge attorney fees eats up most of the money left to do repairs especially if you sue as a group.
Chapter 40 is a joke and it's done nothing but make two trial attorneys in our lovely state rich.That would be Canepa in Vegas and Maddox in Reno
By glassguy

April 2, 2009

3:25 p.m.

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I cannot beleieve how uneducated our senate leaders are. Our wonderful senate didn't even ask a single good question, it just goes to show how much our government officials do not know about the bills they are being presented with. A little education on a subject can go a long way when deciding bills that effect the lives and business of thousands of Nevada residents. A good question would have been how much money has Canepa made in the last 5 years "fighting" for homeowners and then follow up with how much money did he actually get for homeowners that actually had problems. The next question should have been how many homeowners actually got enough to fix the true problems with their homes. The chapter 40 lawsuits make tons of money for the attourneys and do nothing to help with homeowners who actually have defects in their homes.
By RGFranklin

April 3, 2009

12:52 a.m.

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NRS 40 was originally brought to the legislature by the Builders. This was to shoe horn construction defects claims into law suits that would benefit the Builder. A compromise was reached. Home owners got a token. Original law consisted of 8 pages. In 2003 Builders came back with amendment to NRS 40. Changes took 37 pages. In original form this was "Screw the Homeowner Bill."
A compromise was reached. Homeowners were prevented from filling a law suit until after they had given the builder the right to repair. Builders this would eliminate frivolous law suits. No need to turn over claim to their insurance company. The prescription in NRS 40 provided steps to be taken by the homeowner. If the problems were not fixed by the builder, only then could the homeowner bring a law suit against the builder.
At first the builders treated the notification indifferently. The Builders Experts, many who are not even licensed as Contractors in the State of Nevada, filed reports where the deficiencies "were not observed." Builders denied anything was wrong. Home owners then were forced to get an attorney. Builders changed tactics, turning over any letter requiring repairs under NRS 40 to their insurance companies. The same builders who in 2003 didn't want their insurance companies involved and wanted the right to make the repairs. Now had changed their tune.
NRS 40 letters received by the builder are turned over to the insurance company. The company assigns it to local attorneys to defend the builder and limit the loss to the company. The Defense Attorneys notify every single sub contractor who set foot on the job site. These sub contractors insurance companies to defend the subs. The attorneys representing the subs then try to settle the case to get the sub out. In these cases the Subs have no direct responsibility. The settlements are usually the amount of the subs deductable. The subs insurance is not out anything. The Company then uses it to offer a settlement to the home owner. Most often the lead insurance company is not out anything. The builders deductable covers it. The builders would be smart to make the repairs and save some money. Homeowners are not looking to get into law suits. They want a whole house. They bought one. They are entitled to it.
The changes being requested by the builders are unconscionable. A well constructed home should last from 75 to 100 years. Cutting time limits down would be less time for a warranty on a home than the average consumer receives on a new car that is built to last 7 to 10 years.
By LostnLV

April 3, 2009

7:37 a.m.

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RG Franklin is a home inspector that points his findings which normally are not very good as he just is a high priced photo copier. He has been in my neighborhood many times soliciting the Chapter 40 process. Richard get a real job. I have been reading much about this Chapter 40 process. Fees, Expert Costs (RGFRANKLIN) on top of a settlement the prejudgment interest. I watched the Senate Judiciary Hearing on the internet where the question was asked if the settlements were actually smaller than the fees that Mr. Canepa gets. The whole room laughed even seen some smirks on the Senators faces. Mr.Canepa stumbled then stated YES like he did not know. BS - Nothing in this bill hurts the Home Owner. Check it out. If you have an issue call the Nevada State Contractors Board. They will come out investigate and have the Builder or Subcontractor make the necessary repair. Increase the timeframe the Contractors Board has jurisdiction over to match the statue's and issue solved. If they don't they get fines and license forfeiture. Wow you still have their insurance to go after. If you cannot find a flaw yourself in 6 years of time you must be blind. Need and expert to find what is wrong when nothing is. Ok call GEORGE. Get the laws fixed and now call the CD Attorney and they will come and sue if it is truly an issue. They will not be able to make up these fake charges and frivolous accusations that pit the Homeowner, Builder and Subcontractor against each other. Nevada will loose all the CD ambulance chasers and send them packing back to California where they came from. Good attorneys will stay and do their jobs. This is NEVADA not CALIFORNIA and if you want it to be CALI go home. Boy they set the example of the perfect state. Nevada Homeowners had rights before this fiasco was started and will again. Follow the procedures get real issues fixed and keep our builders and subcontractors providing jobs. Gimme a break Mr. Canepa how many do you employ. See your working out of state also. Lucrative business these Construction Defect suits. How many millions did you settle and stick in your pockets! Get Real!!! Get your hands out of ours!!!!!!

Change the laws and bring common sense to this wasteful process.
By cityoflightsNV

April 3, 2009

7:40 a.m.

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Wow MC Mohave John and now Richard George Franklin - The Slueth must be at it again. John and George whats business a little slow!!
Photo copier break down - Give us all a break!
By mcmc_john

April 4, 2009

9:31 a.m.

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RGFranklin, let me introduce you to twiddle dee and twiddle dum. Both men will purge the truth from anything that might be going on in the construction industry with vile words and slander. Jumping from point to point with little regards to the truth of the topic on Chapter 40.

LostnLV- why do you feel the legal warranty period should be lowered from 10 years to only 6 years?

If there is nothing wrong with the home then why try to limit the homeowners rights? Your logic that if you can not find a problem in 6 years you will not be able to find it in 10 years; should move your group to expand the time line to protect homeowners, not reduce the time line to protect shoddy work. Even the car industry is expanding the warranty period on their products, while builders and subcontractors are promoting to be able to walk away from liability as fast as they can. Do you know what that says to the consumer?

Your group would like to change the rules. Those rules protect homeowners. The changes you and your partners are attempting to do has nothing to do with protecting the person who bought one of your homes. That my friend (sarcastically used) is a tale telling sign on who you, and what you are interested in protecting. So maybe you and your friend would like to post just one frivolous lawsuit in Nevada, one that the courts through out... Then maybe these readers would have a chance to believe in your unsavory words.

The fact is that under the changes to the laws that you are promoting, homeowners would not have been protect from the Kitec problem that plagues this valley. So what do you say to that?

Del Webb was one of two builders who took the opportunity to solve the Kitec issue under a Chapter 40 process, but unfortunately it was only in their Sun City project. So, LostnLV, why did they only solve the problem in one community without a lawsuit but held out for the lawsuit for their other communities?

The answer is that the builder wanted to cross sue their subcontractor partners. I suppose that you two know that the homeowners do not sue subcontracts, but builders cross sues subcontracts. And they do this so they can make all subcontractors pay for the Kitec problem. Why would subcontractors work for someone who is willing to sue them for problems that the builders know that every other subcontractors besides the plumber had nothing to do with installing Kitec.... now wouldn't you agree that this cross suing contractors to gain money from subcontractors who had no liability with the problem is the only frivolous and legal thuggery in the new home construction industry? And this practice has nothing to do with homeowners or plaintiffs attorneys but builders cheating their own "trade partners."

My final question is posted for lostnLV and cityoflightsNV... both Richard and I use our names in our usernames... but neither of you gentlemen or ladies do. Why?

WHO IS HIDING ... AND WHY...
By LV1Team

April 5, 2009

8:05 a.m.

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Simple Solution:

Homeowner finds an issue.

Homeowner calls Nevada State Contractors Board (Not a Lawyer or So Called Expert). Contractors Board authority extended to match Staute of Repose and Statue of Limitations.

Nevada State Contractors Board (true neutral expert) inspection takes place and State determines if an issue with Builder, Subcontractor and Homeowner present is valid.
Contractors Board advises Builder/Subcontractor to make repair or no repair for Homeowner.

(Issue bigger than Contractors Board i.e.- Settling, Structural, Slab, Roof etc. advises homeowner to get an Attorney. No need for extra fees as a real Attorney and real Construction Experts will jump at the chance.) Brings in only the true parties at that time. No Extra Fees or Costs it's all settled by the true cost of the issue.

Builder/Subcontractor make the repair and Nevada State Contractors Board approves HO should be happy if not they can still sue. No Extra Incentive of Fees and Costs for Law Firm. Keeps everyone's hands in their own pockets. Builder/Subcontractor does not fix Nevada State Contractors Board takes away their license and puts them out of business. Believe me it will get the issues fixed. No need for Attorney or Construction Expert as 90%+ of all true items will be repaired.

Remember no matter whom builds something, we are all humans. Human hands with manmade products will never be perfect.

All true rights are preserved for the Homeowner, all good businesses stay in business, 90% of true issues fixed (no more frivolous issues), Homeowner saved the long wasteful process of Chapter 40, Chapter 40 not needed thus saving the State's legal system tons of wasted money on CD Claims, real attorneys will have plenty of work in itself and the Homeowner the true issue will be much happier!!!
Forget the Chapter 40 process all of you as we all know it is Driven By the Money!

It's all about the MONEY and nothing to do with the Homeowner.

"The Kitec issue is not the fault of the Builder or Subcontractor but about a product. Its bigger than that of the Nevada State Contractors Board and needs the courts to settle. What's not truly fair is the Builder and the Subcontractor are left holding the bag. Kitec was used all over the US and it seems the fittings corrode in our very nasty water. Product Liability issue and we all know it."

Stop all the non-sense in these Blogs.
By missmaui

April 6, 2009

1:25 p.m.

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The point to all of this is the subs still pay even if they do repairs needed. They pay even if there are no repairs needed. They pay no mater what happens because the attorneys get paid even if there is no issue with the home. The insurance compaines just pay rather than going to trial. No one is ever off the hook for the attorneys fees.Buy the way SB800 which is Californi's defect laws are now better than Nevada. The attorney's fees are not part of SB800 they actualy have to go all the way to get paid. So of course they do. Californis also defines a construction defect much better than Nevada. Example they say if a nail in sheetrock is functioning even if it is an 1/8 short it can not be considered a construction defect.