Category: Constructional Defects

Building the New West

Aug 30 2008

Contractor Liability Under Implied Warranties in Residential Construction

The Arizona Supreme Court recently ruled that homeowners (and homeowner associations on behalf of homeowners) may sue residential homebuilders on an implied warranty of workmanship and habitability even if the homebuilder was not also the vendor of the homes and the homebuilder had no other direct relationship with the homebuyer. See The Lofts at Fillmore Condominium Assoc. v. Reliance Commercial Construction, No. CV-07-0416-PR (Ariz. filed Aug. 19, 2008) (http://www.supreme.state.az.us/opin/pdf2008/ACV070416PR.pdf).

How does this work in Nevada?
Nevada has not addressed the situation at issue in Arizona's Lofts at Fillmore case where the homebuilder was not also the vendor or a joint venturer with the vendor of the homes. The Nevada Supreme Court, however, has held that where a homebuilder is a joint venturer with the vendor, both the homebuilder and the vendor are jointly and severally liable to the homebuyer for breach of the implied warranty of habitability. See Radaker v. Scott, 109 Nev. 653, 855 P.2d 1037 (1993).

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Jun 27 2008

Does NRS Chapter 40 Apply to Completed Blueprints for an Unfinished Residence?

The quick answer is "No". In Pankopf v. Peterson, ___ Nev. ___, 175 P.3d 910 (2008), the Pankopfs entered into a contract with Peterson for residential design and drawing services for a personal residence. Peterson provided blueprints for a personal residence, and excavation for the residence’s construction began. The plans failed to identify the types of trees that would be planted on the site as required by the Pankopf’s homeowner’s association, and the excavation process was halted. According to the Pankopfs, a number of deficiencies in Peterson's work ultimately prevented them from building their residence. The Pankopfs brought suit against Peterson, alleging that Peterson's plans contained numerous design defects, mistakes, omissions, and inaccuracies that prevented them from constructing the residence. Peterson subsequently filed a motion to dismiss under NRCP 12(b)(5), arguing that the Pankopfs failed to comply with certain requirements set forth in NRS Chapter 40 that applied in constructional defect cases. The Pankopfs argued that they did not make a claim for relief based on any constructional defect within the scope of NRS Chapter 40.

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Posted by Jeffrey Steffen at 1:58 PM | Email Post
Categories: Constructional Defects | NRS Chapter 40 | Blue Prints

Jun 27 2008

Court Defines New Residence and Addresses Buyer Waivers of Constructional Defect Claims

In Westpark Owners’ Association v. Eighth Judicial District Court, ___ Nev. ___, 167 P.3d 421 (2007), the Court addressed three (3) issues concerning NRS Chapter 40 (constructional defects): i) the definition of “residence”; ii) the definition of “new”, in the context of a residence; and iii) the effect of a general waiver of constructional defects in a sales contract. Westpark Associates, LLC (“Westpark”) purchased a partially completed condominium project out of bankruptcy, and completed an additional 108 units, but due to market conditions decided to lease the 108 units as apartments, and did so from 1997 through 2003. Westpark started selling the units to the general public, and each contract required the buyer to waive “any” possible construction defect claims. The converted condo owners began experiencing problems with their units, and the Westpark Owners’ Association (the “Association”) served Westpark with a formal Chapter 40 notice.

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Posted by Jeffrey Steffen at 1:38 PM | Email Post
Categories: Constructional Defects | NRS Chapter 40 | Nevada

Jun 27 2008

Court Creates Reasonable Threshold Test For Constructional Defect Pre-Litigation Notices

In D.R. Horton v. Eighth Judicial District Court, ___ Nev. ___, 168 P.3d 731 (2007), D.R. Horton, Inc. (“D.R. Horton”) constructed 414 residences in 138 buildings in the First Light at Boulder Ranch Community in Henderson, Nevada (“First Light”). Believing that numerous constructional defects may exist in each residence, First Light hired experts to assist it in preparing an NRS 40.645 pre-litigation notice of constructional defects. The notice was formulated after using visual and invasive testing in a small representative sampling of homes in the community. First Light did not provide D.R. Horton with the addresses or the expert report of the homes that were tested. Using the information they found, the First Light experts simply extrapolated the percentage of homes in which they believed each defect existed throughout the community. D.R. Horton moved the district court for a declaratory judgment, stating that First Light’s NRS 40.645 notice was unreasonable and thus statutorily insufficient. The district court denied the motion, and D.R. Horton filed a writ petition challenging the district court’s order. To address the problem of what satisfies the “reasonable detail” requirement of NRS 40.645, the Court formulated the “reasonable threshold” test to be used when pre-litigation notices contain extrapolated data. The scope of the extrapolated notice must be narrow.

First, the homeowner’s expert must test and verify the existence of an alleged defect in at least one of the homes in each subset of homes included within the scope of the extrapolated notice. Additionally, the claimants must provide the address of each home tested and clearly identify the subset of homes to which the pre-litigation notice applies. In order to provide valid pre-litigation notice, claimants must narrow the scope of their extrapolated notice. They should investigate and identify a subset of homes within the community that has the purported defect. If they genuinely believe that every home in the community may have the alleged defect, then the claimants should test and verify the defect in at least one home from each subset of homes in the community and extrapolate the percentage of homes within each subset that they believe are likely to contain the defect. The court emphasized that the legislature intended NRS 40.645 to provide Nevada contractors an opportunity to inspect and repair defects in the homes they construct. To that end, a pre-litigation notice must contain reasonable detail so that a contractor, who makes the business decision, can decide whether to inspect and repair. The Court also concluded that a claimant cannot utilize the phrase “to the extent known” in NRS 40.645(2)(c) to justify withholding pertinent information from a pre-litigation notice, and that NRS 40.645(4)(c) requires a claimant to disclose the expert opinions and reports in its possession that were used to prepare its pre-litigation notice.

Posted by Jeffrey Steffen at 12:57 PM | Email Post
Categories: Constructional Defects | NRS Chapter 40 | Reasonable Threshhold