SB1468 - 532R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 12-1362, Arizona Revised Statutes, is amended to read:

START_STATUTE12-1362. Dwelling action; offer to repair or replace; jurisdictional prerequisite; insurance

A. Except with respect to claims for alleged construction defects involving an immediate threat to the life or safety of persons occupying or visiting the dwelling, a purchaser must first comply with this article before filing a dwelling action.

B. A seller who receives a written notice of claim pursuant to section 12‑1363 has a right pursuant to section 12‑1363 to repair or replace any alleged construction defects after sending or delivering to the purchaser a written notice of intent offer to repair or replace the alleged construction defects. The seller does not need to repair or replace all of the alleged construction defects. A purchaser may not file a dwelling action until the seller has completed all intended repairs and replacements of the alleged construction defects.

C. If a seller presents a notice received pursuant to section 12‑1363 to an insurer that has issued an insurance policy to the seller that covers the seller's liability arising out of a construction defect or the design, construction or sale of the property that is the subject of the notice, the insurer must treat the notice as a notice of a claim subject to the terms and conditions of the policy of insurance. An insurer is obliged to work cooperatively and in good faith with the insured seller within the time frames specified in this article to effectuate the purpose of this article. Nothing in this subsection otherwise affects the coverage available under the policy of insurance or creates a cause of action against an insurer whose actions were reasonable under the circumstances, notwithstanding its inability to comply with the time frames specified in section 12‑1363. END_STATUTE

Sec. 2. Section 12-1363, Arizona Revised Statutes, is amended to read:

START_STATUTE12-1363. Notice and offer to repair or replace; tolling of time limits; admissible evidence; definition

A. Before filing a 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. After receipt of the notice described in subsection A of this section, the seller may inspect the dwelling to determine the nature and cause of the alleged construction defects and the nature and extent of any repairs or replacements necessary to remedy the alleged construction 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 an 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 construction defects and the nature and extent of any repairs or replacements necessary to remedy the alleged construction defects. If the seller conducts testing pursuant to this subsection, the seller shall restore the dwelling to its condition before the testing.

C. Within sixty days after receipt of the notice described in subsection A of this section, 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 the seller's notice of intent offer to repair or replace any alleged construction defects, to have the alleged construction defects repaired or replaced at the seller's expense or to provide monetary compensation to the purchaser. The written notice of intent offer to repair or replace shall describe in reasonable detail all repairs or replacements that the seller intends to make or provide to the dwelling and a reasonable estimate of the date by which the repairs or replacements will be made. This subsection does not prohibit the seller from offering monetary compensation or other consideration instead of or in addition to a repair or replacement. Within thirty days after receipt of the seller's offer, the purchaser may shall accept or reject an offer of monetary compensation or other consideration, other than repair or replacement the offer in whole or in part and, if rejected in whole or in part, may proceed with a dwelling action on completion of any accepted repairs or replacements the seller intends to make or provide. The parties may negotiate for a release if an offer involving monetary compensation or other consideration is accepted.

D. If the seller does not provide a written response to the purchaser's notice within sixty days, the purchaser may file a dwelling action.

E. If the response provided pursuant to subsection C of this section includes a notice of intent an offer to repair or replace the alleged construction defects and the offer to repair or replace is accepted in whole or in part, the purchaser shall allow the seller a reasonable opportunity to repair or replace the alleged construction defects or cause the alleged construction defects to be repaired or replaced pursuant to the following:

1. The purchaser and the seller or the seller's construction professionals shall coordinate repairs or replacements within thirty days after acceptance of the seller's notice of intent offer to repair or replace was sent pursuant to subsection C of this section. If requested by the purchaser, repair or replacement of alleged construction defects undertaken by the seller shall be performed by a construction professional that is selected by the seller and consented to by the purchaser, whose consent shall not be unreasonably withheld, and that was not involved in the construction or design of the dwelling.

2. Repairs or replacements shall begin as agreed by the purchaser and the seller or the seller's construction professionals, with reasonable efforts to begin repairs or replacements within thirty-five days after the seller's notice of intent to repair or replace was sent pursuant to subsection C of this section offer was accepted by the purchaser. If a permit is required to perform the repair or replacement, reasonable efforts shall be made to begin repairs or replacements within ten days after receipt of the permit unless the permit is delayed at no fault of the seller or thirty‑five days after the seller's notice of intent to repair or replace purchaser's acceptance was sent pursuant to subsection C of this section, whichever is later.

3. All repairs or replacements shall be completed using reasonable care under the circumstances and within a commercially reasonable time frame considering the nature of the repair or replacement, any access issues or unforeseen events that are not caused by the seller or the seller's construction professionals.

4. The purchaser shall provide reasonable access for the repairs or replacements.

5. The seller is not entitled to a release or waiver solely in exchange for any repair or replacement made pursuant to this subsection, except that the purchaser and seller may negotiate a release or waiver in exchange for monetary compensation or other consideration.

6. At the conclusion of any repairs or replacements, the purchaser may commence a dwelling action or, if the contract for the sale of the dwelling or the community documents contain a commercially reasonable alternative dispute resolution procedure that complies with section 12‑1366, subsection C, may initiate the dispute resolution process including any claim for inadequate repair or replacement.

F. During the notice and repair or replacement process, and for thirty days after rejection of all repairs or substantial completion of the repair accepted repairs or replacement replacements, whichever is longer, the statute of limitations and statute of repose, including section 12‑552, applicable to the purchaser, including any construction professionals involved in the construction or design, are tolled as to the seller and the seller's construction professionals who were involved in the construction or design of the dwelling for all alleged construction defects described in reasonable detail in the written notice sent to the seller pursuant to subsection A of this section.

G. Both parties' conduct during the repair or replacement process prescribed in subsections B, C, D and E of this section may be introduced in any subsequent dwelling action. Any repair or replacement efforts undertaken by the seller are not considered settlement communications or offers of settlement and are admissible in evidence.

H. A purchaser may amend the notice provided pursuant to subsection A of this section to include alleged construction defects identified in good faith after submission of the original notice. The 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 B, C, D and E of this section for the additional alleged construction defects identified in reasonable detail in the notice.

I. Subject to Arizona rules of court, during the pendency of a dwelling action the purchaser may supplement the list of alleged construction defects to include additional alleged construction defects identified in good faith after filing of the original dwelling action that have been identified in reasonable detail as required by this section. 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 construction defects, and the nature and extent of any repairs or replacements necessary to remedy the additional alleged construction defects. and, On request of the seller, the court shall provide sufficient time to make an offer to repair or replace the additional alleged construction defects and, if accepted by the purchaser, sufficient time for the repairs to be completed. The parties shall comply with the requirements of subsections B, C, D and E of this section for the additional alleged construction defects identified in reasonable detail in the notice.

J. The service of an amended notice identifying in reasonable detail the alleged construction defects during the pendency of a dwelling action shall relate back to the original notice of alleged construction defects for the purpose of tolling applicable statutes of limitations and statutes of repose, including section 12‑552.

K. By written agreement of the seller and purchaser, the time periods provided in this section may be extended.

L. 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 and 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.

M. If the seller does not comply with the requirements of this section and the failure is not due to any fault of the purchaser or as a result of an unforeseen condition, including an unforeseen weather condition or government delay, the purchaser may commence a dwelling action.

N. If the purchaser fails to comply with the requirements of this section before bringing a dwelling action, the dwelling action shall be dismissed. If the dwelling action is dismissed after the statute of limitations or statute of repose, including section 12-552, applicable to the purchaser, any subsequent dwelling action brought by the purchaser is time barred as to the seller and the seller's construction professionals involved in the construction or design of the dwelling stayed pending compliance with the requirements of this section.

O. The completion of any repair or replacement that is performed by the seller constitutes substantial completion of the improvement to real property as prescribed in section 12-552.

O. P. For the purposes of this section, "reasonable detail" includes:

1. A detailed and itemized list that describes each alleged construction defect, the location that each alleged construction defect has been observed by the purchaser or seller in each dwelling that is the subject of the notice and the impairment to the dwelling that has occurred as a result of each of the alleged construction defects or is reasonably likely to occur if the alleged construction defects are not repaired or replaced.

2. In connection with the seller's offer, the location of each offered repair and the method of the repair that will be implemented. END_STATUTE

Sec. 3. Title 12, chapter 8, article 14, Arizona Revised Statutes, is amended by adding section 12-1364, to read:

START_STATUTE12-1364. Dwelling action; attorney fees, expert witness fees and taxable costs; prohibited costs

A. In a contested dwelling action, the court shall award the successful party reasonable attorney fees, reasonable expert witness fees and taxable costs. If the judgment finally obtained is more favorable to the purchaser than any combination of consideration provided by or repairs or replacements performed by the seller pursuant to this article, if any, the purchaser is deemed to be the successful party from the date that the purchaser provided notice to the seller pursuant to section 12‑1363, subsection A. If the judgment finally obtained is less favorable to the purchaser than any combination of consideration provided by or repairs or replacements performed by the seller pursuant to this article, the seller is deemed to be the successful party from the date that the seller provided a response to the purchaser pursuant to section 12‑1363, subsection C. This subsection does not alter, prohibit or restrict present or future contracts or statutes that may provide for attorney fees, witness fees and costs.

B. The seller may not be reimbursed for an investigation or repair that the seller performed pursuant to this article.

Sec. 4. Section 12-1366, Arizona Revised Statutes, is amended to read:

START_STATUTE12-1366. Applicability; claims and actions

A. This article does not apply:

1. To personal injury claims.

2. To death claims.

3. To claims for damage to property other than a dwelling.

4. To common law fraud claims.

5. To proceedings brought pursuant to title 32, chapter 10.

6. To claims solely seeking recovery of monies expended for repairs to alleged defects that have been repaired by the purchaser.

7. To claims for alleged defects if the seller previously refused, in writing, to repair the alleged defect or already performed a repair on the alleged defect that failed.

8. If the contract for the sale of the dwelling or an association's community documents contain commercially reasonable alternative dispute resolution procedures.

B. A dwelling action brought by an association is also subject to title 33, chapter 18.

C. After the repair or replacement process has been completed as prescribed by section 12‑1363, this article does not affect either party's ability to enforce any commercially reasonable alternative dispute resolution procedures contained in the contract for the sale of the dwelling or an association's community documents. The seller's election to enforce any commercially reasonable alternative dispute resolution procedures contained in the contract for the sale of the dwelling or an association's community documents does not negate, abridge or otherwise reduce the seller's right to repair or replace any alleged construction defects pursuant to section 12‑1363. If the contract for the sale of a dwelling contains the procedures, the procedures shall conspicuously appear in the contract in bold and capital letters and a disclosure statement in at least twelve‑point font, bold and capital letters shall appear on the face of the contract and shall describe the location of the alternative dispute resolution procedures within the contract. END_STATUTE