HB2477 - 542R

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

Section 1. Section 12-1363, Arizona Revised Statutes, is amended to read:

START_STATUTE12-1363. Notice and right 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. A seller who receives notice under this subsection shall promptly forward a copy of the notice to the last known address of each construction professional who the seller reasonably believes is responsible for an alleged construction defect that is specified in the notice. The seller's notice to each construction professional may be delivered by electronic means.

B. After receipt of the notice described in subsection A of this section, the seller and the seller's construction professional 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 not later than ten days after the purchaser receives the seller's and the seller's construction professional's request for an inspection. The seller and the seller's construction professional shall provide reasonable notice to the purchaser before conducting the inspection. The inspection shall be conducted at a reasonable time. The seller and the seller's construction professional 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 or the seller's construction professional conduct conducts testing pursuant to this subsection, the seller or the seller's construction professional 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 and the seller's construction professional's notice of intent to repair or replace any alleged construction defects, to have the alleged construction defects repaired or replaced at the seller's or seller's construction professional's expense or to provide monetary compensation to the purchaser. The written notice of intent to repair or replace shall describe in reasonable detail all repairs or replacements that the seller and the seller's construction professional intend 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. The purchaser may accept or reject an offer of monetary compensation or other consideration, other than repair or replacement and, if rejected, may proceed with a dwelling action on completion of any repairs or replacements the seller and the seller's construction professional intend 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 to repair or replace the alleged construction defects, the purchaser shall allow the seller and the seller's construction professional 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 professional shall coordinate repairs or replacements within thirty days after the seller's notice of intent 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. A contractor or subcontractor that was not involved in the construction or design of the dwelling and that performs any repair or replacement of the alleged construction defect pursuant to this section is liable only to the seller or purchaser who contracted for the contractor's or subcontractor's services for the contractor's or subcontractor's scope of work, and that contractor or subcontractor may be named in an amended notice pursuant to subsection I of this section or in the corresponding dwelling action.

2. Repairs or replacements shall begin as agreed by the purchaser and the seller or the seller's construction professional, 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. 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 or thirty‑five days after the seller's notice of intent to repair or replace 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 professional.

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 substantial completion of the repair or replacement, the statute of limitations and statute of repose, including section 12‑552, applicable to the purchaser, including any construction professional involved in the construction or design, are tolled as to the seller and the seller's construction professional 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. The statute of limitations and statute of repose, including section 12‑552, that apply to the seller's claim for indemnity or contribution against any construction professional is tolled from the date the seller receives the notice required by this section until nine months after the purchaser's service of the civil complaint or arbitration demand on the seller.

H. All 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 or the seller's construction professional are not considered settlement communications or offers of settlement and are admissible in evidence.

I. 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 and the seller's construction professional 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.

J. 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 and the seller's construction professional 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 or the seller's construction professional, sufficient time to repair or replace the additional alleged construction defects. 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.

K. 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.

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

M. 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. This subsection does not create a fiduciary duty or provide any person or entity with a private right or cause of action or administrative action.

N. A purchaser who files a contested dwelling action under this article must file an affidavit with the purchaser's complaint, under penalty of perjury, that the purchaser has read the entire complaint, agrees with all of the allegations and facts contained in the complaint and, unless authorized by statute or rule, is not receiving and has not been promised anything of value in exchange for filing the dwelling action.

O. 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.

P. 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 professional involved in the construction or design of the dwelling stayed pending compliance with this section.

Q. For the purposes of this section, "reasonable detail" includes all of the following:

1. An itemized list that describes each alleged construction defect with sufficient detail to allow the seller or seller's construction professional to identify the alleged construction defect.

2. The location that each alleged construction defect has been observed by the purchaser in each dwelling that is the subject of the notice.

3. 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.

4. The street address for each dwelling that is the subject of the notice. END_STATUTE

Sec. 2. Section 12-1364, Arizona Revised Statutes, is amended to read:

START_STATUTE12-1364. Dwelling actions; attorney fees and taxable costs; expert witness fees; definition

A. In a contested dwelling action, the court or tribunal may award the prevailing party with respect to a contested issue reasonable attorney fees and taxable costs. A purchaser is deemed the prevailing party with respect to a contested issue if the relief obtained by the purchaser for that contested issue, exclusive of any fees and taxable costs, is more favorable than the repairs or replacements and offers made by the seller before the purchaser filed a dwelling action pursuant to section 12‑1363. The seller is deemed the prevailing party with respect to a contested issue if the relief obtained by the purchaser for that contested issue, exclusive of any fees and taxable costs, is not more favorable than the repairs or replacements and offers made by the seller before the purchaser filed a dwelling action pursuant to section 12‑1363.

B. An award of attorney fees pursuant to this section is limited to the amount of fees actually and reasonably incurred with respect to the contested issue for which the party has been deemed the prevailing party. In determining whether the fees actually incurred with respect to a contested issue are reasonable, the court or tribunal shall may consider all of the following:

1. The repairs, replacements or offers made by the seller, if any, before the purchaser filed the dwelling action pursuant to section 12‑1363.

2. The purchaser's response to the seller's repairs, replacements or offers made or proposed, if any, before the purchaser filed the dwelling action pursuant to section 12‑1363.

3. The relation between the fees incurred over the duration of the dwelling action and the value of the relief obtained with respect to the contested issue.

4. 3. The amount of fees incurred in responding to any unsuccessful motions, claims and defenses during the duration of the dwelling action.

C. This section does not alter, prohibit or restrict present or future contracts that may provide for attorney fees or expert witness fees.

D. Notwithstanding any other law, in a contested dwelling action that involves a single purchaser, the court or tribunal may award the prevailing party with respect to the contested issue reasonable expert witness fees. The determination of the prevailing party and the reasonableness of the expert witness fees shall be made using the same criteria used in determining the award of attorney fees pursuant to subsections A and B of this section. This subsection does not apply to a dwelling action that involves more than one purchaser or an action that is consolidated with any other dwelling action. The expert witness fees prescribed in this subsection are in addition to the taxable costs authorized by section 12‑332.

E. For the purposes of this section, :

1. "Contested issue" means an issue that relates to an alleged construction defect and that is contested by a purchaser following the conclusion of the repair and replacement procedures prescribed in section 12‑1363.

2. "purchaser" means any person or entity, including the current owner of the dwelling, who that files a dwelling action during the time period described in section 12‑552. END_STATUTE

Sec. 3. 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. 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 alternative dispute resolution procedures, the procedures shall conspicuously appear in the contract in bold and capital letters and a disclosure statement in at least twelve‑point font, and in 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