Construction Defect Law - Nevada

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Q. What is a Construction Defect?

Nevada Revised Statutes 40.615 defines a Construction Defect as a design, construction, manufacture, repair or landscaping of a residence:

  1. Which is done in violation of local codes or ordinances;
  2. Which proximately causes physical damage to the residence or an appurtenance;
  3. Which is not completed in a good and workmanlike manner in accordance with the generally accepted standard of care in the industry; or
  4. Which presents an unreasonable risk of injury to a person or property.

Common examples of defective construction may include: Significant cracks in the slab and/or foundation; unevenness in floor slabs caused by abnormal soils movement; leaky roofs and/or windows; moisture problems due to improper drainage and/or waterproofing; faulty or corroded plumbing; faulty framing; homes that do not adequately heat or cool; over stressed structural members, bowing or slanting of floors and walls; doors and windows that bind and are difficult to open and close and cabinets or counter tops that are separated from walls or ceilings. (This is not an all-inclusive list.)

Q. How do I know if I have a claim?

A. Of course, some conditions may be obvious, such as large cracks in the foundation, floor slab, or walls. However, as a general rule, most defective conditions become apparent approximately 3 to 5 years after the completion of construction.

In our experience, if you own a tract home or condominium, the problems or concerns you have are not unique to your property. Talk to your neighbors. Chances are they will have similar conditions. In all circumstances, we suggest that you contact your builder/developer for an explanation concerning the potential problem as well as assistance in fixing it. Be careful to make sure that the problem is fully identified and that the proposed fix is not a temporary "band-aid." For the most objective opinions, we strongly suggest that you have a qualified construction expert inspect your property as soon as you suspect that a problem exists.

Q. What are my rights under Nevada law for faulty construction?

A. Nevada law favors the property owner. In the case of mass produced tract homes or condominiums, the builder/developer is responsible for all defective conditions that may exist within your property or community. Nevada's Construction Defect Statute NRS 40.640 et. seq, is attached for you review.

Q. Who is responsible for defective conditions?

A. The builder/developer is responsible for all defective conditions even if the actual work was performed by a subcontractor or if the defective materials used in construction are manufactured by someone else. Of course, the involved design professionals and subcontractors remain responsible for their work. However, in light of the builder/developer's responsibility for the work of others, it is easier for the property owner to go directly to the builder/developer for recourse. Many of our clients relate horror stories in which the builder/developer disavowed his/her own responsibility and advised the property owner to "chase" the subcontractors. We advise our clients that in many cases, this is unnecessary and fails to result in a satisfactory resolution.

Q. What remedies are available to me?

A. Damages may include the cost of repairs, diminution in value of property, the costs of expert investigation, additional living expenses incurred while the necessary repairs are made, attorney's fees, and loss of use and enjoyment. NRS 40.655 is attached for your review:

NRS 40.655 Limitation on recovery.

 Except as otherwise provided in NRS 40.650, in a claim governed by NRS 40.600 to 40.695, inclusive, the claimant may recover only the following damages to the extent proximately caused by a constructional defect:

  1.  Except as otherwise provided in NRS 40.650, in a claim governed by NRS 40.600 to 40.695, inclusive, the claimant may recover only the following damages to the extent proximately caused by a constructional defect:
    1. (a) Any reasonable attorney's fees;
    2. (b) The reasonable cost of any repairs already made that were necessary and of any repairs yet to be made that are necessary to cure any constructional defect that the contractor failed to cure and the reasonable expenses of temporary housing reasonably necessary during the repair;
    3. (c) The reduction in market value of the residence or accessory structure, if any, to the extent the reduction is because of structural failure;
    4. (d) The loss of the use of all or any part of the residence;
    5. (e) The reasonable value of any other property damaged by the constructional defect;
    6. (f) Any additional costs reasonably incurred by the claimant, including, but not limited to, any costs and fees incurred for the retention of experts to:
      1. (g) Any interest provided by statute.
  2. The amount of any attorney's fees awarded pursuant to this section must be approved by the court.
  3. If a contractor complies with the provisions of NRS 40.600 to 40.695, inclusive, the claimant may not recover from the contractor, as a result of the constructional defect, anything other than that which is provided pursuant to NRS 40.600 to 40.695, inclusive.
  4. This section must not be construed as impairing any contractual rights between a contractor and a subcontractor, supplier or design professional.
  5. As used in this section, "structural failure" means physical damage to the load-bearing portion of a residence or appurtenance caused by a failure of the load-bearing portion of the residence or appurtenance.

Q. Who may assert claims for construction defects?

A. Any individual or entity whose interest in the real property has been harmed may assert a claim for construction defects. One need not be the original owner. A subsequent purchaser has the same rights to pursue claims as the original owner. However, a subsequent purchaser's claims may be limited to the extent possession of the property was acquired with knowledge of the defects. Similarly, a homeowners association in a common interest development such as a condominium project may assert claims for damages to the common areas, as well as for damage to an individual owner's separate interests which arises out of, or are integrally related to, damage to the common areas or separate interests that the association is obligated to maintain or repair.

Q. Can I still recover money damages if my builder/ developer or other responsible party filed for bankruptcy protection?

A. Most likely yes! The mere fact that the builder/ developer filed for bankruptcy protection does not afford protection to any liability insurance policies for the builder/developer, subcontractor or whoever it is that filed bankruptcy. Typically, upon a motion made before the bankruptcy court, or by agreement with the attorney appointed by the insurance company to defend the developer, the bankruptcy court will allow the lawsuit to proceed, with the recovery limited to the proceeds of insurance policies. In all instances where bankruptcy has occurred, there must be a careful evaluation of the potential for insurance coverage, and the nature of the bankruptcy proceeding.

Q. What is the process involved in a construction defect claim?

A. The process begins with an identifiable defective condition within the home. This could be a leaking roof or a faulty heating and air conditioning system. Once this condition is identified we have it inspected by a qualified expert and issue a Chapter 40 Notice placing that places builder on notice of the condition and tolls the statue of limitations. See example of a Chapter 40 Notice.

At that point, the developer and subcontractors have an opportunity to make repairs; however, if the developer or subcontractors elect not to make the repairs or settle through mediation, the case will then proceed to litigation.

Q. How much time do I have to make a claim?

A. In Nevada, the time limits for your construction defect claim are as follows:

  1. 1.Parent Defects - Patent defects are those that are obvious and readily discoverable. You have six years from substantial completion to file a claim for patent defects. (NRS 11.205)
  2. 1.Latent Defects – Latent defects are those that are hidden or not readily apparent. You have eight years from substantial completion to file a claim for latent defects. (NRS 11.204 )
  3. 1.Known Defects – Known defects are defects that the Builder knew or in the exercise of reasonable diligence, should have known about at the time of construction (which runs from the date of substantial completion of the home). You have ten years from substantial completion to file a claim for known defects. (NRS 11.203)

Q. Can I sell or re-finance my home during construction defect litigation?

A. Although some lending institutions have policies against financing properties involved in construction defect litigation, numerous other lenders regularly provide these types of financing. In addition, there are certain companies that provide private loans to those who are involved in litigation.

Q. Do I have to disclose my defects to a potential buyer?

A. Yes. Regardless of whether you are involved in a construction defect claim, owners have a common law duty to disclose any construction defects that they are aware of, or should be aware of.

In addition, NRS 40.688  requires that owners disclose, in writing, to any prospective purchaser:

  1. All construction defect notices given by the owner to the builder.
  2. All expert opinions that the owner received.
  3. The terms of any settlement, order, or judgment related to the claim; and
  4. A detailed report of all the repairs that were made, as a result of the claim.

Q. Will a construction defect lawsuit reduce the value of my home?

A. Unfortunately, the value of your home may have already been reduced by the discovered defects. Under Nevada law, you must disclose all known defects to potential buyers. By filing a construction defect suit you are actually serving to protect the value of your home by recovering funds to make the necessary repairs.

Q. Why are experts necessary and what do they do?

A. We use a team of experts to help prove your construction defect claim. Experts help determine the nature and extent of your construction defect problems, design methods of repair, and estimate the cost of those repairs. Some of the experts we use are:

  1. Architects
  2. Civil Engineers
  3. Soil Engineers
  4. Mechanical Engineers
  5. Sound Engineers
  6. Appraisers
  7. Economists
  8. Stucco Experts

Q. Should I contact the builder before a lawsuit?

A. Yes. A reputable builder will usually offer to make the necessary repairs to your home. If that is the case, it's still a good idea to retain your own expert to oversee the repairs, and to ask the developer for additional warranties relative to the repair work.

Q. What if I am part of a Home Owner's Association?

A. If you are part of a Home Owner's Association, then the Association should be the party to seek recourse for defects in common areas, areas the Association is required to maintain, or separate area damage that is related to common area issues. Your Association's governing documents will specify the extent of the Associations responsibility.

Q. Can the building inspector be held responsible for my construction defects?

A. In just about every case, we are asked by our clients:

"Why did the building inspector ever approve our property when it is defective?" And, "Why can't we sue that inspector?"

The answer is: We would like to, but public employees are generally immune from suit for acts within their discretion. Further, building officials who act in good faith and without malice (ill will or evil intent) in the discharge of their duties are statutorily immune from liability.

Q. Do I need to hire a lawyer that is experienced in construction defect litigation to represent me?

A. Today, most attorneys work in a specific area to provide greater service and expertise to their clients. In the area of construction defect law, your lawyer must be knowledgeable in all the following:

  • Insurance Contracts and Coverage
  • Soils Engineering
  • Mechanical Engineering
  • Structural Engineering
  • Cost Estimating
  • Real Estate Appraising
  • Statistical Analysis and Random Sampling Methodologies
  • Complex Litigation Techniques

Effective counsel typically has a track record of successful settlements and court verdicts from which you can gauge his/her ability to fully and adequately represent you. As a potential client, do not be afraid to ask about a lawyer's experience.

Q. What if it becomes necessary to file a lawsuit?

When all else fails, and you receive no satisfaction from the builder/developer of your property, the next step is to file a lawsuit. To make the litigation process easier and more efficient, you should fully and timely cooperate with your attorney and provide specific information regarding your property and the damage it has suffered. The lawsuit will go much more smoothly if this information is provided to your lawyer prior to filing the suit.

It will be necessary for your lawyer to know:

  • The full name, address, driver's license number, occupation, employer and length of time with that employer, employment for the past five years, and educational background for each person who is named on the grant deed to the property.
  • The address of the property.
  • The date you purchased the property.
  • From whom you purchased the property.
  • The amount you paid for the property.
  • The name and address of the builder/developer of the property.
  • A concise list of the defective conditions at the property. List every problem you have had with the property, where the problem is located in the property, and when the problem was first discovered. (For example: Door to master bedroom no longer fits properly. It sticks in the door frame and the latch is no longer aligned. First noticed the problem around January of 2010).
  • Any contact you have had with the builder. (For example: Phone call to builder, February 2, 2010, to tell them that the master bedroom door no longer fits properly.) List any complaints you made to the builder, and any response you have gotten from the builder. v
  • Any and all improvements you have made to the property, the cost of those improvements, the name and address of the contractor that did the improvement work, the dates the work was done, and the cost of the work.
  • Any and all repair work done at your property by the builder, and the date the work was done.
  • If you have had any construction experts look at the property, provide the name and address of the expert or experts, as well as the findings.
  • A concise, complete list of the damage caused by each leak. (For example: Leak in the ceiling above the guest bathroom. Leak damaged the drywall on the ceiling and walls, damaged the insulation; and the water damaged a bunch of cosmetics on the countertop).
  • The cost of repairs (if repairs have not been completed, provide an estimate of the cost) and give the name and address of the person or company that performed (is performing) the repairs.
  • Who paid for repairs, whether it was you or your insurance company

If any representations regarding the condition of your property were made to you by the builder or the builder's representatives. Give the name of the representative and relate what representations were made. (For example: Bill Smith with Build'em Right told us that it is normal for the patio slab to move up and away from the house. He told us that in March of 2011).

You will also be required to provide numerous documents, such as:

  • The grant deed to the property
  • Escrow documents
  • Advertising brochures from the builder/developer
  • Repair invoices
  • Correspondence to the builder or any subcontractor
  • Insurance policies
  • Photographs or videotapes of the property or any damage to the property which you know about
  • Reports by any construction experts retained prior to the commencement of the lawsuit
  • Appraisals
  • Refinancing documentation
  • Correspondence to any governmental agency
  • Any plans and/or contracts for installing improvements to the property
  • Any permit documents
  • Walk-through inspection reports
  • Any and all other documents that relate to your property

Providing your attorney with the appropriate information and dates will make the handling of your lawsuit easier and more efficient. At some point in the lawsuit, you will be required to verify this information (and possibly more) under oath.

Conclusion

As we advise each of our clients, never make a "mountain out of a molehill." Each defect that you allege to exist within your property must be later disclosed to a would-be buyer. However, there is no question that a property owner is entitled to the quality product the builder/developer represented. Nevada law provides you, the owner, the legal right and procedures to recover the value of your home and investment when significant construction defects exist. This Construction Defect FAQ is for general informational purposes only; does not provide specific legal advice; and is not meant to be relied upon as applying to a particular set of facts or circumstances. An attorney-client relationship is not intended nor created by receipt of this Guide. Although every effort has been made to ensure the accuracy of the information contained in this Guide, no warranty is made, either express or implied, and neither the publisher nor the authors assume any liability in connection with or resulting from its use.

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