AB 125 will correct out-of-control housing defect litigation
Las Vegas, NV – This week the Nevada legislature is taking up meaningful reform of a broken “Chapter 40” construction defect law that is costly for homeowners and builders alike, the Nevada Home Builders Association reports.
AB 125, strongly supported by the homebuilders and others, would restore the intent of Chapter 40 to protect homeowners by bringing homeowners and builders together to resolve construction defect issues quickly and without having to enter into expensive and time-consuming litigation. Problems under the present legal environment include:
- A small group of defect plaintiff lawyers have built a nearly $2 billion industry around defect litigation. The lawsuits can drag on for up to 10 years, and Nevada’s unique entitlement to legal fees in this area of law has led to verdicts in which defect lawyer fees far exceed defect costs – higher by more than 1500 percent in one recent example (Aventine-Tramonti v Vanguard).
- This frequency of defect litigation in Nevada is 38 times the national average and the worst in the nation according to a UNLV report.
- The costs of excessive defect litigation get passed on to homeowners, and they may be unable to sell their homes while they are tied up in lengthy lawsuits. Protracted litigation can also mean that defects identified may not be repaired for years.
- The number of new townhouses and condominiums (excluding high-rise) being built, which is the housing most affected by Chapter 40 lawsuits, was approximately 1500 percent higher a decade ago than in 2014 in the southern Nevada market, according to Home Builders Research.
- The lawsuits are mostly motivated by legal fees, not defect concerns. A recent survey by Luce Research of homeowners involved in construction defect lawsuits found that only two percent sought out an attorney themselves, while 77 percent were presented with a lawsuit arranged by others, and nearly 70 percent became aware of their involvement in the litigation after the fact.
- Since the advent of Chapter 40 litigation and the economic downturn, Nevada has lost more than 100 homebuilding businesses the association reports.
As Governor Sandoval referenced in his State of the State address this year, much of Nevada’s ongoing unemployment is because of construction jobs, which were cut in half in the last recession, and reform would help address the lingering unemployment.
“The impacts of Chapter 40 lawsuits are severe and merit the legislature’s quick action to pass meaningful reform legislation,” said Nevada Homebuilders Association co-chair Jesse Haw. “AB 125 presents a solution that will help not only homebuilders and homeowners, but also Nevada’s economy.”
Commentary by others supporting Chapter 40 reform follows:
“Reforming construction defect laws by revising Chapter 40 will create a level playing field that will be fair to homeowners and contractors alike. It will also likely spur growth in our construction industry, put hundreds of Nevadans back to work and help our economy.”
–Paul Moradkhan, Vice President of Government Affairs
Las Vegas Metro Chamber of Commerce
“Nevadans have so many reasons to be proud of what our state has to offer, and widespread and imbalanced construction defect litigation should not be a reason to hold us back. Chapter 40 abuses, which have severely hobbled the construction of new townhouses and condominiums, should not narrow housing choices for new families and new manufacturing employees coming to the area.”
–Tray Abney. Director of Government Relations
The Chamber of Reno, Sparks, and Northern Nevada
“The Nevada housing market is showing signs of growth and recovery, but one area that is still lagging is the construction of new townhome and low-rise condominiums. This product type is vital for the recovery of our local housing market, especially to accommodate first-time and entry-level home buyers. This type of attached housing has also been a frequent target of often-frivolous construction defect litigation. We believe Chapter 40 needs to be amended to balance this system and give homeowners the right to address and repair perceived construction defects and to whenever possible avoid costly litigation.”
–Kevin Sigstad, 2015 President
Nevada Association of REALTORS
“Hispanic entrepreneurs are part of the future of Nevada’s small business economy and the long-awaited job market recovery. It’s very frustrating to see the construction defect issue blocking construction job growth generally and stifling home construction startups that can mean significant economic opportunity for Hispanics and all Nevadans.”
–Javier Trujillo, former Chairman
Las Vegas Latin Chamber of Commerce
“The tens of thousands of subcontractors who take great pride in their work and what it means to Nevada homeowners fully support AB 125, which will help restore fairness and efficiency to construction defect dispute resolution in our state.”
–Scott Donnelly, President
Nevada Subcontractors Association
The Nevada Home Builders Association is greatly encouraged by the joint meeting of the Assembly and Senate judiciary committees as the critical first step of reviewing Chapter 40 issues and discussing Assembly Bill 125. The association urges quick passage to help bring Nevada law back in line with the rest of the nation.
The Nevada Home Builders Association is a non-profit organization dedicated to enhancing the quality of life by meeting the housing and community development needs of Nevada. Founded by members of both the Southern Nevada Home Builders Association and the Builders Association of Northern Nevada, the NVHBA provides information and support to our members and consumers across the state of Nevada. For more information, visit nvhba.org.