PRINTER'S NO. 718
No. 558 Session of 2007
INTRODUCED BY DALLY, BEYER, BOYD, BUXTON, EVERETT, GEIST,
GIBBONS, GRUCELA, HARHART, HENNESSEY, HERSHEY, KILLION, KULA,
MILLARD, R. MILLER, MUSTIO, PHILLIPS, PICKETT, SCAVELLO,
SIPTROTH, R. STEVENSON AND WALKO, MARCH 7, 2007
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, MARCH 7, 2007
AN ACT
1 Providing for civil actions or arbitration proceedings for
2 damages or indemnity for injury or loss to a dwelling or
3 personal property arising out of or related to the design,
4 construction, condition, sale or remodeling of a dwelling,
5 for notice and opportunity to repair, for insurance
6 requirements, for contract of sale, for contractor
7 notification requirements and for actions of associations.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Short title.
11 This act shall be known and may be cited as the Construction
12 Disputes Act.
13 Section 2. Declaration of policy.
14 The General Assembly finds and declares that:
15 (1) This Commonwealth needs an alternative method to
16 resolve legitimate construction disputes that would reduce
17 the need for litigation while adequately protecting the
18 rights of homeowners.
19 (2) An effective alternative dispute resolution
1 mechanism in certain construction defect matters should
2 involve the claimant filing a notice of claim with the
3 construction professional that the claimant asserts is
4 responsible for the defect, and providing the construction
5 professional with the opportunity to resolve the claim
6 without litigation.
7 Section 3. Definitions.
8 The following words and phrases when used in this act shall
9 have the meanings given to them in this section unless the
10 context clearly indicates otherwise:
11 "Action." A civil lawsuit or action or arbitration
12 proceeding for damages or indemnity for injury or loss to a
13 dwelling or personal property caused by an alleged defect
14 arising out of or related to the design, construction,
15 condition, sale or remodeling of a dwelling.
16 "Association."
17 (1) When used in any statute finally enacted before
18 December 7, 1994, any form of unincorporated enterprise owned
19 by two or more persons other than a partnership or limited
20 partnership.
21 (2) When used in any statute finally enacted on or after
22 December 7, 1994, an association as defined in 15 Pa.C.S. §
23 102 (relating to definitions).
24 "Claimant." A homeowner, including a subsequent purchaser,
25 or association that asserts a claim against a construction
26 professional concerning a defect in the design, construction,
27 condition, sale or remodeling of a dwelling.
28 "Construction defect." A deficiency in or a deficiency
29 arising out of the design, specifications, surveying, planning,
30 supervision, construction or observation of construction of
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1 residential improvements that results from any of the following:
2 (1) Defective material, products or components used in
3 the construction of residential improvements.
4 (2) Violation of the applicable codes in effect at the
5 time of construction of residential improvements.
6 (3) Failure of the design of residential improvements to
7 meet applicable professional standards of care at the time of
8 the governmental approval of the design of residential
9 improvements.
10 (4) Failure to construct residential improvements in
11 accordance with accepted trade standards for good and
12 workmanlike construction at the time of construction.
13 Compliance with the applicable codes in effect at the time of
14 construction shall conclusively establish construction in
15 accordance with accepted trade standards for good and
16 workmanlike construction with respect to all matters
17 specified in those codes.
18 "Contractor." A person, firm, partnership, corporation,
19 association or other organization that is engaged in the
20 business of designing, developing, constructing or selling
21 dwellings.
22 "Design professional." A person licensed in the State as an
23 architect, interior designer, landscape architect, engineer or
24 surveyor.
25 "Dwelling." A single-family house, duplex or multifamily
26 unit designed for residential use in which title to each
27 individual unit is transferred to the owner under a condominium
28 or cooperative system, including common areas and improvements
29 that are owned or maintained by an association or by members of
30 an association. A dwelling includes the systems, other
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1 components and improvements that are part of a single or
2 multifamily unit at the time of construction.
3 "Service." Personal service or delivery by certified mail,
4 return receipt requested, to the last known address of the
5 addressee.
6 "Subcontractor." A contractor who performs work on behalf of
7 another contractor in the construction of a dwelling.
8 "Supplier." The provider of materials, equipment or other
9 supplies for the construction of a dwelling.
10 Section 4. Dismissal of dwelling action without prejudice.
11 If a claimant files an action relating to a dwelling without
12 first complying with the provisions of this act, on application
13 by a party to the action, the court shall dismiss the action
14 without prejudice, and the action may not be refiled unless the
15 claimant complies with the requirements of this act.
16 Section 5. Act not applicable to personal injury or death
17 claims.
18 This act shall not apply to actions arising out of claims for
19 personal injury or death.
20 Section 6. Notice and opportunity to repair.
21 (a) Notice.--In every action brought against a contractor
22 arising out of the construction of a dwelling, the claimant
23 shall, no later than 90 days before filing an action, serve
24 written notice of claim on the contractor. The notice of claim
25 shall state that the claimant asserts a construction defect
26 claim and shall describe the claim in reasonable detail
27 sufficient to determine the general nature of any alleged
28 construction defects and include a description of the results of
29 the defects, if known.
30 (b) Notice to subcontractors.--Within 15 days after the
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1 initial service of the notice of claim under subsection (a), the
2 contractor shall forward a copy of the notice to each
3 subcontractor, supplier and design professional who the
4 contractor reasonably believes is responsible for a defect
5 specified in the notice and include with the notice the specific
6 defect for which the contractor believes the subcontractor,
7 supplier or design professional is responsible.
8 (c) Evidence.--Upon the request of the contractor,
9 subcontractor, supplier or design professional who has received
10 a notice under subsection (a) or (b), the claimant shall provide
11 to the contractor, subcontractor, supplier or design
12 professional any evidence that depicts the nature and cause of
13 the construction defect and the nature and extent of repairs
14 necessary to remedy the claim, including expert reports,
15 photographs and video tapes if that evidence would be
16 discoverable under the applicable rules of evidence.
17 (d) Response.--Within 30 days after service of the notice of
18 the claim under subsection (a) or (b), each contractor,
19 subcontractor, supplier or design professional that has received
20 a notice of the claim shall serve a written response on the
21 claimant by registered mail or personal service. The written
22 response shall do one of the following:
23 (1) Offer to compromise and settle the claim by monetary
24 payment without inspection.
25 (2) Propose to inspect the dwelling that is the subject
26 of the claim.
27 (3) State that the contractor, subcontractor, supplier
28 or design professional disputes the claim and will neither
29 remedy the alleged construction defect nor compromise and
30 settle the claim.
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1 (e) Dispute of claim or failure to remedy, compromise or
2 respond.--If the contractor, subcontractor, supplier or design
3 professional disputes the claim and will neither remedy the
4 alleged construction defect nor compromise and settle the claim
5 or does not respond to the claimant's notice of claim within the
6 time stated in subsection (d), the claimant may bring an action
7 against the contractor, subcontractor, supplier or design
8 professional for the claim described in the notice of claim
9 without further notice.
10 (f) Notice of claimant's rejection.--If the claimant rejects
11 the settlement offer made by the contractor, subcontractor,
12 supplier or design professional under subsection (d), the
13 claimant shall serve written notice of the claimant's rejection
14 on the contractor, subcontractor, supplier or design
15 professional. The notice shall include the basis for the
16 claimant's rejection of the contractor, subcontractor, supplier
17 or design professional's proposal or offer.
18 (g) Action by claimant.--After service of the rejection
19 required under subsection (f), the claimant may bring an action
20 against the contractor, subcontractor, supplier or design
21 professional for the claim described in the initial notice of
22 claim without further notice.
23 (h) Access for inspection.--If the claimant elects to allow
24 the contractor, subcontractor, supplier or design professional
25 to inspect the dwelling in accordance with the contractor,
26 subcontractor, supplier or design professional's proposal under
27 subsection (d)(2), the claimant shall provide the contractor,
28 subcontractor, supplier or design professional and its
29 contractors or other agents reasonable access to the claimant's
30 residence during normal working hours to inspect the premises
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1 and the claimed defect to determine the nature and cause of the
2 alleged defects and the nature and extent of any repairs or
3 replacements necessary to remedy the alleged defects.
4 (i) Service on claimant.--Within 14 days following
5 completion of the inspection, the contractor, subcontractor,
6 supplier or design professional shall serve on the claimant:
7 (1) a written offer to remedy the construction defect at
8 no cost to the claimant, including a report of the scope of
9 the inspection, the findings and results of the inspection, a
10 description of the additional construction necessary to
11 remedy the defect described in the claim and a timetable for
12 the completion of the remedy;
13 (2) a written offer to compromise and settle the claim
14 by monetary payment; or
15 (3) a written statement that the contractor,
16 subcontractor, supplier or design professional will not
17 remedy the alleged defects.
18 (j) Failure to pay or remedy as promised.--If a claimant
19 accepts a contractor, subcontractor, supplier or design
20 professional's offer made under subsection (i)(1) or (2) and the
21 contractor, subcontractor, supplier or design professional does
22 not proceed to make the monetary payment or remedy the
23 construction defect within the agreed timetable, the claimant
24 may bring an action against the contractor, subcontractor,
25 supplier or design professional for the claim described in the
26 initial notice of claim without further notice.
27 (k) Written statement that remedy will not be forthcoming.--
28 If a claimant receives a written statement that the contractor,
29 subcontractor, supplier or design professional will not proceed
30 further to remedy the defect, the claimant may bring an action
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1 against the contractor, subcontractor, supplier or design
2 professional for the claim described in the initial notice of
3 claim without further notice.
4 (l) Rejection of proposed remedy by claimant.--
5 (1) If the claimant rejects the offer made by the
6 contractor, subcontractor, supplier or design professional to
7 either remedy the construction defect or to compromise and
8 settle the claim by monetary payment, the claimant shall
9 serve written notice of the claimant's rejection on the
10 contractor, subcontractor, supplier or design professional.
11 The notice shall include the basis for the claimant's
12 rejection of the contractor, subcontractor, supplier or
13 design professional's offer.
14 (2) After service of the rejection, the claimant may
15 bring an action against the contractor, subcontractor,
16 supplier or design professional for the claim described in
17 the notice of claim without further notice.
18 (m) Rejected offer.--If a claimant unreasonably rejects an
19 offer made as provided by this section or does not permit the
20 contractor, subcontractor, supplier or design professional a
21 reasonable opportunity to repair the defect pursuant to an
22 accepted offer of settlement, the claimant may not recover an
23 amount in excess of one of the following:
24 (1) The reasonable cost of the offered repairs which are
25 necessary to cure the construction defect and which are the
26 responsibility of the contractor, subcontractor, supplier or
27 design professional.
28 (2) The amount of the monetary settlement offered by the
29 contractor, subcontractor, supplier or design professional.
30 (n) Acceptance of remedy.--Any claimant accepting the offer
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1 of the contractor, subcontractor, supplier or design
2 professional to remedy the construction defects shall do so by
3 serving the contractor, subcontractor, supplier or design
4 professional with a written notice of acceptance within a
5 reasonable period of time after receipt of the offer but no
6 later than 30 days after receipt of the offer.
7 (o) Acceptance of offer to repair.--If a claimant accepts a
8 contractor, subcontractor, supplier or design professional's
9 offer to repair a defect described in an initial notice of
10 claim, the claimant shall provide the contractor, subcontractor,
11 supplier or design professional and its contractors or other
12 agents reasonable access to the claimant's residence during
13 normal working hours to perform and complete the construction by
14 the timetable stated in the offer.
15 (p) Presumption that damages could have been mitigated.--A
16 claimant's failure to do any of the following is admissible in
17 any dwelling action and creates a rebuttable presumption that
18 the claimant's damages could have been mitigated:
19 (1) Allow a reasonable inspection requested by the
20 contractor, subcontractor, supplier or design professional.
21 (2) Provide a good faith, written response to a
22 contractor, subcontractor, supplier or design professional's
23 offer.
24 (q) Failure to respond to claimant's notice.--Absent good
25 cause, the contractor, subcontractor, supplier or design
26 professional's failure to respond in good faith to the
27 claimant's notice under subsection (a) shall preclude the
28 contractor, subcontractor, supplier or design professional from
29 asserting that the claimant did not comply with the provisions
30 of this act.
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1 (r) Toll of statute of limitations.--A claimant's written
2 notice under subsection (a) tolls the applicable statute of
3 limitations until 90 days after the contractor, subcontractor,
4 supplier or design professional receives the notice.
5 Section 7. Additional construction defects.
6 A construction defect which is discovered after a claimant
7 has provided a contractor with the claim notice required under
8 section 6 may not be alleged until the claimant has given the
9 contractor, subcontractor, supplier or design professional that
10 performed the original construction one of the following:
11 (1) Written notice of the alleged defect required under
12 section 6.
13 (2) A reasonable opportunity to repair the alleged
14 construction defect in the manner provided under section 6.
15 Section 8. Insurance requirements.
16 (a) General rule.--A contractor, subcontractor, supplier or
17 design professional that receives notice of a constructional
18 defect under section 6 may present the notice to an insurer that
19 issued a policy of insurance covering all or part of the conduct
20 or business of the contractor, subcontractor, supplier or design
21 professional.
22 (b) Notice.--Notice provided to an insurer under subsection
23 (a):
24 (1) Constitutes the making of a claim under the policy.
25 (2) Requires the contractor, subcontractor, supplier or
26 design professional and the insurer to perform any
27 obligations or duties required by the policy.
28 Section 9. Contract of sale.
29 (a) Notice of right to offer to cure defects.--Upon entering
30 into a contract for sale, construction or substantial remodeling
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1 of a dwelling, the contractor, subcontractor, supplier or design
2 professional shall provide notice to the owner of the dwelling
3 of the contractor, subcontractor, supplier or design
4 professional's right to offer to cure construction defects
5 before a claimant may commence litigation against the
6 contractor, subcontractor, supplier or design professional.
7 Notice shall be conspicuous and may be included as part of the
8 underlying contract.
9 (b) Notice.--The notice required by subsection (a) shall be
10 in substantially the following form:
11 STATE LAW CONTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW
12 BEFORE YOU MAY FILE A LAWSUIT FOR DEFECTIVE CONSTRUCTION
13 AGAINST THE CONTRACTOR WHO CONSTRUCTED YOUR HOME. NINETY DAYS
14 BEFORE YOU FILE YOUR LAWSUIT, YOU MUST DELIVER TO THE
15 CONTRACTOR A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS
16 YOU ALLEGE ARE DEFECTIVE AND PROVIDE YOUR CONTRACTOR AND ANY
17 SUBCONTRACTORS, SUPPLIERS OR DESIGN PROFESSIONALS THE
18 OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE
19 DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY
20 THE CONTRACTOR OR ANY SUBCONTRACTORS, SUPPLIERS OR DESIGN
21 PROFESSIONALS. THERE ARE STRICT DEADLINES AND PROCEDURES
22 UNDER STATE LAW, AND FAILURE TO FOLLOW THEM MAY AFFECT YOUR
23 ABILITY TO FILE A LAWSUIT.
24 Section 10. Contractor notification requirements.
25 A contractor who constructs a new residential dwelling shall
26 within 30 days after the close of sale provide in writing to the
27 initial purchaser of the residence:
28 (1) The name, license number, business address and
29 telephone number of each subcontractor or design professional
30 who performed any work related to the design or construction
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1 of the dwelling.
2 (2) A brief description of the work performed by each
3 subcontractor.
4 Section 11. Actions of associations.
5 (a) Encouragement or discouragement of damage claim.--
6 (1) A person shall not provide or offer to provide
7 anything of value to the property manager of an association
8 or to a member or officer of an executive board to induce the
9 property manager, member or officer to encourage or
10 discourage the association to file a claim for damages
11 arising from a construction defect.
12 (2) A property manager shall not accept anything of
13 value in exchange for encouraging or discouraging the
14 property manager's association to file a claim for damages
15 arising from a construction defect.
16 (3) A member or officer of an executive board shall not
17 accept anything of value in exchange for encouraging or
18 discouraging the member's or officer's association to file a
19 claim for damages arising from a constructional defect.
20 (4) A person who willfully violates subsection (a)
21 commits a misdemeanor of the third degree.
22 (b) Recovery by association of damages.--An association may
23 bring an action to recover damages resulting from construction
24 defects in any of the units, common elements or limited common
25 elements of the common-interest community only:
26 (1) If the association first obtains the written
27 approval of the owner of each unit or interest in the common
28 elements or limited common elements that will be the subject
29 of the action or claim.
30 (2) Upon a vote of the units' owners to which at least a
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1 majority of the votes of the members of the association are
2 allocated.
3 (3) Upon a vote of the executive board of the
4 association.
5 (c) Statement by attorney.--If an action is brought by an
6 association to recover damages resulting from construction
7 defects in any of the units, common elements or limited common
8 elements of the common-interest community, the attorney
9 representing the association shall provide to the executive
10 board of the association and to each unit's owner a statement
11 that includes in reasonable detail:
12 (1) The defects and damages or injuries to the units,
13 common elements or limited common elements.
14 (2) The cause of the defects, if known.
15 (3) The nature and the extent that is known of the
16 damage or injury resulting from the defects.
17 (4) The location of each defect within the units, common
18 elements or limited common elements, if known.
19 (5) A reasonable estimate of the cost of the action or
20 mediation, including reasonable attorney fees.
21 (6) An explanation of the potential benefits of the
22 action or mediation and the potential adverse consequences if
23 the association does not commence the action or submit the
24 claim to mediation, or if the outcome is not favorable to the
25 association.
26 (7) All disclosures that the unit owners are required to
27 make upon the sale of the property.
28 (d) Destructive tests.--An association or an attorney for an
29 association shall not employ a person to perform destructive
30 tests to determine any damage or injury to a unit, common
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1 element or limited common element caused by a constructional
2 defect unless:
3 (1) The person is licensed as a contractor under State
4 law.
5 (2) The association has obtained the prior written
6 approval of each unit's owner whose unit or interest in the
7 common element or limited common element will be affected by
8 the testing.
9 (3) The person performing the tests has provided a
10 written schedule for repairs.
11 (4) The person performing the tests is required to
12 repair all damage resulting from the tests in accordance with
13 State law and local ordinances.
14 (5) The association or the person so employed obtains
15 all permits required to conduct the tests and to repair any
16 damage resulting from the tests.
17 (e) Commencement of action.--An association may commence an
18 action only upon a vote or written agreement of the owners of
19 the units to which at least a majority of the votes of the
20 members of the association are allocated. The association shall
21 provide written notice to the owner of each unit of the meeting
22 at which the commencement of an action is to be considered or
23 action is to be taken within 21 calendar days before the
24 meeting.
25 (f) Option of executive board.--The executive board of an
26 association may, without giving notice to the units' owners,
27 employ a contractor and such other persons as are necessary to
28 make repairs to a unit or common element within the common-
29 interest community required to protect the health, safety and
30 welfare of the units' owners.
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1 Section 12. Effective date.
2 This act shall take effect in 60 days.
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