PRINTER'S NO. 567
No. 534 Session of 1989
INTRODUCED BY GREENLEAF, HELFRICK AND AFFLERBACH,
FEBRUARY 15, 1989
REFERRED TO URBAN AFFAIRS AND HOUSING, FEBRUARY 15, 1989
AN ACT
1 Providing for a new home warranty and for security programs;
2 requiring registration of builders; imposing duties upon the
3 Secretary of Community Affairs; and imposing a penalty.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the New Home
8 Warranty and Builders' Registration Act.
9 Section 2. Definitions.
10 The following words and phrases when used in this act shall
11 have the meanings given to them in this section unless the
12 context clearly indicates otherwise:
13 "Builder." An individual corporation, partnership or other
14 business organization engaged in the construction of new homes.
15 "Department." The Department of Community Affairs of the
16 Commonwealth.
17 "Fund." The New Home Warranty Security Fund.
18 "Major construction defect." Any actual damage to the load-
1 bearing portion of the home, including damage due to subsidence,
2 expansion or lateral movement of the soil (excluding movement
3 caused by flood or earthquake), which affects its load-bearing
4 function and which vitally affects or is imminently likely to
5 vitally affect use of the home for residential purposes.
6 "New home." Any dwelling unit not previously occupied,
7 excluding dwelling units constructed solely for lease.
8 "Owner." Any person for whom the new home is built, or to
9 whom the home is sold, for occupation by him or his family as a
10 home and his successors in title to the home or mortgagee in
11 possession. The term does not include any development company,
12 association or subsidiary company of the builder or any person
13 or organization to whom the home may be sold or otherwise
14 conveyed by the builder for subsequent resale, letting or other
15 purpose.
16 "Secretary." The Secretary of Community Affairs of the
17 Commonwealth.
18 "Warranty." The warranty prescribed by the secretary
19 pursuant to this act.
20 "Warranty date." The first occupation or settlement date,
21 whichever is sooner.
22 Section 3. New home warranty; time periods.
23 (a) Regulations.--The secretary is hereby authorized and
24 directed to prescribe by rule or regulation a new home warranty
25 and procedures for the implementation and processing of claims
26 against the fund as provided for in section 7. The warranty
27 shall include standards for construction and of quality for the
28 structural elements and components of a new home with an
29 indication, where appropriate, of what degree of noncompliance
30 with such standards shall constitute a defect. A hearing shall
19890S0534B0567 - 2 -
1 be required prior to the adoption, supplement, amendment or
2 repeal of such rule or regulation.
3 (b) Warranty time periods.--The time periods of warranties
4 established pursuant to this act are as follows:
5 (1) One year from and after the warranty date, the
6 dwelling shall be free from defects caused by faulty
7 workmanship and defective materials due to noncompliance with
8 the building standards as approved by the secretary pursuant
9 to subsection (a) except as set forth in paragraphs (2) and
10 (3).
11 (2) Two years from and after the warranty date, the
12 dwelling shall be free from defects caused by faulty
13 installation of plumbing, electrical, heating and cooling
14 delivery systems. However, in the case of appliances, no
15 warranty shall exceed the length and scope of the warranty
16 offered by the manufacturer.
17 (3) Ten years from and after the warranty date, the
18 dwelling shall be free from major construction defects as
19 defined in this act.
20 (4) Any alternate program provided for in section 8
21 submitted for approval, subsequent to the effective date of
22 this act, may contain warranties and time periods greater
23 than those provided for in paragraphs (1), (2) and (3).
24 Section 4. Liability of owner.
25 A builder of a new home shall be liable to any owner during
26 the time period when the new home warranty, prescribed by the
27 secretary pursuant to this act, is applicable to the home for
28 any defect therein which is covered by the warranty in
29 accordance with its terms and conditions. The liability of a
30 builder under the new home warranty shall be limited to the
19890S0534B0567 - 3 -
1 purchase price of the home in the first good faith sale thereof
2 or the fair market value of the home on its completion date if
3 there is no good faith sale.
4 Section 5. Certificate of registration.
5 (a) Regulations.--No builder shall engage in the business of
6 constructing new homes unless he is registered with the
7 department. The department shall provide application forms for
8 the registration and shall prescribe the information to be
9 included therein. Each application shall be accompanied by a
10 reasonable fee, prescribed by the secretary, and proof,
11 satisfactory to the secretary, of participation in the fund or
12 an approved alternate new home warranty security program. Upon
13 receipt of the above, the department shall issue a certificate
14 of registration.
15 (b) Certificate of registration.--Each certificate of
16 registration shall be valid for a period of two years from the
17 date of issue and may be renewed for additional two-year
18 periods.
19 (c) Participation in warranty program.--As a condition for
20 the registration, a builder shall be required to participate in
21 the fund or an approved alternate new home warranty security
22 program. No corporation, partnership or other business
23 organization shall be entitled to registration hereunder, nor
24 shall it engage in the construction of new homes, unless a
25 stockholder, director, officer, partner or employee thereof, as
26 the case may be, shall be a registered builder.
27 Section 6. Investigation of allegations; revocation of
28 certificate.
29 (a) Investigation.--The secretary, upon the complaint of an
30 aggrieved person, may conduct investigations into the
19890S0534B0567 - 4 -
1 allegations made against any builder required to be registered
2 under this act. In pursuit of the investigations, the secretary
3 shall be authorized to hold hearings, subpoena witnesses and
4 compel their attendance, require the production of papers,
5 records or documents, administer oaths or affirmations to
6 witnesses, inspect such relevant books, papers, records or
7 documents of such builder at his place of business during
8 business hours, and conduct inspections of new home construction
9 sites owned by a builder or in which a builder has an ownership
10 interest.
11 (b) Action on certificate.--The secretary may deny, suspend
12 or revoke any certificate of registration, after affording the
13 registrant or applicant the opportunity for a hearing in
14 accordance with Title 2 of the Pennsylvania Consolidated
15 Statutes (relating to administrative law and procedure), if the
16 registrant or applicant has:
17 (1) Willfully made a misstatement of a material fact in
18 his application for registration or renewal.
19 (2) Willfully committed fraud in the practice of his
20 occupation.
21 (3) Practiced his occupation in a grossly negligent
22 manner.
23 (4) Willfully violated any applicable building code to a
24 substantial degree.
25 (5) Failed to continue his participation in the fund or
26 an approved alternate new home warranty security program
27 after proper notice from the secretary in writing by
28 certified mail.
29 (6) Violated any provision of this act or any rule or
30 regulation adopted pursuant thereto, after proper notice from
19890S0534B0567 - 5 -
1 the secretary in writing by certified mail.
2 Section 7. New Home Warranty Security Fund; review by
3 conciliation or arbitration procedure.
4 (a) Establishment of fund.--There is hereby established a
5 New Home Warranty Security Fund to be maintained by the State
6 Treasurer and administered by the secretary. The purpose of the
7 fund is to provide moneys sufficient to pay claims by owners
8 against builders participating in the fund for defects in new
9 homes covered by the new home warranty. The amounts payable by
10 participating builders shall be established and may be changed
11 from time to time, as the experience of the fund shall require,
12 by the secretary, and shall be sufficient to cover anticipated
13 claims, to provide a reasonable reserve and to cover the costs
14 of administering the fund. Amounts paid by participating
15 builders shall be forwarded to the State Treasurer and shall be
16 accounted for and credited by him to the fund.
17 (b) Administration of fund.--The State Treasurer shall hold,
18 manage, invest and reinvest moneys in the fund and credit all
19 income earned thereon to the fund in the same manner as provided
20 by law for the investment of pension and retirement funds
21 administered by the Commonwealth. The department shall keep the
22 State Treasurer advised of anticipated cash demands for payment
23 of claims against the fund.
24 (c) Claim.--Prior to making a claim against the fund for
25 defects covered by the warranty, an owner shall notify the
26 builder of such defects and allow a reasonable time period for
27 their repair. If the repairs are not made within a reasonable
28 time or are not satisfactory to the owner, he may file a claim
29 against the fund in the form and manner prescribed by the
30 secretary. The secretary shall investigate each claim to
19890S0534B0567 - 6 -
1 determine the validity thereof, and the amount of the award that
2 shall be made thereon, and shall hold a hearing if requested by
3 either party, in accordance with Title 2 of the Pennsylvania
4 Consolidated Statutes (relating to administrative law and
5 procedure). Reasonable hearing fees shall be assessed against
6 the unsuccessful party. The amount of the award shall be
7 sufficient to cover the reasonable costs necessary to correct
8 any defect or defects covered under the warranty, but the total
9 amount of awards from the fund for any new home shall not exceed
10 the purchase price of the home in the first good faith sale
11 thereof or the fair market value on the home on its completion
12 date if there is no good faith sale. All claims submitted by an
13 owner shall first be reviewed through a conciliation or
14 arbitration procedure by the department, and in the event that
15 the owner if found to be in the right, the builder shall be
16 required to correct such claims as determined through the
17 conciliation or arbitration procedure. If a builder is unable or
18 willfully refuses to correct such deficiency, then an amount
19 sufficient to cure the problem shall be paid from the fund to
20 the owner. In such cases, the secretary may then proceed against
21 the builder in accordance with section 6(b). Upon certification
22 from the secretary of the amount of an award, the State
23 Treasurer shall make payment to the claimant from the fund.
24 (d) Insufficient funds.--If, at any time, the moneys
25 available in the fund are insufficient to satisfy outstanding
26 awards and anticipated awards for the succeeding year, the
27 secretary shall, by regulation and after public hearing upon
28 reasonable notice to all interested parties, require
29 participating builders to pay additional amounts to replenish
30 the fund. The secretary may also provide for surcharges against
19890S0534B0567 - 7 -
1 those participating builders who are responsible for a
2 significant number of awards against the fund, and may
3 discontinue the participation in the fund of any builder who is
4 responsible for an excessive number of awards against the fund
5 after a hearing in accordance with Title 2 of the Pennsylvania
6 Consolidated Statutes. At no time shall the Commonwealth be
7 required to contribute any moneys to the fund, nor shall the
8 Commonwealth have any liability to any person having any right
9 to or claim against the fund over and above the amount therein.
10 Section 8. Review and approval of alternate new home warranty
11 security programs.
12 (a) Alternate programs.--The secretary is authorized and
13 directed to review and approve alternate new home warranty
14 security programs which provide for payment of claims against
15 builders for defects covered under the new home warranty and
16 financial security adequate to cover the total amount of claims
17 that may be reasonably anticipated against participating
18 builders at least equivalent to that provided by the fund.
19 However, any new home warranty insurance program approved by the
20 secretary prior to the adoption of this act shall:
21 (1) Constitute an approved alternate new home warranty
22 security program and shall be deemed in accordance with this
23 section and in compliance with this act in the form and
24 substance heretofore approved by the secretary.
25 (2) Not be subject to any rules and regulations adopted
26 by the secretary pursuant to this act when the rules and
27 regulations are in conflict with the previously approved new
28 home warranty program.
29 (b) Approval of new programs.--Any person desiring approval
30 of a new home warranty security program shall make application
19890S0534B0567 - 8 -
1 to the secretary in such form and manner as he shall prescribe.
2 The secretary may establish and charge reasonable fees to cover
3 the costs incurred in reviewing and approving the applications.
4 The secretary shall review each application and conduct any
5 investigation he deems necessary with respect to an application.
6 The secretary may, and if an applicant so requests, shall, hold
7 a hearing on an application in accordance with Title 2 of the
8 Pennsylvania Consolidated Statutes (relating to administrative
9 law and procedure). If the secretary finds that a new home
10 warranty security program provides coverage and financial
11 security at least equivalent to the fund, he shall approve the
12 program. The secretary may revoke or suspend the approval of
13 such a program after a hearing in accordance with the same
14 procedures applicable to hearings on applications if he finds
15 that the program no longer provides coverage and financial
16 security equivalent to the fund.
17 Section 9. Availability of any legal remedy to owner; election
18 of remedy.
19 Nothing contained in this act shall affect other rights and
20 remedies available to the owner. The owner shall have the
21 opportunity to pursue any remedy legally available to the owner.
22 However, initiation of procedures to enforce a remedy shall
23 constitute an election which shall bar the owner from all other
24 remedies. Nothing contained herein shall be deemed to limit the
25 owner's right of appeal as applicable to the remedy elected.
26 Section 10. Rules and regulations.
27 The secretary shall promulgate such rules and regulations as
28 may be necessary to carry out this act.
29 Section 11. Supersedure of municipal ordinance or regulation.
30 This act shall supersede any municipal ordinance or
19890S0534B0567 - 9 -
1 regulation which provides for the licensing or registration of
2 builders or for the protection by bonds or warranties required
3 to be supplied by builders, exclusive of those required by
4 water, sewer, utilities or land use requirements.
5 Section 12. Failure to register; penalty; enforcement and
6 collection.
7 Any builder who fails to register as required in this act
8 commits a summary offense and shall, upon conviction, be
9 sentenced to pay a fine not exceeding $2,000.
10 Section 13. Applicability.
11 This act shall apply to all new homes where construction is
12 commenced on or after the effective date of this act.
13 Section 14. Effective date.
14 This act shall take effect in 60 days.
A26L12CHF/19890S0534B0567 - 10 -