PRINTER'S NO. 755
No. 656 Session of 2005
INTRODUCED BY GORDNER, PILEGGI, COSTA, WAUGH, BOSCOLA, ROBBINS,
WOZNIAK, ERICKSON, C. WILLIAMS, PIPPY, PUNT, D. WHITE,
M. WHITE AND LEMMOND, APRIL 29, 2005
REFERRED TO URBAN AFFAIRS AND HOUSING, APRIL 29, 2005
AN ACT
1 Providing for dispute resolution procedures relating to
2 residential construction defects between contractors and
3 homeowners or members of associations; and prescribing
4 penalties.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Short title.
8 This act shall be known and may be cited as the Residential
9 Construction Dispute Resolution Act.
10 Section 2. Definitions.
11 The following words and phrases when used in this act shall
12 have the meanings given to them in this section unless the
13 context clearly indicates otherwise:
14 "Action." A civil lawsuit, judicial action or arbitration
15 proceeding asserting a claim, in whole or in part, for damages
16 or other relief in connection with a dwelling, caused by a
17 construction defect.
18 "Association." An association as defined under 68 Pa.C.S. §§
1 3103 (relating to definitions), 4103 (relating to definitions)
2 and 5103 (relating to definitions).
3 "Claimant." Any person who asserts a claim concerning a
4 construction defect.
5 "Construction defect." The term shall have the same meaning
6 assigned by a written express warranty either provided by the
7 contractor or required by applicable statutory law. If no
8 written express warranty or applicable statutory warranty
9 provides a definition, then the term shall mean a matter
10 concerning the design or construction of a dwelling, or an
11 alteration of or addition to an existing dwelling or of an
12 appurtenance to a dwelling on which a person has a complaint
13 against a contractor. The term may include any physical damage
14 to the dwelling, any appurtenance or the real property on which
15 the dwelling or appurtenance is affixed, proximately caused by a
16 construction defect.
17 "Consultant." An engineer, architect, contractor, inspector
18 or other person purporting to have expertise relating to
19 residential construction.
20 "Contractor." A person, firm, partnership, corporation,
21 association or other organization that is engaged in the
22 business of developing, constructing or selling newly
23 constructed dwellings or constructing additions or appurtenances
24 to an existing dwelling. The term includes an owner, officer,
25 director, shareholder, partner or employee of a contractor. For
26 purposes of this act, the term also includes an industrialized
27 housing manufacturer. The term does not include a real estate
28 agent or broker.
29 "Dwelling." A single-family house or duplex. The term
30 includes a multifamily unit designed for residential use in
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1 which title to each individual unit is transferred to the owner.
2 Under a condominium or cooperative system, the term includes
3 common areas and improvements that are owned or maintained by an
4 association or by members of an association. The term includes
5 the systems, other components, improvements, other structures
6 and recreational facilities that are appurtenant to the house,
7 duplex or multifamily unit but not necessarily a part of the
8 house, duplex or multifamily unit. For purposes of this act, the
9 term also includes industrialized housing.
10 "Industrialized housing." A structure designed primarily for
11 residential occupancy and which is wholly or in substantial part
12 made, constructed, fabricated, formed or assembled in
13 manufacturing facilities for installation or assembly and
14 installation on the building site so that concealed parts or
15 processes of manufacture cannot be inspected at the site without
16 disassembly, damage or destruction. The term does not include a
17 structure or building classified as an institutional building or
18 manufactured home, as defined by the National Manufactured
19 Housing Construction and Safety Standards Act of 1974 (Public
20 Law 93-383, 42 U.S.C. § 5401-5426).
21 "Industrialized housing manufacturer." A person, firm,
22 partnership, corporation, association or other organization
23 involved in the process of making, constructing, fabricating,
24 forming or assembling, in a manufacturing facility, for
25 installation or assembly and installation on the building site,
26 industrialized housing from raw, unfinished or semifinished
27 materials.
28 "Serve" or "service." For an individual, delivery by
29 certified mail, return receipt requested, to the last known
30 address of an addressee. For a corporation, limited partnership,
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1 limited liability company or other registered business
2 organization, the term shall mean delivery on the registered
3 agent or other agent for service of process authorized by the
4 laws of this Commonwealth.
5 Section 3. Notice and opportunity to repair.
6 In every action subject to this act, the claimant shall, no
7 later than 60 days before initiating an action against a
8 contractor, provide service of written notice of claim on that
9 contractor. The notice of claim shall state that the claimant
10 asserts a construction defect claim or claims and is providing
11 notice of the claim or claims pursuant to the requirements of
12 this act. The notice of claim shall describe the claim or claims
13 in detail sufficient to explain the nature of the alleged
14 construction defects and the results of the defects. Service of
15 the notice of the claim shall be the equivalent of service of a
16 lawsuit or demand for arbitration with respect to imposing on
17 the contractor a legal obligation to pay as damages the cost of
18 any repairs and/or monetary payment made to settle the claim. In
19 addition, the claimant shall provide to the contractor any
20 evidence that depicts the nature and cause of the construction
21 defect, including expert reports, photographs and videotapes, if
22 that evidence would be discoverable under this Commonwealth's
23 evidentiary rules. If, after proper request, the claimant fails
24 to provide such evidence, then the claimant shall not be
25 permitted to introduce any such evidence not produced into
26 evidence in any action.
27 Section 4. Personal injury or death claims.
28 This act shall not apply to any claim for personal injury or
29 death.
30 Section 5. Procedure.
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1 (a) Contents of notice.--
2 (1) In an action subject to this act, the claimant must,
3 at least 60 days before initiating the action against a
4 contractor, provide service of written notice of claim on
5 that contractor. The notice of claim shall:
6 (i) State that the claimant asserts a construction
7 defect claim and is providing notice of the claim
8 pursuant to requirements of this act.
9 (ii) Describe the claim in detail sufficient to
10 explain the nature of the construction defect and the
11 result of the defect.
12 (iii) Include any reports by consultants that
13 describe the construction defect that the claimant
14 possesses.
15 (2) Service under this subsection shall toll all
16 applicable statutes of limitations until 60 days after the
17 receipt of the notice of claim.
18 (b) Response.--Except as otherwise provided for under
19 subsection (g), within 15 days after service of the notice of
20 claim under subsection (a), the contractor that has received the
21 notice of claim may serve on the claimant and on any other
22 contractor that has received the notice of claim a written
23 response to the claim, which either:
24 (1) offers to settle the claim by monetary payment, the
25 making of repairs or a combination of both, without
26 inspection, including a timetable for the making of the
27 payment or repairs;
28 (2) proposes to inspect the dwelling that is the subject
29 of the claim within 15 days; or
30 (3) rejects the claim.
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1 (c) Inspection of dwelling.--
2 (1) If the contractor requests the opportunity to
3 inspect the dwelling under subsection (b)(2), the claimant
4 shall provide the contractor and its consultants complete
5 access to inspect the dwelling in order to document the
6 defect and perform any destructive or nondestructive tests
7 necessary to evaluate the claim. If testing is performed, the
8 contractor shall return the dwelling to its pretesting
9 condition.
10 (2) If an inspection reveals a condition that requires
11 additional testing, the contractor shall provide notice to
12 the claimant of the need for the additional testing and the
13 claimant shall provide access to the dwelling.
14 (3) If a claim is asserted on behalf of owners of
15 multiple dwellings or multiple owners of units within a
16 multifamily complex, the contractor shall be entitled to
17 inspect each of the dwellings or units.
18 (d) Process following inspection.--Within 15 days following
19 completion of an inspection or testing under subsection (c), the
20 contractor may serve a written response on the claimant which:
21 (1) offers to settle the claim by monetary payment, the
22 making of repairs or a combination of both, and includes a
23 timetable for making the payment or repairs; or
24 (2) rejects the claim.
25 (e) Notice of claimant's response.--
26 (1) The claimant shall accept or reject an offer by a
27 contractor under subsection (b)(1) or (2) and (d)(1) within
28 15 days of receipt of the offer.
29 (2) If the claimant rejects the settlement offer made by
30 the contractor under subsection (b) or (d), the claimant
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1 shall provide written notice of the claimant's rejection to
2 the contractor and include the specific reasons for the
3 claimant's rejection.
4 (3) If the claimant fails to respond as required under
5 paragraph (1), the contractor's offer of monetary payment or
6 offer to repair shall be deemed to be accepted.
7 (f) Claimant's ability to bring action.--If the contractor:
8 (1) rejects the claim;
9 (2) does not respond to a notice of claim made under
10 subsection (a); or
11 (3) does not make monetary payment or repair within the
12 proposed timetable,
13 the claimant may bring an action against the contractor for the
14 defect described in the notice of claim without further notice
15 and notwithstanding the 60-day time period set forth under
16 subsection (a).
17 (g) Construction defects involving physical safety of
18 occupants.--
19 (1) If a construction defect poses an imminent threat to
20 the physical safety of the occupants of the dwelling, the
21 notice shall so advise the contractor, and the deadline for
22 the contractor's initial response under subsection (b) shall
23 be seven days after receipt of the notice.
24 (2) If the contractor's response under subsection (b)
25 contains a request to inspect the dwelling, the contractor
26 shall arrange for the inspection within five days.
27 (3) If the contractor determines there is an imminent
28 threat to physical safety, the contractor shall provide the
29 claimant with a proposal for a monetary offer or offer to
30 repair within three days of the determination. If the
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1 contractor determines there is no imminent threat to public
2 safety, the contractor shall respond as provided in
3 subsection (d).
4 (4) During the course of any notice to an inspection by
5 the contractor, the claimant or contractor may take such
6 interim repair steps to maintain the structural integrity of
7 the dwelling without prejudicing its claims or defenses.
8 (h) Right of action.--
9 (1) If a claimant rejects a reasonable monetary offer or
10 reasonable supplemental monetary offer or does not permit the
11 contractor to repair the defect pursuant to an accepted offer
12 to repair under subsection (e), the claimant may not recover
13 an amount in excess of:
14 (i) the fair market value of an offer to repair the
15 construction defect or the actual cost of the repairs,
16 whichever is less; or
17 (ii) the amount of the monetary offer of settlement.
18 (2) For purposes of this subsection, the trier of fact
19 shall determine the reasonableness of a monetary offer or
20 offer to repair made under subsection (b). If the claimant
21 has rejected a reasonable monetary offer or offer to repair,
22 the claimant may not recover costs or attorney fees incurred
23 after the date of rejection.
24 (i) Timely access for repairs.--If a claimant accepts a
25 contractor's offer to repair a construction defect, the claimant
26 shall provide the contractor and its subcontractors, agents,
27 experts and consultants access to the dwelling to complete the
28 repairs within the timetable set forth under this section.
29 (j) Agreement between claimant and contractor.--Following
30 service under subsection (a), a claimant and a contractor may
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1 alter the procedures under this act by mutual written agreement.
2 (k) Limitation of liability.--In an action involving a
3 construction defect, a contractor shall not be liable for
4 damages caused by:
5 (1) Normal shrinkage due to drying or settlement of
6 construction components within the tolerance of building
7 standards.
8 (2) The contractor's reasonable reliance on written
9 information relating to the dwelling that was obtained from
10 official government records or provided by a government
11 entity.
12 (3) Refusal of the claimant to allow the contractor or
13 the contractor's agents to perform their warranty service
14 work.
15 Section 6. Additional construction defects.
16 A construction defect that is discovered after a claimant has
17 served notice under section 5(a) (relating to procedure) may not
18 be alleged in an action until the claimant has complied with the
19 requirements of section 5.
20 Section 7. Actions of homeowner associations.
21 (a) General prohibition.--No person may provide or offer to
22 provide anything of value, directly or indirectly, to a property
23 manager of an association or to a member or officer of an
24 association to induce the property manager, member or officer to
25 encourage or discourage the association to file a claim for
26 damages arising from a construction defect.
27 (b) Property managers.--No property manager retained by an
28 association or member or officer of an association may accept
29 anything of value, directly or indirectly, in exchange for
30 encouraging or discouraging the association to file a claim for
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1 damages arising from a construction defect.
2 (c) Penalty.--A person who knowingly violates subsection (a)
3 or (b) commits a misdemeanor of the third degree.
4 Section 8. Right of action for association.
5 An association may bring an action against a contractor to
6 recover damages resulting from construction defects in any of
7 the common elements or limited common elements of a common-
8 interest community. The action may be maintained only after:
9 (1) A majority of the board of directors of the
10 association and the contractor have met in person and
11 conferred in a good faith attempt to resolve the
12 association's claim or the contractor has definitively
13 declined or ignored the requests to meet with the board of
14 directors of the association. Prior notice of a meeting under
15 this paragraph shall be provided to all board members and to
16 the contractor.
17 (2) The association has complied with section 5
18 (relating to procedure).
19 Section 9. Destructive tests.
20 No association may employ a person to perform destructive
21 tests to determine any damage or injury to a unit, common
22 element or limited common element caused by a construction
23 defect unless:
24 (1) The person performing the test has provided a
25 written schedule for repairs.
26 (2) The person performing the test is required to repair
27 all damage resulting from the tests in accordance with
28 Commonwealth laws and local ordinances relating thereto.
29 (3) The association or the person so employed obtains
30 all permits required to conduct the tests and to repair any
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1 damage resulting from the tests.
2 (4) Reasonable prior notice and opportunity to observe
3 the tests is given to the contractor against whom an action
4 may be brought as a result of the tests.
5 Section 10. Contractor employed by association.
6 The board of directors of an association may, without giving
7 notice to the unit owners, employ a contractor and such other
8 persons as are necessary to make such immediate repairs to a
9 unit or common element within the association as are required to
10 protect the health, safety and welfare of the units' owners.
11 Section 11. Construction.
12 Nothing in this act shall be construed as establishing a
13 cause of action on behalf of any claimant or contractor.
14 Section 12. Notice required at time of contracting.
15 (a) Written notice.--Upon entering into a contract to
16 construct a dwelling or to complete a remodeling project on a
17 dwelling, the contractor shall give the potential claimant a
18 written notice worded substantially as follows:
19 NOTICE CONCERNING CONSTRUCTION DEFECTS
20 Pennsylvania law contains important requirements you must
21 follow before you may file a lawsuit for defective
22 construction against the contractor who constructed your
23 dwelling or completed your remodeling project.
24 Pennsylvania law requires you to deliver to the
25 contractor a written notice by certified mail of any
26 construction conditions that you believe are defective
27 before you file your lawsuit, and you must provide your
28 contractor the opportunity to make an offer to repair or
29 pay for the alleged defects. You are not obligated to
30 accept any offer made by the contractor, but failure to
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1 accept a reasonable offer can limit your recoverable
2 damages. There are strict deadlines and procedures under
3 Pennsylvania law and failure to follow them may affect
4 your ability to file a lawsuit.
5 (b) Type of notice.--The notice required under subsection
6 (a) shall be in ten-point boldface type or greater and shall be
7 included within the contract between the contractor and
8 potential claimant.
9 Section 13. Applicability.
10 This act shall apply as follows:
11 (1) This act shall not apply to a contractor's right to
12 seek contribution, indemnity or recovery against a
13 subcontractor, supplier or design professional for any claim
14 made against the contractor by a claimant.
15 (2) This act shall apply regardless of the date of sale
16 or substantial completion of a dwelling, consistent with 42
17 Pa.C.S. § 5536.
18 Section 14. Effective date.
19 This act shall take effect in 60 days.
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