Changes to Nevada’s Construction Defect Law – What Does it Mean for Homeowners?

As you probably have heard, Governor Sandoval recently signed into law Assembly Bill No. 125 (“AB 125”) that drastically changed the landscape of construction defect claims in Nevada. Nevada had been at the forefront of pro-homeowner legislation for about two decades in this field. Lawyers flocked to Nevada to practice construction defect law because of the drastic increase in the number of cases Nevada’s “Chapter 40” statute had brought about.  AB 125 was passed for many reasons, but the primary purpose was undoubtedly to curb that trend.

There are many provisions of the Bill that will have a substantial impact on litigation in Nevada, but the most important provision for the general public is certainly the changes to the statute of repose. A statute of repose is a lot like a statute of limitation, which is the more familiar term to most. It sets a deadline for an injured party to bring his or her claim. If you don’t file a lawsuit or do something else to toll (postpone) the statute, then you could be barred from filing a lawsuit.

Under the old system, homeowners would have anywhere from 6-12 years after purchasing their new home from a builder to bring a construction defect lawsuit. Construction defect lawsuits included everything from minor issues, like paint peeling, all the way to the big problems, like foundation cracking. Due to the statute of repose, you would see homeowners that were nearing the end of their statutory period filing lawsuits to “preserve” the statute and get the builder to come out and repair anything that was wrong with their home (or, in the alternative, write a check). Many times these lawsuits will act as a whole-home checkup and facelift because the definition of a “construction defect” under the statute was so broad that almost anything could qualify. The threat of attorney fees and expert fees encouraged homebuilders to pay substantial settlements just to get rid of the claims.

The problem with the old statute of repose was that the language of the statute was so poorly written that no one could be 100% certain of when their home was beyond the statute. I won’t bore you with the finer points of the law here, but the concept of the statute was a good one: defects that were obvious had shorter statutory periods and hidden/concealed defects had longer periods. The execution of this plan was horrible, however, and most lawyers in Las Vegas just assumed that any owner of a home built less than 12 years ago was capable of filing a lawsuit. 

This is all gone now. In AB 125, the legislature has changed it to one uniform statute of repose: six years from substantial completion of your home. Substantial completion is essentially the date that your home is fit for occupancy, and is defined in the statute in more detail. This statute is going to apply retroactively, meaning that it will apply even to homes that were built before AB 125 was passed.  So if your home was built from 2003 - 2009, this law will bar you from filing a lawsuit against the builder in the very near future.

There is a one-year grace period built into the new statute, however, to protect homeowners who may be affected by this drastic change of policy. If your statute of repose is set to expire this year and your claim “accrued” prior to the effective date of AB 125 (which is February 24, 2015) you may still be able to file a lawsuit as long as you do it quickly.   

I have litigated thousands of homes in construction defect litigation here in Nevada, representing clients who sue and who get sued, and I was initially very happy to see reforms being made to construction defect law in Nevada. The system that was designed to protect homeowners was routinely abused to the point where even well-built, quality homes were joining construction defect litigation and putting small businesses into bankruptcy. The majority of the changes are good ones, which should help builders and insurance companies return to Nevada and help our economy grow over the next decade.

I believe the change to the statute of repose was a mistake, however. There needed to be revisions to the statute of repose, but reducing it to a blanket six years goes too far. I have litigated hundreds of homes that didn’t show any signs of soil movement or structural damage until the homes were at least 4-5 years old. My top civil engineer expert witness has repeatedly said that many homes with expansive soils will not show their full signs of damage until five years or more after construction.

The best advice I can give you if your home was built from 2003-2009 is to take the time now to investigate your home. Have a home inspector come out and check your home or talk to a construction expert and have him or her take a look around your home if possible. Most of us cannot possibly identify signs of problems that are on the horizon; we can only spot the most obvious of defects. Hopefully your home is in great shape and you’ll have the peace of mind that comes with having it inspected. If not, the time to act is now. There is no guarantee you will succeed on your claim, but you will lose your right to even try if you don’t take action this year. 

- Andrew R. Muehlbauer, Esq.