Big money is involved in battle over building defects
With Republicans in the Nevada Legislature trying to reduce business liability for construction defects, a homebuilder last week re-launched his website where he posts legal disclosures of defects in specific properties where possible buyers can find them.
David Lissner, who built homes in Cold Springs, said he has had the site up for about a year but has fine tuned it.
He obtains the legally required disclosures from court records when there have been construction defects lawsuit settlements.
“They have a right to know in order to make an informed purchase,” Lissner said, referring to home buyers.
The notion of a homebuilder working for greater transparency of construction defects may seem counterintuitive, but Lissner said, “I have lots of homebuilders and subcontracters that are supporting it. Others are supporting it but do not want to put their names on it.”
The law requires that when a home is being sold, a “seller’s real property disclosure” form (SRPD) must be filled out and supplied to prospective buyers. But Lissner said he has reason to believe that while forms are always filled out, they are routinely inaccurate or false. In addition, if they are handed over to possible buyers at all, it is either done in a way that downplays their importance, or it is not handed over at all. He said he sent a questionnaire to 29 recent home buyers. One of the questions asked was “Were you aware when you purchased the house that it was in the middle of a construction defects case?”
“Twenty-eight of the 29 said they were not aware of it, and they were angry that they didn’t know,” Lissner said.
He said the reasons some homebuilders would support his efforts are, “If it’s brought to light what’s going on, and it results in a decrease in the amount of construction defect litigation that’s filed, that helps the contractors and the builders at the same time, as well as the buyers.”
At the capitol, meanwhile, the construction defects issue warmed up. On March 18, Sen. Michael Roberson, a Clark County Republican whose bill to water down construction defects laws was going nowhere in the Senate Judiciary Committee, introduced a second bill whose title said it dealt with “licensing of residential mortgage loan servicers,” and got it sent to the Committee on Commerce, Labor and Energy. It contains language changing existing construction defects law, which may be a violation of law. Article four of the Nevada Constitution reads, “Each law enacted by the Legislature shall embrace but one subject.”
The chair of Judiciary, Richard Segerblom, is not receptive to processing the original bill, Senate Bill 161. The chair of Commerce, Kelvin Atkinson, may do so with the new measure, Senate Bill 411. (Not all bills get hearings or votes.) Both senators are Clark County Democrats.
Republicans not only had Democrats unknowingly working with them, but also had the aid of journalists. Numerous news stories defined what the Republicans were attempting as “reform.” In one Las Vegas Sun story on construction defects legislation, the term was used four times. Other journalism entities helped the Republicans in another way—by ignoring the issue altogether. The Sun is one of the few reporting on construction defects at all.
Lissner said that while SRPD forms are virtually always filled out prior to home sales, “The law says you have to fill it out but there are no penalties for bad information.”
Groups that are supporting the changes in construction defects law at the legislature include chambers of commerce at both ends of the state, the Associated General Contractors, Leading Builders of America, Marnell Companies, Nevada Realtors, Nevada Subcontractors, Pardee Homes.
On the other side is the Nevada Justice Foundation, formerly the Nevada Trial Lawyers Association.
Both sides have been free with campaign contributions. And the debate going on in Carson City seems to have very little middle ground.
Reno Chamber of Commerce lobbyist Tray Abney wrote in a recent chamber message to members, “What has actually occurred, however, is that a group of lawyers has created a very lucrative industry based around suing the insurance companies of builders and their subcontractors. The lawyers and their teams go out and target entire neighborhoods that have homes bumping against the 10-year statute of repose and then file claims on everything from stucco cracks and wind-blown roof tiles to smoke detectors with no batteries and other basic maintenance items that should be the responsibility of the occupants of the home. Abney said the focus is on attorney’s fees.
“Even if the issue is a crack in the stucco, the landscaping company that planted the bushes in the front yard is filed against as well. As you can imagine, this drives insurance costs through the roof. These companies, if they can afford it and survive, are then forced to pay huge premiums with dollars that could instead be used to reinvest in the business or hire more employees. The worst thing is that since the language states that all attorney fees must be paid, there are plenty of instances when the lawyers gobble up all of the money and the homeowner does not receive enough to even take care of the issue that began the whole sordid process in the first place! … The main goal is to get rid of the attorney fee language. At the end of the day, builders just want to be notified of a legitimate problem right away and then be able to immediately fix that problem.
Segerblom response was much more terse.
“The current law protects homeowners from defects created by contractors,” he said. “Any change should [be] based on helping homeowners, not developers, contractors or lawyers.”
Attorney Robert Maddox elaborated.
“Chapter 40 [the existing construction defects law] protects the rights of homeowners to get their houses fixed. Builders have an absolute, unfettered right to repair when they receive notice from a homeowner. In fact, if a homeowner denies a builder the ability to fix, their case is subject to immediate dismissal. Homeowners are very limited in Chapter 40 in what damages they can recover. They can only receive funds to fix their home, and reasonable attorney fees and costs. If a homeowner had to pay their attorney out of the funds to fix their home, it would ensure they would never have enough funds to make them whole.”
On the proposed changes, Maddox said, “The proposed changes to Chapter 40 would hurt homeowners, and protect builders who do not want to be held accountable for their poor practices.”
The Sun reported in February that legislative leaders were meeting behind closed doors with lobbyists from both sides.