GT Alert

Florida Legislature Adopts New Rules for Residential Construction Defect Disputes

June 2004
By Michael J. Sabatello, IV, Esq., Greenberg Traurig

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Chapter 558 of the Florida Statutes was originally adopted by the Legislature in 2003 to provide for an alternative means of resolving residential construction defect claims without relying on the courts. In simple terms, the current provisions of the Chapter require that a claimant, such as a homeowner or condominium association, notify a contractor or other responsible party before suing for an alleged construction defect in a dwelling. Upon receiving a notice of a claim, the contractor, subcontractor, supplier or design professional (collectively referred to herein as a “contractor”) has a short period of time within which to inspect the dwelling and offer to repair the defect or otherwise settle the claim. If, after the proscribed periods, the parties are unable to resolve their differences, the claimant is free to proceed with legal action.

"In simple terms, the current provisions of the Chapter require that a claimant, such as a homeowner or condominium association, notify a contractor or other responsible party before suing for an alleged construction defect in a dwelling."

In 2004, the Legislature adopted House Bill 1899, which Governor Bush signed on June 18th. The new law’s changes are intended to make the notice and cure procedures of the Chapter more equitable and manageable to further the resolution of construction defect disputes.

The bill makes the dispute resolution procedures of Chapter 558 optional. Under the new section 558.005, F.S., the provisions of the Chapter only apply to a contract for the design, construction or remodeling of a dwelling entered into on or after July 1, 2004, which contains the proscribed notice of section 558.005(2). If the notice is not included, the provisions do not apply.

The scope of the Chapter has also been refined through the adjustment of several critical definitions. First, the term “contractor” is revised to include those in the business of designing, constructing and remodeling a dwelling and exclude an individual selling a new or previously occupied home. Second, “construction defects” resulting from the repair and alteration of a dwelling and its appurtenances, e.g., a garage and swimming pool, are now governed by the Chapter. Finally, the definition of “dwelling” which originally meant a single-family home, manufactured home, modular home or duplex, is now broadened to include a triplex, quadradplex or other multifamily unit designed for residential use and owned (rather then rented) by an individual owner, e.g., cooperative and condominium units, and the appurtenant recreational facilities, roadways and other common areas.

The time frames for issuing and responding to a notice of claim have also changed under the new provisions. Most notably, large condominium, cooperative and homeowners’ associations with 20 or more owners must give notice 120 days in advance of any suit, and the subsequent response and inspection periods are lengthened.

If the contractor disputes the claim or refuses to respond, the claimant is free to proceed with legal action. If the parties are able to settle their differences, the contractor is given a reasonable (or otherwise agreed) period of time within which to complete the repairs and/or pay the agreed sum, if applicable, or the claimant can proceed with its action. If a settlement is reached and the contractor performs, the claimant is barred from bringing an action against the contractor for the alleged defects.

The contractor’s right to inspect the dwelling remains, and the new law encourages (but does not require) a claimant to allow reasonable destructive testing, if necessary, provided the testing does not render the dwelling uninhabitable. Under the new provisions, a claimant is barred from recovering damages that could have been avoided had the destructive testing been permitted by the claimant and a feasible remedy promptly implemented. Although a contractor is not given the absolute right to conduct destructive tests, this new provision should encourage claimants to consent to such testing.

The Bill also includes a new and important provision requiring that both the claimant and the contractor exchange all available discoverable evidence relating to the construction defects, including all reports, photographs and information discovered during the contractor’s inspection. However, although this information must be shared, the expert reports that are exchanged may not be used in subsequent litigation unless the expert testifies or the report is otherwise used in the litigation. In light of this change, contractors or design professionals should take care in responding to a notice of claim and considering their rights to inspect the dwelling. Additionally, the Bill clarifies the fact that a contractor’s offer to repair an alleged defect or settle a claim does not constitute an admission of liability and is not admissible in any subsequent legal action.

The new provisions of Chapter 558 apply to all contracts entered into on or after July 1, 2004, that include the new statutory notice in section 558.005 (2), F.S. As to claims accruing before but not yet commenced as of July 1, 2004, the procedures of the Chapter apply notwithstanding the fact that the contract included the 2003 statutory notice rather than the revised 2004 notice.

Incidentally, the new provisions permit a claimant and contractor to alter the procedures under the Chapter by mutual written agreement after the initial notice of claim is issued.

Those in the homebuilding and remodeling businesses should review the Bill in detail and consult their attorney to decide if the provisions of the Chapter are right for them. Homebuilders will have to revise their retail sales contracts in order to reflect the new provisions, and subcontractors and suppliers may want to do the same to take into account these changes. Finally, all contractors, subcontractors, suppliers and designers should consult with legal counsel before responding to any notice of claim and exercising their rights under the Chapter.

© 2004 Greenberg Traurig

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