Alaska is known as the Last Frontier, but home developers are increasingly exploring its vast stretches of open land. Building companies are creating new suburban communities from Anchorage to Juneau. You may decide to purchase a home that is being built by a developer.
Most likely, you’ll buy the house based upon the renderings and specifications the developer gives you, before actually seeing the completed home. What happens if, after moving in, you realize the home is not what you expected? Perhaps the workmanship is shoddy, or perhaps the home is materially different from what was promised – fewer bedrooms, fewer amenities, or worse-quality materials.
If you find yourself in this situation, do not let yourself be taken advantage of. Your builder has lowered the value of the home that you purchased. How can you use Alaska law to recover from builder or developer for such defects?
If you believe you might have a sizeable claim against your builder, you should invest in an attorney consultation. Suing a developer is not an easy task. Many builders are parts of statewide or nationwide corporations with teams of attorneys to defend themselves from claims.
If you believe that there are significant defects in your home, you should consult a local attorney – preferably one with experience in Alaska real estate or construction – about your situation. Suing a developer is different from a small lawsuit against a home contractor, for example, which can often be handled without an attorney in Alaska’s small claims courts. Be ready to take the lawsuit seriously, and recognize that there will be a financial cost – an investment, really – to recouping the damages caused by your builder’s faulty work.
Building a house is ordinarily a formal arrangement, particularly if it’s within a new planned community. Your builder or developer in all likelihood gave you extensive materials describing your new property. You would have needed to sign a contract outlining your payment and the builder's promise to construct the home.
If you have to file a lawsuit against the builder, part of your claim will be that it breached this agreement – did not give you the building that it promised it would. Here, all of the materials the builder gave you, including photos, descriptions of the home, plans and drawings, and emails describing the work, will be useful to establishing your expectations at the time you entered into the contract.
For example, if the various documents clearly show that you thought you were getting a home with hardwood floors, and the floors are a cheap laminate, this demonstrates the builder’s breach.
Alaska law contains a three-year statute of limitations for breach of contract (A.S. § 09.10.053). This means that claims based on a contract with the builder must be brought within this period, or they are barred.
However, discovery of the defect can toll (put off) the limitation period in some situations. When a homeowner could not have reasonably discovered the existence of the breach until after the three-year period – for example, if the roof caves in after four years because the builder used low-quality wood and the homeowner couldn’t have reasonably known – a court might allow the action to proceed.
Breach of contract isn’t the only possible basis upon which to sue your builder or developer. Another legal ground is called "ordinary negligence." In this context, that means the builder’s failure to exercise the correct standard of care in building your home.
In Alaska, in order to establish a claim for negligence, the person filing suit must establish that 1) a particular duty was imposed on the builder or developer by law; 2) the builder failed to conform to that legally imposed standard; 3) there was a causal link between the failure to meet the standard of care and the resulting construction defect; and 4) you suffered actual economic damages as a result of the injury to your home.
Note that Alaska has a two-year statute of limitations (a deadline on when you can file suit) for property damage caused by negligence under A.S. § 09.10.070.
An important aspect of construction defect litigation in Alaska is the Statute of Repose for improvements to real property, A.S. § 09.10.140. Under this legislation, homeowners have ten years from the substantial completion (or the last specific act or omission of the builder) to file suit. After the builder has been “off the job” for ten years, a homeowner is generally barred from suing over an alleged construction defect, regardless of when the defect was or is discovered.
This is different from many states, where the limitation period can be further tolled (or delayed) based on when the homeowner discovers the existence of the defect. This statute is meant to give certainty to builders, so that they need not worry about claims after ten years have gone by. As a homeowner, this means that you essentially have an “ultimate deadline” to file your lawsuit: ten years after the completion of construction of your home.
Alaska law allows contractual provisions between you and your builder to prevent you from filing a lawsuit, at least at first. It is common in construction contracts, in Alaska and elsewhere, to find a dispute resolution clause.
That clause may say that you were required to go to mediation with your builder or developer before filing your lawsuit. In this context, mediation is a facilitated negotiation for settlement, led by a third-party neutral individual. Often, that individual will have some experience with construction law, engineering, or building development.
Your contract may also contain an arbitration clause. This clause would require that you go to arbitration against the builder or developer, instead of suing in a court of law. In arbitration, either one or three individuals – again, typically with experience in construction – will render a final determination on your dispute.
The advantage of arbitration is that it is typically quicker than litigation, saving you money on legal fees. A potential disadvantage, however, is that an arbitrator's decisions cannot, in most situations, be appealed.
Finally, take note of any aspects of the contract that shorten your statute of limitations or ability to make claims. It is not uncommon that construction contracts will shorten the amount of time you have in which to file a legal claim against your builder. An attorney with experience in construction defect litigation in Alaska will be able to carefully review the document for these sorts of limitations and help strategize how to best seek compensation from your builder or developer.