Imagine that you’ve just moved into a newly constructed home in Tucson, Arizona, constructed by a builder or developer. From the outside, the house looks wonderful, just as you'd been promised and dreamed about. But after a couple weeks, months, or even years of living there, you begin to develop some concerns.
Perhaps the concerns are based on matters of appearance – the kitchen tiles don’t look quite straight, or the floor stains have bubbles. Or perhaps your concerns relate to structural matters – the stucco is falling off, or the doors don’t fit into the frames.
For the price you paid for your new home, you'd think it would be perfect, or at least reasonably close thereto. Construction defects, if significant enough lower the value of your home. How can you recover against the Arizona builder or developer for such defects?
Arizona is somewhat unique in that it governs contractors and subcontractors through the Arizona Registrar of Contractors (ROC). This is essentially a regulatory body that gives accreditation to builders based on its broad licensing and regulatory authority over contracting activities, including residential building.
The rules of the ROC state that “All work shall be done in a workmanlike manner.” They create minimum standards for workmanlike construction practices. Moreover, Arizona state law, at A.R.S. § 32-1154, imposes requirements that include compliance with building plans, specifications and applicable building codes, as well as, compliance with the ROC rules that include the previously mentioned workmanship standards.
If your Arizona contractor or builder did not perform in a professional manner – for example, left your roof unfinished or stairs unstable – you could report the entity to the ROC. Filing this complaint will trigger a visit from a state inspector, who has the authority to issue a “corrective work order.” This process is generally much faster than suing a builder for money damages in court.
When you moved into a newly constructed home, your Arizona builder or developer in all likelihood gave you written materials describing it. You should have signed a contract, outlining your payment and the builder's promise to construct the home.
Part of your lawsuit against the builder will be that it breached this contract or agreement – the builder did not create the structure that it agreed to. Here, all of the materials the builder gave you, including photos, descriptions of the home, and emails discussing the work, will be useful to proving 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 a finished basement, but the basement as built has only a concrete slab and plywood walls, this would demonstrate the builder’s breach.
Arizona has a six-year statute of limitations for breach of contract, under ARS § 12-548. This means that claims based on a contract with the builder must be brought within this period, or they will be barred. An exception to this is when a homeowner could not have reasonably discovered the existence of the breach until after the period – for example, if the roof caves in after seven years because the builder used low-quality wood and the homeowner couldn’t have reasonably known that a problem existed.
Ordinary negligence in the context of construction defects is the builder’s failure to exercise the correct standard of care. In Arizona, in order to establish a claim for negligence, a party must establish that 1) a duty was imposed by law; 2) the builder failed to conform to that standard; 3) there was a causation between the failure to meet the standard of care and the resulting construction defect; and 4) actual economic damages from the injury to your home. Note that Arizona has a two-year statute of limitations for basic negligence under A.R.S. 12-542.
A unique facet of construction defect litigation in Arizona is the Statute of Repose for improvements to real property, A.R.S. § 12-552(A). Under this state law, homeowners have eight years from the substantial completion of the home (or the last specific act or omission of the builder) to file suit.
After the builder has been “off the job” for eight years, a homeowner is generally barred from filing a lawsuit for an alleged construction defect, regardless of when the defect was or is discovered. This is different from many states, where the limitation period is 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 eight years. However, it means homeowners must be vigilant to ensure they do not get blocked by the statute.
There is one minor statutory exception to this rule, however. If the defect occurs during the eighth year, the limitations period extends by one year. A.R.S. § 12-552(b) notes that "Notwithstanding [the eight-year limit], in the case of injury to real property or an improvement to real property, if the injury occurred during the eighth year after the substantial completion, or, in the case of a latent defect, was not discovered until the eighth year after substantial completion, an action to recover damages for injury to the real property may be brought within one year after the date on which the injury to real property or an improvement to real property occurred or a latent defect was discovered, but in no event may an action be brought more than nine years after the substantial completion of the improvement."
In plain English, this means that if you discover a latent defect in your home eight years after construction (for example, the roof was constructed with low-quality materials), the Statute of Repose would not block your lawsuit. Rather, you would have one additional year from the date of discovery to file your complaint.
Because Arizona's ROC has regulatory authority, applying the statutes of limitations to individual situations is a bit more complicated than in other states. You should be able to maintain both a lawsuit and also a regulatory action against a builder through the ROC. However, the ROC can incentivize contractors into “behaving” and correcting their defective construction in a more expedient manner than a lengthy court process.
Before considering filing a lawsuit, read your contract with the Arizona builder carefully. You are likely to find -- as is common in construction contracts -- a dispute resolution clause. That clause may provide that you must go to mediation with your builder or developer before filing a lawsuit. Mediation means, in this context, a facilitated negotiation for settlement, led by a third-party neutral person. Often, that person will have some experience with construction law, engineering, or building development.
Your contract may also have 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 who have experience in construction – will make a final determination on your dispute. The advantage of arbitration is that it is generally quicker than litigation, saving you money on legal fees. A potential disadvantage, however, is that an arbitrator's decisions cannot, ordinarily, be appealed to a higher authority.
Finally, take note of any aspects of the contract that shorten your statute of limitations or ability to make claims against the builder or developer. It is not uncommon for construction contracts to shorten the amount of time that you have in which to file a legal claim against your builder. An attorney with experience in construction defect litigation in Arizona will be able to carefully review the document for these sorts of limitations.