Many New Mexico homebuyers purchase their homes from developers before the homes are actually constructed. These builders are in the business of selling homes to prospective buyers with promises about what the home will eventually look like – its size and layout, its appearance, and its amenities. All of these factors determine the price.
Imagine that you expected to purchase a two-story house with four bedrooms, a porch, and a jacuzzi, but when you moved into the constructed home, there were only three bedrooms, and no jacuzzi. Or perhaps the porch was much smaller than was promised on the plans. Or perhaps the heat throughout the home is faulty, costing you thousands of dollars in necessary repairs.
Construction defects are not uncommon in new-home construction. Whether the defect represents a major material misrepresentation by the builder (like a missing jacuzzi) or a fixable but important problem (like faulty electric work), construction defects lower the value of your home.
How does New Mexico law help you recover against the builder or developer for such defects?
Unlike many states, New Mexico law does not require that you give your developer the chance to correct any construction defects before you file suit in court. Nevertheless, sending a sort of “warning letter” can be a good idea, for several reasons.
A demand letter will explain the problems – with pictures and descriptions of the defects and references to the contract – and ask that the developer either remedy the work or reimburse you for the cost of hiring another contractor to fix it. Even if you have raised these issues verbally with the developer, a formal letter gets attention in a whole new way.
The developer, wanting to avoid litigation, may do the right thing and send inspectors or contractors to correct the issues.
If the developer ignores the letter or fails to properly address the situation, you’ll know that -- assuming the potential recovery is greater than the likely cost of legal fees -- it’s time to file suit.
When you arranged for the construction of your New Mexico home, the builder or developer likely gave you a stack of written materials describing the place. You probably signed a contract, outlining your payment and its promise to build the home according to certain specifications.
Part of your lawsuit against the builder will likely be that it breached this agreement – it failed to construct the house as agreed upon. Here, all of the materials the builder gave you, including photos, floor plans and descriptions of the home, emails describing the work, and lists of materials, finishes, or appliances, will be useful in demonstrating your rightful 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 built-in laundry closet, but the closet as built couldn't possibly fit a washer/dryer combination, this demonstrates the builder’s breach.
Don’t delay: New Mexico has a six-year statute of limitations for breach of contract claims under N.M. Stat. § 37-1-3(A). This means that claims based on a contract with the builder must be brought within this period, or they are barred.
An exception to this would be when a homeowner could not have reasonably discovered the existence of the breach until after the period – for example, if the living room ceiling collapses after seven years because the builder didn't properly grout the upstairs shower and water has been slowly seeping into the structure, which the homeowner couldn’t see or have reasonably known about.
Another promising legal theory upon which to sue a New Mexico builder is negligence. Ordinary negligence in the context of construction defects is said to be the builder’s failure to exercise the correct standard of care.
In New Mexico, 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 duty of care; 3) there was a causal link between the failure to meet the standard of care and the resulting construction defect; and 4) you sustained actual economic damages due to the injury to your home.
New Mexico courts have held that builders have an implied duty to perform services required by their contract with homeowners in a skillful, careful, diligent, and workmanlike manner, even without a written agreement. Note that New Mexico has a four-year statute of limitations for property damage caused by basic negligence, found in N.M. Stat. § 37-1-4.
New Mexico’s Statute of Repose may affect your construction-defect litigation. Under N.M. Stat. Ann. § 37-1-27, homeowners have a maximum of ten years in which to sue a builder based on improvements to their real property.
A homeowner who waits until the builder has been “off the job” for ten years is probably barred from filing suit for the alleged construction defect, regardless of when the defect was discovered.
This is different from the law in many other states, where the limitation period is tolled (delayed) based on when the homeowner discovers the existence of the defect. This statute is meant to give certainty to builders and contractors, so that they need not worry about potential claims after ten or more years have gone by.
However, it means that homeowners must be vigilant about the condition of their home to ensure they do not get blocked by the statute. If you see any signs of trouble with the construction of your new home, investigate further rather than waiting for it to fully manifest! A small water stain or other problem could be a sign of something larger lurking beneath or within. The window of the Statute of Repose begins to run regardless of whether the homeowner could have known about the defect in construction.
Before filing your lawsuit, check your contract to see whether other steps must be taken first.
Many construction contracts contain a dispute resolution clause. That clause may provide that the homeowner is required to go to mediation with the builder or developer before filing suit. Mediation, in this situation, means a facilitated negotiation for settlement, led by a third-party neutral individual. Often, that individual will have 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 litigation in a court of law.
In arbitration, either one or three individuals – again, typically with experience in construction – will issue a final determination on your dispute. The advantage of arbitration is that it is usually quicker than litigation, saving you money on legal fees. A potential disadvantage, however, is that the arbitrator's decisions are ordinarily final, that is, not subject to appeal or further court proceedings.
Finally, take note of any aspects of the contract that shorten your statute of limitations or ability to make claims. It is not uncommon for construction contracts to shorten the amount of time that the homeowner has in which to file a legal claim against the builder. An attorney with experience in construction defect litigation in New Mexico will be able to discuss with you whether these limitations can be enforced against you and help you further explore your likely remedies.