Buying a brand new home is exciting. The paint is fresh. The appliances are shiny. The carpet is unblemished. Everything is perfect -- until you notice something that isn’t. Maybe a puddle appears under a window after a rainstorm. Or maybe the grout around the bathroom tile promptly cracks.
Some defects may turn out to be minor. For instance, a few nail heads may punch through the sheetrock, outdoor sprinkler systems may need to be adjusted, or paint may need touching up. A good contractor will promptly fix minor defects that he or she is responsible for. Even if the contractor doesn’t, you may be able to fix them yourself without incurring a significant bill.
What do you do, though, if the defect is major? As a new homebuyer in Oregon, you have rights and remedies.
After discovering a defect in your new home, it is important to act promptly to protect your rights and preserve potential remedies. Here are some steps to take.
You should document any construction-related issues. At a minimum, keep contracts and receipts related to your efforts to repair defects. Taking photos of the damage is also a good idea.
In most cases, one of the first things you should do upon discovering a defect is inform your contractor. If the contractor didn’t do the defective work personally, he or she will know which subcontractor handled it. Between them, they will be in the best position to identify the problem and fix it.
When informing your contractor, be sure to comply with any notice requirements that apply. Some contracts will contain specific notice requirements. Statutory notice requirements may also apply. If you have to sue your contractor to enforce your rights, whether or not you complied with these notice requirements may determine whether you may proceed with your lawsuit.
For the most part, this article uses the terms “contractor” and “builder” interchangeably. However, if you bought your house as part of a new-home development, you may not know who your “contractor” is. In this case, you will want to inform your builder or developer of any defect you discover.
If the contractor won’t fix the problem, or is simply nonresponsive (as sometimes occurs), you may need to contact another contractor to inspect the defect and identify the problem. If it can be fixed easily and inexpensively, you may just want to have the new contractor fix the problem, and leave it at that. (But do save those records, in case you later have to take action over a pattern of defects.)
You won’t help your case by sitting back and watching matters deteriorate. Even if the work is too expensive for you to fix on your own, at least take steps to make sure the problem doesn’t get worse. For example, if there is a leak in the roof that has damaged your ceiling, do what you can to plug it to prevent further damage to the floors, carpeting, and so on – even if you have to leave a full repair for later.
In Oregon, if you fail to mitigate the damage, you may be held responsible for any damage that occurs after you discover the defect.
What remedies are available to you as an Oregon homeowner will be determined by the facts of your case, such as:
If you personally signed an agreement with your contractor to build a new home, he or she should have included a written offer of a warranty against defects in materials and workmanship of the structure. (ORS 701.320). If you accepted this offer, the warranty will cover structural defects (such as the foundation and frame), major home system failures (such as plumbing and heating), and workmanship.
Even if you didn’t personally contract with the contractor to build your new home, you might still be protected by implied warranties if you are the first owner of a newly constructed Oregon home. These warranties include an implied warranty that the house was constructed in a reasonably skillful manner and an implied warranty that it fit for human habitability.
If the defect relates to an appliance, door, or window, the above warranties may not apply. However, the above-listed items may have come with a manufacturer’s warranty. Your contractor should provide you documentation related to any applicable manufacturer’s warranty. If he or she didn’t, most warranty information can be obtained on the company’s website.
In Oregon, the Unlawful Trade Practices Act (UTPA) may also provide you protection as a new-home buyer. If your contractor represented that the “real estate, goods or services are of a particular standard, quality, or grade, or that real estate or goods are of a particular style or model” he or she may have violated UTPA if the real estate, goods, or services are of another standard quality or grade. (ORS 646.608(1)(g)).
If your contractor violated the UTPA, you can bring a suit for damages. If you prevail at trial, you can recover your damages (see below for a description of recoverable damages) as well as your attorney fees. However, a UTPA claim has a short statute of limitations, meaning you must act promptly if want to take advantage of its protections.
You may also have a cause of action against your contractor or builder if he or she:
A contractor who is found to have done one of the above may be required to pay your damages. Whether one or more of these causes of action apply will depend on the facts of your case.
The Construction Contractor Board (CCB) provides a process for new-home buyers with a complaint against a licensed contractor. (ORS 701.145). You are not required to file a complaint with the CCB. If you want to recover from the contractor’s surety bond, though, the sooner you file a complaint with the CCB, the better. If the contractor has other complaints pending, you may find that the bond has been depleted if you wait to file the complaint.
The process attempts to reconcile any dispute through mediation. (ORS 701.145(4)). You will need to make the home available for an investigation or mediation. You will also need to let the contractor on the site for the investigation and mediation.
If mediation is unsuccessful, and if you obtain a judgment or arbitration award, you will be able recover your damages (or at least some of your damages) from your contractor’s surety bond. Such recovery may not be enough to cover all the expenses you incur trying to fix the defect and resolve the dispute with your contractor, but it's better than nothing, especially if the contractor is insolvent or you can’t otherwise collect the debt owed.
Your damages are likely to be the amount it will cost to make you whole again. Damages may include the cost to repair the defect or the difference in value between the as constructed value of the home and the value of the home as contracted for.
Strict timelines and notice requirements apply to new-home defect claims. For instance, before filing a lawsuit or initiating arbitration, you will need to provide your contractor notice of the defect. (ORS 701.565) [http://www.oregonlaws.org/ors/701.565]. You must also provide the contractor an opportunity to inspect the defect. (ORS 701.575.)
A thorough review of all notice requirements and deadlines that may apply to your claim is beyond the scope of this article. To protect your rights and interests, after discovering a defect, contact your attorney to make sure your rights are preserved.