SECOND REGULAR SESSION
SENATE BILL NO. 1081
92ND GENERAL ASSEMBLY
INTRODUCED BY SENATORS KINDER, GROSS, COLEMAN, CLEMENS, KENNEDY, SHIELDS, CAUTHORN,
CALLAHAN, DOLAN, LOUDON, GRIESHEIMER AND YECKEL.
Read 1st time January 15, 2004, and ordered printed.
TERRY L. SPIELER, Secretary.
3591S.01I
AN ACT
To amend chapter 431, RSMo, by adding thereto six new sections relating to resolution of disputes concerning alleged defective residential construction.
Section A. Chapter 431, RSMo, is amended by adding thereto six new sections, to be known as sections 431.300, 431.303, 431.306, 431.309, 431.312, and 431.315, to read as follows:
431.300. As used in sections 431.300 to 431.315, unless the context clearly requires otherwise, the following terms shall mean:
(1) "Action", any civil lawsuit, action, or arbitration proceeding, in contract or tort, or otherwise, for damages or indemnity, brought to assert a claim, whether by complaint, counterclaim, or cross-claim, for damage to or the loss of use of real or personal property caused by an alleged defect arising out of or related to the design, construction, condition, or sale of a residence or substantial remodel of a residence. Action does not include any civil action in tort alleging personal injury or wrongful death to a person or persons resulting from a construction defect;
(2) "Association":
(a) An association or unit owners' association as defined and provided for in subdivision (3) of section 448.1-103, RSMo;
(b) A homeowner's association, including but not limited to a nonprofit corporation or unincorporated association of home owners created pursuant to a declaration to own and operate portions of a planned community or other residential subdivision and which has the power under the declaration to assess association members to pay the costs and expenses incurred in the performance of the association's obligations under the declaration, or tenants-in-common with respect to the ownership of common areas or amenities of a planned community or other residential subdivision; or
(c) Any cooperative form of ownership of multiunit housing;
(3) "Claimant", a homeowner or association which asserts a claim against a contractor concerning a defect arising from the design, construction, or sale of a residence or in the substantial remodel of a residence;
(4) "Contractor", any person, company, firm, partnership, corporation, association or other entity that is engaged in the business of designing, developing, constructing, or remodeling residences;
(5) "Homeowner", any person, company, firm, partnership, corporation, association, or other entity who contracts with a contractor for the construction, substantial remodel of a residence, or the sale of a residence constructed by such contractor. Homeowner also includes a subsequent purchaser of a residence from any homeowner;
(6) "Residence", a single-family house, duplex, triplex, quadraplex, or a unit in a multiunit residential structure in which title to each individual unit is transferred to the owner under a condominium or cooperative system, and shall include common areas and common elements as defined in subdivision (4) of section 448.1-103, RSMo. Residence shall include the land and improvements to land under and around the house, unit, or structure;
(7) "Serve" or "service", personal service to the person intended to be notified or mailing by certified mail to the last known address of such person;
(8) "Substantial remodel", a remodel of a residence, for which the total cost exceeds one-half of the assessed value of the residence for property tax purposes at the time the contract for the remodel work was made.
431.303. 1. In every action against a contractor arising from construction or substantial remodel of a residence, a claimant shall, not less than ninety days before filing an action, serve the contractor with a written notice of claim of construction defects. The notice of claim shall state that the claimant asserts a construction defect claim against the contractor and shall describe the claim in reasonable detail and provide supporting documentation sufficient to determine the general nature of the defect and known results of the defect.
2. Within thirty days after service of the notice of claim, the contractor shall serve a written response on the claimant which shall:
(1) Propose to inspect the residence that is the subject of the claim and to complete the inspection within a specified time frame. The proposal shall include the statement that the contractor shall, based on the inspection, thereafter offer to remedy the defect, compromise by payment, or dispute the claim;
(2) Offer to compromise and settle the claim by monetary payment without inspection. A contractor's offer pursuant to this subdivision to compromise and settle a homeowner or association's claim may include, but is not limited to, an express offer to purchase the claimant's residence that is the subject of the claim; or
(3) State that the contractor disputes the claim and will neither remedy the construction defect nor compromise and settle the claim.
3. (1) If the contractor disputes the claim pursuant to subdivision (3) of subsection 2 of this section or does not respond to the claimant's notice of claim within the time stated in subsection 2 of this section, the claimant may bring an action against the contractor for the defect described in the notice of claim without further notice.
(2) If the claimant rejects the inspection proposal or the settlement offer made by the contractor pursuant to subsection 2 of this section, the claimant shall serve written notice of the claimant's rejection on the contractor. The notice shall include the basis for claimant's rejection. After service of the rejection, the claimant and contractor shall attempt to resolve the claim through mediation in accordance with section 431.309. If the claim is not resolved through mediation, the claimant may bring an action against the contractor for the construction defect claim described in the notice of claim without further notice. If the contractor has not received from the claimant within thirty days after the claimant's receipt of the contractor's response either an acceptance or rejection of the inspection proposal or settlement offer, the contractor may at any time thereafter terminate the proposal or offer by serving written notice to the claimant. If the contractor so terminates the proposal, the claimant may thereafter bring an action against the contractor for the construction defect claim described in the notice of claim without further notice.
4. (1) If the claimant elects to allow the contractor to inspect in accordance with the contractor's proposal pursuant to subdivision (1) of subsection 2 of this section, the claimant shall provide the contractor and its subcontractors, suppliers, or other agents reasonable access to the claimant's residence during normal working hours to inspect the premises and the claimed defect. The contractor shall perform the inspection at its own cost. If destructive testing is necessary, the contractor shall repair all damage caused by the testing.
(2) Within fourteen days following completion of the inspection, the contractor shall serve on the claimant:
(a) A written offer to remedy the construction defect at no cost to the claimant, including a report of the scope of the inspection, the findings and results of the inspection, a description of the construction or work necessary to remedy the defect described in the claim, and a timetable for the completion of such construction or work;
(b) A written offer to compromise and settle the claim by monetary payment pursuant to subdivision (2) of subsection 2 of this section; or
(c) A written statement that the contractor will not proceed further to remedy the defect.
(3) If the contractor does not proceed further to remedy the construction defect within the stated timetable, or if the contractor fails to comply with the provisions of subdivision (2) of this subsection, the claimant may bring an action against the contractor for the claim described in the notice of claim without further notice.
(4) If the claimant rejects the offer made by the contractor pursuant to paragraph (a) or (b) of subdivision (2) of this subsection to either remedy the construction defect or to compromise and settle the claim by monetary payment, the claimant shall serve written notice of the claimant's rejection and the reasons for the rejection on the contractor. After service of the rejection notice, the claimant and contractor shall attempt to resolve the dispute through mediation in accordance with section 431.309. If the dispute is not resolved through mediation, the claimant may bring an action against the contractor for the construction defect claim described in the notice of claim. If the contractor has not received from the claimant within thirty days after the claimant's receipt of the contractor's response either an acceptance or rejection of the offer made pursuant to paragraph (a) or (b) of subdivision (2) of this subsection, the contractor may at any time thereafter terminate the offer by serving written notice to the claimant. If the contractor so terminates its offer, the claimant may bring an action against the contractor for the claim described in the notice of claim without further notice.
5. (1) Any claimant accepting the offer of a contractor to remedy the construction defect pursuant to paragraph (a) of subdivision (2) of subsection 4 of this section shall do so by serving the contractor with a written notice of acceptance within a reasonable time period after receipt of the offer, and no later than thirty days after receipt of the offer. The claimant shall provide the contractor and its contractors or other agents reasonable access to the claimant's residence during normal working hours to perform and complete the construction or work by the timetable stated in the offer. Any dispute relating to performance of the remedial construction or work by the contractor shall be subject to mediation in accordance with section 431.309. If the dispute is not resolved by mediation, the claimant may bring an action against the contractor for the construction defect set forth in the notice of claim.
(2) The claimant and contractor may, by mutual written agreement, alter the extent of construction or the timetable for completion of construction stated in the offer, including, but not limited to, repair of additional defects.
6. Any action commenced by a claimant prior to compliance with the requirements of this section shall, upon motion by a party to the action, be subject to dismissal without prejudice, and shall not be recommenced until the claimant has complied with the requirements of this section.
7. Prior to commencing any action alleging a construction defect or after the dismissal of any action without prejudice pursuant to subsection 6 of this section, the claimant may amend the notice of claim to include construction defects discovered after the service of the original notice of claim and shall otherwise comply with the requirements of this section for the additional claims. The service of an amended notice of claim shall relate back to the original notice of claim for purposes of tolling statutes of limitations and repose. Claims for defects discovered after the commencement or recommencement of an action may be added to such action only after providing notice to the contractor of the defect and allowing for response under subsection 2 of this section.
8. A claimant's written notice of claim pursuant to subsection 1 of this section shall toll the applicable statute of limitation until ninety days after receipt by contractor of the written notice of claim, or ninety days after mediation required by this section, whichever is later.
9. A written notice of claim and any written response by a contractor shall be treated as a settlement offer and shall not be admissible in an action related to a construction defect asserted therein.
431.306. 1. (1) If an association or an executive board acting on behalf of an association institutes an action asserting defects in the construction of two or more residences, common elements, or common areas, the provisions of this section shall apply. For purposes of this section, "action" has the same meaning as set forth in subsection 1 of section 431.300.
(2) The board of directors or executive board of the association shall substantially comply with the provisions of this section.
2. (1) Prior to filing an action alleging defective construction, the association or board of directors or executive board shall serve written notice of the anticipated commencement of such action to each homeowner who is a member of the association at the last known address described in the association's records.
(2) The notice required by subdivision (1) of this subsection shall state a general description of the following:
(a) The nature of the action and the relief sought; and
(b) The expenses and fees that the board of directors or executive board anticipates will be incurred in prosecuting the action.
(3) The association or board of directors or executive board shall obtain written consent to proceed with the action from a majority of the homeowners who are members of the association.
3. Nothing in this section shall be construed to:
(1) Require the disclosure in the notice or the disclosure to a unit owner of attorney-client communications or other privileged communications;
(2) Permit the notice to serve as a basis for any person to assert the waiver of any applicable privilege or right of confidentiality resulting from or to claim immunity in connection with the disclosure of information in the notice; or
(3) Limit or impair the authority of the association or executive board to contract for legal services, limit or impair the ability of the association or executive board to make such repairs to a unit, common area, or common element as are required to protect the health, safety, and welfare of the units' owners, or limit or impair the ability to enforce such a contract for legal services.
431.309. 1. Unless a contractor either fails to respond to a written notice of claim or completely disputes a written notice of claim and refuses to remedy pursuant to subdivision (1) of subsection 3 of section 431.303, or a contractor takes no action to remedy a defect following inspection or does not provide a written offer to remedy or compromise as provided in section 431.303, a claimant shall attempt to resolve a claim against a contractor through mediation before commencing an action against a contractor arising from construction or substantial remodel of a residence. Mediation pursuant to this section shall be nonbinding and the contractor and claimant shall mutually agree upon a qualified independent mediator and shall equally share the cost of the mediator. If the parties cannot agree upon a mediator, either party may request appointment of a mediator by a court with jurisdiction. The mediation shall take place within a reasonable time period, but in no event later than forty-five days after service of a request for mediation by a claimant upon a contractor or a request by a contractor upon a claimant. A contractor which receives a request for mediation from a claimant shall serve a response in writing within fourteen days and shall include within the response the name of a proposed mediator and mediation date. A claimant who receives a request for mediation from a contractor shall serve a response in writing within fourteen days and shall include within the response the name of a proposed mediator and mediation date.
2. A contractor may include in the mediation any party reasonably necessary for resolution of the claim asserted, including but not limited to subcontractors, suppliers, insurers, or other agents. This subsection shall not be construed to mandate attendance at a mediation by a party other than the contractor served with a notice of claim.
3. Documents and statements presented by the claimant, contractor, or other party in the course of the mediation shall not be admissible in an action related to a construction defect asserted therein.
431.312. 1. The contractor shall provide notice to each homeowner upon entering into a contract for sale, construction, or substantial remodel of a residence of the contractor's right to offer to cure construction defects before a homeowner may commence litigation against the contractor. Such notice shall be conspicuous and may be included as part of the underlying contract signed by the homeowner. In the sale of a condominium unit, the requirement for delivery of such notice shall be deemed satisfied if contained in a public offering statement in accordance with the laws of this state.
2. The notice required by this subsection shall be in substantially the following form:
SECTIONS 431.300 TO 431.315 OF MISSOURI REVISED STATUTES CONTAIN IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MAY FILE A LAWSUIT FOR DEFECTIVE CONSTRUCTION AGAINST THE SELLER OR BUILDER OF YOUR HOME. NINETY DAYS BEFORE YOU FILE YOUR LAWSUIT, YOU MUST DELIVER TO THE SELLER OR BUILDER A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE AND PROVIDE YOUR SELLER OR BUILDER THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY THE BUILDER OR SELLER. UNLESS YOUR SELLER OR BUILDER REFUSES TO RESPOND TO YOUR NOTICE OR REFUSES TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS, YOU ARE REQUIRED TO ATTEMPT TO RESOLVE YOUR DISPUTE THROUGH MEDIATION PRIOR TO FILING SUIT. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER STATE LAW, AND FAILURE TO FOLLOW THEM MAY AFFECT YOUR ABILITY TO FILE A LAWSUIT.
3. Nothing in sections 431.300 to 431.315 shall preclude or bar any action if notice is not given to the homeowner or association as required by this section.
431.315. Nothing in sections 431.300 to 431.315 shall be construed to create a theory or cause of action upon which liability may be based, nor to hinder or otherwise affect the employment, agency, or contractual relationship between homeowners and contractors during the process of construction or remodeling, and does not preclude the termination of those relationships as allowed under current law. Nothing in sections 431.300 to 431.315 shall negate or otherwise restrict a contractor's right to access or inspection provided by law, covenant, easement, or contract.