SECOND REGULAR SESSION
[P E R F E C T E D]
SENATE SUBSTITUTE FOR
SENATE COMMITTEE SUBSTITUTE FOR
SENATE BILL NO. 1081
92ND GENERAL ASSEMBLY
INTRODUCED BY SENATOR KINDER.
Offered March 29, 2004.
Senate Substitute adopted, March 30, 2004.
Taken up for Perfection March 30, 2004. Bill declared Perfected and Ordered Printed, as amended.
TERRY L. SPIELER, Secretary.
3591S.07P
AN ACT
To amend chapter 431, RSMo, by adding thereto seven new sections relating to resolution of disputes concerning alleged defective residential construction.
Section A. Chapter 431, RSMo, is amended by adding thereto seven new sections, to be known as sections 431.300, 431.303, 431.306, 431.309, 431.312, 431.315, and 1, 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 petition, complaint, counterclaim, or cross-claim, for damage to, diminution in the value of, or the loss of use of real or personal property caused by an alleged construction defect or any civil lawsuit, action, or arbitration proceeding, in contract or tort, or otherwise, for damages or indemnity, brought by petition, complaint, counterclaim, or cross claim, alleging any action on account or breach of a covenant or promise to pay money. Action does not include any civil action in tort alleging personal injury or wrongful death to a person or persons resulting from an alleged 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 an alleged construction defect;
(4) "Construction defect", for the purposes of sections 431.300 to 431.315, a deficiency in, or a deficiency arising out of, any of the following:
(a) Defective material, products, or components used in new residential construction or from a substantial remodel;
(b) Violation of the applicable codes and ordinances, including those ordinances which regulate zoning and the subdivision of land, in effect at the time of the commencement of construction of residential improvements, or as to a substantive remodel, at the commencement of such substantial remodel; provided however, that any matter that is in compliance with applicable codes and ordinances, including without limitation, those ordinances which regulate zoning and the subdivision of land, in effect at the commencement of construction of residential improvements, or to a substantial remodel as the case may be, shall conclusively establish that such matter is not, nor shall it be deemed or construed to be a construction defect, unless a construction defect as to such matter is established because of defective material, products, or components used in new residential construction or in a substantial remodel;
(c) Failure to construct residential improvements in accordance with accepted trade standards for good and workmanlike construction at the time of construction. Compliance with the applicable codes and ordinances, including without limitation, those ordinances which regulate zoning and the subdivision of land, in effect at the commencement of construction, or of a substantial remodeling as the case may be, shall conclusively establish construction in accordance with accepted trade standards for good and workmanlike construction, with respect to all matters specified in those codes;
(d) Failure to construct residential improvements in accordance with the agreement between the contractor and the homeowner or association, notwithstanding anything to the contrary in this subdivision;
(5) "Contractor", any person, company, firm, partnership, corporation, association, or other entity that is engaged in the business of designing, developing, constructing, or substantially remodeling residences;
(6) "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;
(7) "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. Residence shall not include a manufactured home as defined in section 700.010, RSMo;
(8) "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;
(9) "Substantial remodel", a remodel of a residence, for which the total cost exceeds one-half of the assessed fair market value of the residence for property tax purposes at the time the contract for the remodel work was made.
431.303. 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 pursuant to sections 431.300 to 431.315. 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 PROVIDES YOU WITH CERTAIN RIGHTS IF YOU HAVE A DISPUTE WITH A CONTRACTOR REGARDING CONSTRUCTION DEFECTS. IF YOU HAVE A DISPUTE WITH A CONTRACTOR, YOU MUST DELIVER TO THE CONTRACTOR A WRITTEN CLAIM OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE AND PROVIDE YOUR CONTRACTOR THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY THE CONTRACTOR. UNLESS YOUR CONTRACTOR REFUSES TO RESPOND TO YOUR NOTICE OR REFUSES TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS, YOU WILL BE REQUIRED TO ATTEMPT TO RESOLVE YOUR DISPUTE THROUGH MEDIATION PRIOR TO FILING SUIT. BEFORE YOU MAY FILE A LAWSUIT, YOU MUST FILE A CLAIM AS NOTED ABOVE AND ATTEMPT TO RESOLVE THE CONSTRUCTION DEFECT DISPUTE AT LEAST THIRTY DAYS BEFORE YOU FILE A LAWSUIT. READ THIS NOTICE CAREFULLY. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER SECTIONS 431.300 TO 431.315 WHICH MUST BE OBEYED IN ORDER TO PRESERVE YOUR ABILITY TO FILE A LAWSUIT. OTHER THAN REPAIRS TO WORK DONE BY THE CONTRACTOR THAT ARE NECESSARY TO PROTECT THE LIFE, HEALTH, OR SAFETY OF PERSONS LIVING IN A RESIDENCE, OR TO AVOID ADDITIONAL SIGNIFICANT AND MATERIAL DAMAGE TO THE RESIDENCE PURSUANT TO SECTION 431.306(10), YOU MAY NOT INCLUDE IN CLAIMS AGAINST YOUR CONTRACTOR THE COSTS OF OTHER REPAIRS YOU PERFORM BEFORE YOU ARE ENTITLED TO FILE A LAWSUIT UNDER SECTIONS 431.300 TO 431.315.
3. (1) Nothing in sections 431.300 to 431.315 shall preclude or bar any action if a notice is not given to the homeowner or association as required by this section or the contractor does not otherwise comply with the provisions of 431.300 to 431.315.
(2) If notice is not given to the homeowner or association as required by this section, such party may immediately file an action in circuit court without further delay. If the homeowner or association files such an action in circuit court, the homeowner or association shall attach as an exhibit to any initial pleading a copy of the contract for sale, construction, or substantial remodel of a residence as evidence that notice was not given as required by this section.
(3) If the homeowner or association asserts that the contractor has failed to comply with any provision of sections 431.300 to 431.315 other than this section, such party may, by motion to the mediator, ask the mediator to certify the same by signed affidavit. The party filing an action in circuit court, whether by claim, counterclaim, or cross claim, shall attach to any pleading asserting a claim, counterclaim or cross claim an affidavit from the mediator stating either that mediation has occurred and not resolved the dispute or that the contractor has not complied with sections 431.300 to 431.315.
431.306. 1. In every action against a contractor arising from construction or substantial remodel of a residence, a claimant shall serve the contractor with a written notice of claim of construction defects. The claimant must wait thirty days after serving the contractor with the written notice of claim of construction defect before filing an action or before becoming a member of a class certified pursuant to the applicable rules of civil procedure. 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 sufficient to determine the general nature of the defect as well as any 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 within a specified time frame, compromise by payment, or dispute the claim; or
(2) Offer to remedy the claim without an inspection within a specified time frame; or
(3) Offer to remedy part of the claim without inspection and compromise and settle the remainder of the claim by monetary payment within a specified time frame; or
(4) Offer to compromise and settle all of a claim 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
(5) 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 (5) 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 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 431.312. If the claim is not resolved through mediation, the claimant may bring an action against the contractor for the construction defect 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 without further notice.
(3) If the claimant elects to accept the offer of the contractor to remedy the claim without an inspection pursuant to subdivision (2) of subsection 2 of this section, or if the claimant elects to accept the offer of the contractor to remedy part of the claim without inspection and compromise and settle the remainder of the claim by monetary payment pursuant to subdivision (3) of subsection 2 of this section, 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 in accordance with 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 431.312. If the dispute is not resolved by mediation, the claimant may bring an action against the contractor for the construction defect.
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, within fourteen days after the date of the claimant's election to allow an inspection is communicated to the contractor, the claimant and contractor shall agree on a time and date for the inspection, and such inspection shall occur within thirty days from the date of the communication of such election for an inspection unless the claimant and contractor agree to a later date. 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 all of the claim 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 remedy part of the claim, and compromise and settle the remainder of the claim by monetary payment, within a specified time frame; or
(c) A written offer to compromise and settle all of the claim by monetary payment pursuant to subdivision (2) of subsection 2 of this section; or
(d) 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 without further notice.
(4) If the claimant rejects the offer made by the contractor pursuant to paragraph (a), (b), or (c) of subdivision (2) of this subsection to either remedy the construction defect or remedy part of the claim and make a monetary settlement as to the remainder of the claim 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 431.312. If the dispute is not resolved through mediation, the claimant may bring an action against the contractor for the construction defect 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), (b), or (c) 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 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 subcontractors 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 431.312. If the dispute is not resolved by mediation, the claimant may bring an action against the contractor for the construction defect.
(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. 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 for a period equal to sixty days plus the period from service by a claimant of a notice of claim as required pursuant to subsection 1 of section 431.306 through the date on which a claimant may proceed with an action as provided under sections 431.300 to 431.315.
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, except as otherwise permitted by law. A written notice of claim and any written response by a contractor shall not be admissible as a prior inconsistent statement.
10. In the event that immediate action must be taken by a homeowner to prevent imminent injury to a person because of alleged construction defects that threaten the life, physical health not including mental or emotional health, or safety of persons, or alleged construction defects that if not addressed, will result significant and material additional damage to the residence or another person designated by the homeowner, including the contractor, may undertake reasonable repairs necessary to mitigate the emergency situation. Homeowners may thereafter include the cost of such repairs in the written notice of claim of construction defects provided for in subsection 1 of this section. Provided, however, that other than the undertaking of immediate repairs to remedy an emergency situation pursuant to this subsection, any repairs to construction defects undertaken by homeowners may not be included in claims initiated pursuant to subsection 2 of this section, and shall not be the subject of an action.
431.309. 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 a construction defect, 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.
431.312. 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 431.306, or a contractor takes no action to remedy a defect following inspection, or takes no action following an offer to remedy or takes no action following an offer to remedy part of a defect and compromise and settle the remainder, or does not provide a written offer to remedy or compromise as provided in section 431.306, 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. Statements made during the mediation hearing by any party claimant, any party contractor, or any attorney or other agent of a party claimant or party contractor shall not be admissible in a subsequent action.
4. Notwithstanding any provisions of law or the agreements of the parties to the contrary, the resolution of the dispute by the parties through mediation or otherwise shall not operate to release any claim of the claimant except the claim described in the notice of defect, and shall not operate to release the claim described in the notice of defect until the agreed upon remedy has been accomplished. A claimant may not bring an action until the agreed upon remedy has been completed and the parties have executed an appropriate release.
431.315. 1. 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 on or to limit any causes of action or remedies otherwise available to a homeowner or contractor pursuant to law after giving effect to the provisions of sections 431.300 to 431.315, 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.
2. Nothing in sections 431.300 to 431.315 shall be construed to prevent contracts between contractors and homeowners from specifying that disputes shall be resolved by binding arbitration pursuant to chapter 435, RSMo. In contracts between contractors and homeowners that specify binding arbitration as the means of dispute resolution, sections 431.300 to 431.315 shall not be applicable; provided, in those contracts between contractors and homeowners that specify binding arbitration as the means of dispute resolution, the contractor shall provide notice, pursuant to section 435.460, that disputes may be resolved by binding arbitration and sections 431.300 to 431.315 are not applicable to such transactions.
Section 1. The provisions of sections 431.300 through 431.315 shall not apply to any claim of a homeowner against a contractor if such contractor failed to provide the written notice required by section 431.303.