Florida's new construction defect statute: the aggrieved homeowner's obstacle course.

• Author: Lesser, Steven B.

When residential buildings begin to decay and roof tiles blow off in high winds, homeowners can no longer simply march into court and commence litigation against responsible parties. With the recent enactment of Florida's new construction defect statute ("statute"), (1) the aggrieved homeowner now is required to provide contractors and other responsible parties with prior written notice of the alleged construction defects and an opportunity to resolve claims and/or correct construction defects before filing suit. This new law applies to damage claims arising from defects associated with residential construction and excludes claims for personal injury and specific performance. (2)

With the exception of claims arising from alleged medical malpractice, (3) the Florida Legislature had never mandated presuit procedures for any other area of the law. But the recent explosion of mold and mildew cases around the country and the staggering insurance payouts accompanying them prompted our legislature and others to enact "notice and right to cure" laws, (4) which were supposed to diffuse potential litigation and foster settlement. Instead, it is facially apparent that this new law will neither limit the number of mold-related lawsuits nor put construction lawyers and their experts out of business. To the contrary, given the numerous obstacles, ambiguities, and inconsistencies inherent in the statute it will only lead to more litigation and probable constitutional challenges.

This article will discuss and analyze the requirements imposed by Florida's new construction defect statute, identify potential constitutional infirmities associated with it, and offer practical advice for counseling unwary clients on how to avoid the numerous procedural and substantive traps associated with this legislation. The chart on page 26 sets out the statutory time line for compliance with the new provisions.

Summary of the Process

The statute prescribes a procedure for homeowners and contractors to follow prior to the commencement of a lawsuit. (5) First, a person alleging a construction defect ("claimant" or "homeowner") must provide the contractor, subcontractor, supplier, design professional, and others (for ease of reference, collectively referred to as the "contractor") with written notification of the alleged defect(s) at least 60 days before filing a lawsuit, describing that defect in "reasonable detail." (6) Within five business days after service of the notice of claim, the contractor has the right to inspect the dwelling. (7) The inspection may include "destructive testing" by mutual agreement. (8) Within 10 days of receiving notice of the claim, the contractor must forward a copy of it to any other person (i.e., subcontractor, supplier, or design professional) the contractor believes is responsible for the defect. (9) Thereafter, those secondary recipients may also inspect the dwelling in the same manner within five business days after receipt of the notice and issue a written response to the contractor to either repair the defect or dispute the claim. (10) Within 25 days of receiving the notice, the contractor must serve a written response to the claimant. (11) That response must either 1) include a written offer to repair the alleged defect at no cost to the claimant; (12) 2) include a written offer to compromise the claim by monetary payment within 30 days;" (13) or 3) dispute the claim." If the contractor offers to repair or compromise the claim by monetary payment, the claimant has 15 days (or, in the case of a condominium or homeowner association, 45 days) to accept or reject the offer. (15) If the claimant accepts the offer and repair or payment is made, the claimant is thereafter barred from pursuing relief through litigation. If the claimant rejects the offer, it must be done by written notice containing the text of the offer with the word "rejected" printed on it. (16) Significantly, the claimant's failure to reject an offer in strict accordance with this procedure constitutes an acceptance of the offer, whereas no such penalties exist for a contractor's failure to comply with any of these procedures. (17)

These mandatory procedures are the new hurdles a homeowner must clear before pursuing legal action. (18) To the extent a homeowner fails to comply with these specific requirements, the trial court "shall abate" the action without prejudice until the homeowner first complies with such requirements. (19)

Finally, the statute requires that upon entering into all contracts for the "sale, design, construction or remodeling oo a dwelling" the contractor must provide the owner of a dwelling with notice of this dispute resolution procedure. (20) The statute does not create new rights, causes of action, or theories upon which liability may be based. (21)

Hurdles, Obstacles, and Advice

On its face the statute appears to be heavily stacked against the homeowner, but it also contains some provisions that could negatively and unfairly impact the rights of developers, contractors, design professionals, subcontractors, and suppliers.

1) What Constitutes "Reasonable Detail"?

The initial requirement that a claimant identify the alleged defects in "reasonable detail" serves as the only criterion when preparing a notice of claim. (22) As any lawyer can imagine, the use of the word "reasonable" is a pandora's box that inevitably will lead to controversy. Consequently, a contractor could conceivably question whether each and every notice of claim adequately describes an alleged construction defect with "reasonable detail" and immediately move to abate the litigation on this basis alone.

In order to minimize the likelihood of a successful "reasonable detail" challenge, a homeowner should retain a qualified consultant to thoroughly inspect the dwelling to discover the nature and extent of potential deficiencies. (23) This would include identifying defects that violate applicable codes or standards associated with the construction. (24) If the defect exists throughout a dwelling or condominium or homeowner community, this fact along with any known damages should be specified. (25) Omitted components required by the design documents should also be included in the notice. (26)

2) Logistical Nightmare Caused by Short Inspection Window

* Not Enough Time to Inspect

The statute provides a contractor with five business days' right of inspection following receipt of the initial claim. (27) While this short time frame may not appear to be problematic with respect to a single-family home, it is impractical for larger housing developments, especially since the statute permits multiple defects to be alleged in a single claim notice. (28) For example, suppose a developer receives a notice of claim listing 50 separate defects in a 200-unit condominium. Under this circumstance, the developer would only have five business days to investigate and conduct a comprehensive inspection of the multiunit residential condominium project. For that matter, arranging to conduct an inspection of just a single-family home within five business days could pose a challenge to most developers, contractors, subcontractors, suppliers, and design professionals.

Taking advantage of this one-time opportunity to inspect and resolve a construction defect claim without litigation is nearly impossible for out-of-state companies. By the time the notice is served and the contractor arranges for someone to conduct the inspection, the opportunity may have already expired. The practical result of these impractical procedures will be that these inspections may never occur.

* Preparing for Investigation and Inspection

As the above hypothetical illustrates, many participants in the construction process, particularly those involved in the development of large-scale residential communities, may not be equipped to promptly inspect, investigate, and respond to claims. This is especially true of development companies that often dismantle following a sellout of dwelling units, or those that no longer have a local presence. In dealing with the dilemma associated with these short time frames, developers, contractors, design professionals, subcontractors, and suppliers should develop a procedure that will be followed once a claim notice is received. (29) In the future, at the outset of a new residential construction project, developers should contractually obligate the general contractor and/or design professional to timely investigate, conduct an inspection, and evaluate the cost to correct the defect. Similarly, these same parties should negotiate indemnity agreements to address their respective obligations and liability for construction defects. (30) To the extent that the contractor and other parties cannot internally handle the investigative and inspection phases, outside forensic construction professionals should be retained.

Prior to the inspection, the contractor should review the original plans, specifications, and warranty information as well as all original design and construction agreements. This effort also may reap benefits when seeking to shift ultimate responsibility for a construction defect to secondary parties. During the inspection, the contractor should photograph and videotape the alleged defective conditions as well as compile data to enable preparation of a cost estimate. Should a resolution not be reached, the contractor can later use this data during litigation to graphically demonstrate that the defective condition has gotten worse--due to lack of maintenance and/or due to a...