Over the last few years, I've accepted representation in an increasing number of residential construction defect cases, on behalf of both homeowners and contractors. In most cases however, it is the homeowner who comes to me with complaints about their general contractor's performance and workmanship. By the time a homeowner contacts me, they typically have already exhausted their direct remedies with the construction professional, whether it be claims under a warranty provided by the contractor and/or informal efforts to remedy perceived defects. Obviously, when they come to my office, most homeowners are at the point of wanting to sue their contractor to fix the defective construction.
A lot of these potential clients are surprised to learn they cannot go straight to the courthouse, but rather must first comply with the provisions of Idaho's Notice and Opportunity to Repair Act (NORA), Idaho Code § 6-2501, et seq. When I advise them of this hurdle, I routinely hear: “I don't want those @#$%^! back in my house!” I'm guessing I get this feedback because of the implications associated with an “opportunity to repair.” I understand that by the time they are in my office, the homeowner's relationship with the contractor has most likely deteriorated to the point that he or she does not want the contractor to step foot in their house again. Unfortunately, this does not mean you can skip the requirements of NORA. However, as counterintuitive as it may sound, you will see herein that complying with NORA before filing suit does not necessarily require a homeowner to give the contractor an “opportunity to repair” any defects. That is not to say there are no possible consequences of rejecting a reasonable offer, because rejecting a reasonable offer can affect the recoverable damages.
NORA generally provides that before an aggrieved homeowner can sue his or her contractor for claimed defects, the homeowner must provide written notice of the claimed defects to the construction professional and engage in a scripted negotiation process. Failure to do so can be fatal to your possible claims. NORA unequivocally states: “Any action commenced by a claimant prior to compliance with the requirements of this section shall be dismissed by the court without prejudice and may not be recommenced until the claimant has complied with the requirements of this section.” However, NORA only applies to residential construction and only when the subject construction project meets the definition of a “substantial remodel.”
“Residence” is defined as a “single-family house, duplex, triplex, quadraplex, condominium or unit in a multiunit residential structure in which title to each individual unit is transferred to the owner under a cooperative system.” “Substantial remodel” is defined as “a remodel of a residence, for which the total cost exceeds one-half (1/2) of the assessed value of the residence for property tax purposes at the time the contract for the remodel work was made.” Idaho Code § 6-2502(9). The question of whether the project was a substantial remodel, requiring NORA compliance, can be contentious. While the tax assessed value of the residence is definitive, the “total cost” of the remodel may be in dispute. For example, if the contractor's initial bid was for an amount less than 50% of the property's value, but material costs or later approved changes bring the cost of the project over 50%, does NORA apply? What if the contractor's bid is over 50% of the residence's value, but the contractor only completes a small portion of the remodel before abandoning the project or being fired by the homeowner—does NORA apply?
You may simply say, “Why not just comply with NORA to be safe?” This is typically what I advise my clients, but sometimes by the time a client discovers this statute applies, it may be too late to comply. I've had new clients tell me they fired their contractor and hired a replacement contractor to tear out, repair and replace the defective work, and now they want to file suit against the first contractor for the associated costs. Under such circumstances, if NORA applies, it may be impossible to give such a contractor a chance to inspect or an “opportunity to repair.”
Assuming for purposes of this discussion NORA applies, what is required before you can file suit? As previously mentioned, NORA requires a written notice of the claimed defects be served on the construction professional. As for the level of detail, NORA provides: “The notice of claim shall state that the claimant asserts a construction defect claim against the construction professional and shall describe the claim in reasonable detail sufficient to determine the general nature of the defect.” It is not rocket science, but the notice requires more than “Your work is defective.” Service of the varied notices can be achieved by “personal service or delivery by certified mail to the last known address of the addressee.”
Once the construction professional receives adequate NORA notice, he or she has twenty-one (21) days to serve a written response on the homeowner. The contractor's written response contain one of three available responses: (1) propose to inspect the residence and to complete the inspection within a specified time frame, plus include a statement that the contractor shall thereafter offer to remedy the defect, settle the claims by an offered payment, or dispute the claim; (2) offer to compromise and settle the claim by monetary payment without inspection; or (3) state that the construction professional disputes the claim and will neither remedy the construction defect nor compromise and settle the claim.
If the contractor disputes the claim or simply fails to respond within twenty-one (21) days, the homeowner may commence his or her lawsuit without further notice. If the contractor requests an opportunity to inspect or offers a monetary settlement payment, the homeowner has thirty (30) days to either accept or reject the offer. If the homeowner rejects the inspection proposal or settlement offer, he or she is required to serve written notice of such rejection on the contractor, and the homeowner may then immediately pursue their legal claims in court. If the homeowner fails to accept or reject the contractor's offer within thirty (30) days, the construction professional may terminate the proposal or offer by serving written notice to the homeowner, which then allows the homeowner to begin litigation.
If the homeowner consents to the construction professional's proposal to inspect the residence, the homeowner shall provide the construction professional (as well as their subcontractors and other agents) “reasonable access to the claimant's residence during normal working hours to inspect the premises and the claimed defect.” Within fourteen (14) days following completion of the inspection, the contractor is required to serve on the claimant one of three responses: (1) 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 additional construction necessary to remedy the defect described in the claim and a timetable for the completion of such construction; (2) a written offer to compromise and settle the claim by monetary payment; or (3) a written statement denying the claims and offering to do nothing to remedy the defects.
If the contractor denies the claims or fails to serve a response within fourteen (14) days following the inspection, the homeowner may commence the lawsuit. Even if the contractor elects option 1 or 2 described immediately above, the homeowner still has the option to reject such offer by serving the contractor with written notice of such rejection. After service of such notice of rejection, the homeowner may bring the lawsuit based on the construction defects in the original notice of claim. If the contractor has not received a response from the homeowner within thirty (30) days after the offer to remedy the defects following inspection, then the contractor may withdraw and terminate its offer by serving written notice to the homeowner.
If the homeowner wishes to accept the contractor's offer of compromise, he or she is required to serve the contractor with a written notice of acceptance within thirty (30) days after receipt of the offer. The homeowner thereafter is required to provide the contractor (as well as the subcontractors and other agents) “reasonable access to the claimant's residence during normal working hours to perform and complete the construction by the timetable stated in the offer.” If thereafter, the contractor fails to perform the construction agreed upon, fails to remedy the defect, or fails to perform by the agreed timetable, the homeowner can commence litigation based upon the noticed construction defects.
In a suit subject to NORA, a homeowner's damages are limited to certain categories of damages: (a) the reasonable cost of repairs necessary to cure any construction defect, including any reasonable and necessary engineering or consulting fees required to evaluate and cure the construction defect, that the contractor is responsible for repairing under this chapter; (b) the reasonable expenses of temporary housing reasonably necessary during the repair period; (c) the reduction in market value, if any, to the extent that the reduction is due to structural failure; and (d) reasonable and necessary attorney's fees. Further, in all cases, the total damages awarded in a suit may not exceed the greater of the homeowner's purchase price for the residence or the current fair market value of the residence without the construction defect.
However, if the contractor fails to make a reasonable offer or fails to make a reasonable attempt to complete the repairs specified in an accepted offer, or fails to complete, in a good and workmanlike manner, the repairs specified in an accepted offer, the limitations on damages and defenses to liability provided for in NORA do not apply.
On the other hand, if the homeowner denies a request to inspect the house, unreasonably rejects an offer to remedy the construction defect, or does not permit the construction professional a reasonable opportunity to repair the defect pursuant to an accepted offer of settlement, the homeowner may not recover an amount in excess of: (a) the reasonable cost of the offered repairs which are necessary to cure the construction defect and which are the responsibility of the construction professional; or (b) the amount of a reasonable monetary settlement offer made; and (c) the amount of reasonable and necessary attorney's fees and costs incurred before the offer was rejected or considered rejected.
As additional protection for contractors, NORA enumerates several affirmative defenses available to contractors, such as showing: (a) an unforeseen act of nature caused the structure not to meet the standard; (b) the homeowner unreasonably failed to minimize or prevent the damages in a timely manner; and (c) the homeowner failed to follow the builder's or manufacturer's recommendations or commonly accepted homeowner maintenance obligations.
If you are unsure whether NORA applies, and if it is not too late to comply, it likely is a good idea to take efforts to comply to avoid your lawsuit being dismissed. Further, despite the hard feelings a homeowner may have against the contractor, any reasonable offer to remedy the defects or settle the claims should not be rejected out-of-hand, as such a decision could greatly limit the available damages. If you have questions about how to comply with NORA or whether it even applies, you should speak with a lawyer who practices in this field.