March 24, 2005
Construction 'right to cure' statute full of pitfalls
By JOHN E. ZEHNDER JR. and ANTHONY R. SCISCIANI III
Scheer & Zehnder
In 2002, the Legislature enacted RCW 64.50 (the "right to cure" statute), purporting to give a builder the right to repair construction defects before a homeowner could file a lawsuit. Unfortunately, the Legislature stopped short of putting any real teeth into the statute.
The basic requirement under the right to cure statute is that, 45 days before a homeowner (or a condominium association) can file suit against a builder for construction defects, the homeowner must provide the builder with written notice of the claim.
The claim must reasonably describe the defects. Then, the builder has 21 days to respond by: 1) proposing an inspection; 2) offering to pay money or buy back the residence; or 3) disputing the claim. If an inspection is proposed, the builder can thereafter offer to cure the defects, pay money or dispute the claim.
If a builder chooses to dispute the claim, the homeowner can immediately file suit. Equally unsurprising, if a builder offers to pay money or buy back the residence, the homeowner can reject the offer and file suit.
But what if the builder chooses to inspect the home and then offers to repair all the defects? You would expect that the builder, in fairness, must be given that opportunity, right? You would be wrong.
Regardless of the builder's offer to repair the residence, no matter how comprehensive and fair that offer might be, the homeowner has the right to refuse the offer and file suit. In fact, if the builder proposes an inspection in response to the homeowner's notice of claim, the homeowner even can refuse to allow an inspection. The reality is, although the homeowner must provide 45 days notice to the builder, after doing so the homeowner can even in bad faith reject any proposal by the builder.
While it would appear that the homeowner holds all the cards, if the homeowner files a lawsuit without providing the required notice, the lawsuit will be dismissed. However, this typically only provides temporary relief for the builder because with one possible exception, discussed below after dismissal the homeowner may provide the builder with the required notice, wait 45 days, and then re-file the lawsuit.
Statute is retroactive
The Court of Appeals was recently faced with the question of whether the right to cure statute should be applied retroactively, that is, to owners of residences constructed prior to enactment of the statute. This question is important to these homeowners if their lawsuit was dismissed because they failed to provide proper notice to the builder, and the statute of limitations would now bar them from re-filing the lawsuit.
Recently, in Lakemont Ridge Homeowners Association v. Lakemont Ridge Limited Partnership, the Court of Appeals held that the statute is retroactive. The Court of Appeals may not have the last word, however, because Lakemont Ridge has been appealed to the Washington Supreme Court.
Builder must give notice
To trigger the homeowner's duty to provide the 45-day notice, the builder must have provided the homeowner with written notice of this duty and the builder's right to cure. This written notice must be given to the homeowner in the contract for sale, construction or remodel.
So what about homeowners who purchased their residence prior to enactment of the statute and, therefore, received no such notice?
This issue also was resolved in the Lakemont Ridge case, where the court held that a homeowner's duty to provide the 45-day notice to the builder is mandatory under the statute. The only exception is for homeowners who contracted for the sale or construction of their residence after the statute was enacted, but were not given written notice by the builder of the right to cure. Therefore, homeowners who purchased residences prior to enactment of the statute must provide the builder with notice before filing suit, though they did not receive notice of this requirement in their contract.
Is a builder a homeowner?
Up to this point, we have not discussed how to define a "homeowner" or a "builder" with respect to their rights and duties under the right to cure statute. One would think that such a discussion is unnecessary. We all know that the "homeowner" is the one who actually owns the residence at the time the claim is made against the builder, and the "builder" is the one who performed the construction services for the homeowner, right?
Unfortunately, due to some unartful language by the Legislature, the right to cure statute blurs the line between builder and homeowner such that at least one trial court has held that a builder qualifies as a "homeowner" who must provide 45 days notice to its subcontractors before filing suit against them.
The right to cure statute includes "builder" under the broader heading of "construction professional," to whom the homeowner must provide notice before filing suit. The definition of "construction professional" includes architects, builders, condominium declarants and dealers, builder vendors, contractors, subcontractors, engineers and inspectors. The problem, however, is with how the Legislature defined "homeowner."
The statute's definition of "homeowner" includes any "person, company, firm, partnership (or) corporation ... who contracts with a construction professional" for the construction or sale of a residence. Reading this definition in a vacuum, it would appear to characterize a builder as a "homeowner" when it contracts with subcontractors to construct the residence. As a result, some subcontractors have argued that a builder must provide them with 45 days notice prior to filing suit against them, though the builder retained no ownership rights in the residence.
A builder typically has no ownership interest in the property at the time the homeowner makes their claim. Thus, for example, a builder cannot grant a subcontractor access to the residence to make repairs, or even to conduct an inspection, under the right to cure statute because it would be trespassing.
It would seem obvious, therefore, that a builder could not be deemed a "homeowner." However, a trial court in Polygon Northwest Co. v. Four B's Const. case recently held that a builder qualifies as a "homeowner" under the statute. Two other trial courts have reached the opposite conclusion.
Therefore, despite that the builder was sued by the homeowners who actually owned the residences, the Polygon court dismissed the builder's lawsuit against its subcontractors because the builder did not provide 45 days notice to the subcontractors prior to filing suit. The builder in Polygon is now pursuing an appeal.
While the statute essentially provides only an illusory "right" to cure, it presents potential pitfalls for both homeowners and builders alike. It is unlikely that either imagined such a result when it was passed.
Copyright ©2009 Seattle Daily Journal and DJC.COM.
Comments? Questions? Contact us.