What You Need to Know About Notice and Opportunity to Repair Legislation

May 1, 2006

Homeowners file a complaint against you alleging that defects exist in their new home. The complaint is the first notice you have received from the disgruntled homeowners. You notify your insurance company, get the complaint to your attorney, and the time-consuming and expensive litigation process begins.
Well, not so fast. In many states – perhaps yours – disgruntled homeowners or product purchasers cannot file a lawsuit against home builders, product manufacturers or suppliers without first attempting to resolve the dispute under a fairly new law-notice and opportunity to repair or NOR legislation. NOR legislation aims to curb the growth of construction defect litigation and also to address the rising cost of insurance in the home building industry.
While each state’s NOR legislation is unique, following are some common requirements of NOR legislation:

Must Give Written Notice: NOR statutes commonly provide that at a specified time before filing suit, the homeowner or purchaser must give written notice to the home builder or home product manufacturer that a construction defect exists. The notice must adequately describe the alleged construction defect.
Written Response Required: NOR statutes commonly provide that the home builder or home product manufacturer must respond in writing to the notice and indicate what action it will take, such as inspect the alleged defect, offer to settle the defect, or dispute the defect exists and refuse to repair or settle.
Attempts To Repair or Settle: Commonly, NOR statutes regulate the procedure that the parties must use when attempting to repair the alleged defect or settle the dispute.
Penalties for Failure to Comply: Most NOR legislation imposes sanctions for failure to comply with the NOR statute. Some sanctions against the homeowner/home product purchaser include dismissal of the claim or limits on recoverable damages. Some sanctions against the home builder or home product manufacturer for failure to comply include double or triple damages and payment of attorney’s fees and court costs in addition to actual damages.

Check whether or not the states where you do business have NOR legislation. If the NOR legislation is already on the books, then it is crucial that you understand your rights and responsibilities under the statute because penalties for non-compliance can be significant. If NOR legislation is in the works in your state, we urge you to get involved in drafting it to ensure the legislation is workable and comports with industry and trade standards. If your state does not currently have NOR legislation, and if there is no statute in the works, chances are that NOR legislation is coming soon to your neck of the woods.
Over the past three years, 25 states have enacted NOR legislation. Two states have legislation awaiting governors’ signatures and many more have legislation in the works. Given the potential impact of NOR legislation on the home building industry, it is important for home builders, building product manufacturers and dealers to have a voice in drafting NOR legislation.
The impact of this legislation may be positive, but some legislatures have defined a “construction defect” without input from, or consultation with, the industries that manufacture the products used in home construction. In those jurisdictions, the legislatures have broadly defined “construction defect” and this broad definition has imposed unrealistic standards on manufacturers and exposed them to an increased potential for liability.
Wisconsin has the highest concentration of window and door manufacturers in the country. Many of these companies are now working to make sure that Wisconsin’s NOR legislation is developed in conjunction with the home building industry to avoid unreasonable building standards. Their effort will hopefully lead to legislation that allows home builders to limit needless litigation, manufacturers to draft attainable building standards, and homeowners a simplified process to resolve problems related to home construction. Given the widespread acceptance of NOR legislation across the country, the trend of more states enacting NOR legislation is more than likely going to continue. As states either enact new laws or modify existing ones, they should allow all interested parties a voice in the process to ensure reasonable laws for all parties are created. Whether NOR legislation will reduce litigation or lower insurance premiums is unknown, but NOR legislation appears here to stay. Get familiar with your state’s NOR legislation and protect your business by establishing a protocol to respond to NOR notices.
Ruder Ware has represented window and door manufacturers, distributors and installers around the country, as well as other builders and other product manufacturers. It has also been involved in the development of Wisconsin’s NOR legislation.
If you have questions regarding the above, please contact any of the attorneys in the Litigation & Dispute Resolution Practice Group of Ruder Ware.

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This document provides information of a general nature regarding legislative or other legal developments, and is based on the state of the law at the time of the original publication of this article. None of the information contained herein is intended as legal advice or opinion relative to specific matters, facts, situations, or issues, and additional facts and information or future developments may affect the subjects addressed. You should not act upon the information in this document without discussing your specific situation with legal counsel.

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