Defect Claims: Resolution without Litigation, Maybe
Finding yourself sued by an unhappy buyer of a property you helped build is no longer an unusual occurrence. In fact, such claims have become commonplace enough that Florida now has a law in place to address such issues. Chapter 558 provides a roadmap for parties with very specific time frames, provisions and procedures for dealing with such claims prior to suit. These steps are mandatory conditions precedent to filing defect lawsuits. If the proper procedure is not followed prior to filing suit, that suit will be suspended until the aggrieved party properly completes the required steps. This applies to many different classes of persons in the construction industry, and governs claims against contractors, subcontractors, suppliers, and design professionals. It does not, however, apply to projects that have not reached the stage of completion of the building or improvement. The Florida legislature has recently defined this to mean issuance of a Certificate of Occupancy or equivalent, or substantial completion
The first step a party with a construction defect claim must take is to serve written notice of that claim on the contractor, subcontractor, supplier, or design professional whom it maintains may be responsible for the alleged defect. Service must be made by certified mail, hand delivery or courier with evidence of delivery. If the claim arose as a result of work performed under a contract, then the claimant must also serve the notice on the other parties to the contract. The notice of claim must not only describe the construction defect but as well the damage resulting from such defect, and it must be served at least 60 days prior to the filing of any lawsuit, or 120 days if the claim involves an association representing more than 20 parcels. Within 30 days after service (or 50 days in the case of an association representing more than 20 parcels), the party to whom such notice of claim was served may inspect the property subject to the claim. The claimant must provide reasonable access to the property to determine the nature and cause of the defect claim.
Florida Statutes also impose time frames for responses to these notices. Within 45 days after receipt of the notice of a construction defect claim, (or 75 days in the case of an association representing more than 20 parcels), the party to whom the original notice of claim was served must file a response to the claimant. The written response must include one of the following: (a) a written offer to settle the claim at no cost to the claimant; (b) a written offer to settle for a monetary payment that does not involve an insurer, with a hard timetable of payments; (c) a written offer to settle by way of a compromise that includes repairs and a monetary payment; (d) a written statement that disputes the claim and will not remedy or settle the claim; or (e) a written statement that monetary payment, if any, will be determined by an insurer within 30 days of notification to the insurer by serving it with the claim.
Once a party served with a notice of claim disputes the claim and refuses to either remedy or settle the claim, the claimant may immediately file a lawsuit on the claim. However, the statute expressly provides that it is not intended to preclude partial settlements or compromises. So, the parties are free to litigate only those portions of the claim that they were unable to settle or compromise.
What Happens if a Construction Defect Claim is Awarded
If a settlement offer is made, the claimant has 45 days from receipt of the settlement offer to either accept or reject it. If the claimant files a lawsuit prior to accepting or rejecting the offer, the proceeding can be held in abeyance until the offer is either accepted or rejected.
If a claimant accepts an offer to repair the claimed construction defect, the claimant must provide the party who made the offer, along with its agents, reasonable access to the property to perform the repairs. However, if the party who made the offer fails to timely make the required repairs, or fails to pay money in settlement of the claim as agreed, then the claimant may file a lawsuit based upon the claim set forth in the original notice of claim. On the flip side, if the party who made the offer lives up to its bargain by making the required repairs, or by paying the agreed upon monies in a timely manner, then the claimant is forever barred from filing a lawsuit over the claim set forth in the original notice.
These procedures apply to each construction defect, although multiple defects may be included in a single notice of claim. There is no requirement to send out a separate notice for each claim. In the event that a lawsuit is eventually filed, Florida Statutes only allow the suit to be filed with respect to those claims which were properly noticed in the manner set forth above. The statute further states that these procedures do not substitute for notice requirements involving insurers and insureds.
The statute also contains a pre-suit discovery provision mandating the exchange of any …design plans, specifications, and as-built plans; any documents detailing the design drawings or specifications; photographs, videos, and expert reports that describe any defect upon which the claim is made; subcontracts; and purchase orders for the work that is claimed defective or any part of such materials…
within 30 days of a written request for same by either the claimant or any person served with the notice of claim. The written request for exchange of documents must cite Florida Statute § 558.004(15) and include an offer to pay the reasonable costs of reproduction of the foregoing.
It should be noted that all contracts entered into after October 1, 2009, for improvement of real property entered into between an owner and a contractor, or between an owner and a design professional, must contain substantially the following notice: “ANY CLAIMS FOR CONSTRUCTION DEFECTS ARE SUBJECT TO THE NOTICE AND CURE PROVISIONS OF CHAPTER 558, FLORIDA STATUTES.”
All these timelines and requirements serve a purpose. As the legislative intent at the beginning of Chapter 558 makes clear, the primary goal of this law is to provide an alternative manner of resolving construction defect disputes and thus reduce the need for litigation while still protecting the rights of property owners. The notice, response and dispute resolution mechanisms may appear cumbersome but effectively provide a way to resolve construction defect claims without resorting to litigation.