As construction season ramps up, so, too, can the number of construction defect claims by homeowners. Some states, including Indiana, have enacted statutes that mandate prospective complainants to provide builders and other construction professionals the opportunity to fix the issues before litigation commences. But that same shield from litigation can turn costly for construction companies if they ignore these notices.
The goal of these statutes is to steer potential litigants toward a dispute resolution process that avoids costly litigation; they are also intended to shield builders and construction professionals from frivolous claims or unnecessary litigation expenses. Instead of simply being hit with a lawsuit, builders are afforded a chance to solve any problems before the matter lands in court. However, if builders and other construction professionals ignore these laws, then their shield can become a sword in the hands of a residential property owner, at least in Indiana.
Many times builders and other construction professionals faced with claims involving home construction fail to insist on compliance with these statutes. Doing so, they lose protection from what can be costly litigation.
Just as often, construction professionals receiving notice of defect claims fail to fully comply with the statutory procedures or, worse, ignore the notice altogether. This can have very significant consequences. Indiana, like some other states, provides for attorney fee shifting in cases in which a claimant or a construction professional ignores statutory procedures. A homeowner who levels a frivolous claim could end up paying the builder’s attorney’s fees. However, a builder who fails to appropriately respond to a legitimate claim might have to pay for the homeowner’s fees.
The scope of notice and opportunity to cure statutes are not necessarily restricted to builders. In Indiana, they also cover architects, engineers, subcontractors, or "any person performing or furnishing the design, supervision, construction, or observation of the construction of any improvement to real property." Nor are these laws limited to single-family dwellings. Indiana’s statute applies to multiple unit residential structures. The Indiana statute’s scope includes large condominium buildings as well as single family homes. Defects include any deficiency in "residential construction, design, specifications, surveying, planning, supervision, testing, inspection, or observation of construction."
Indiana has an especially robust notice and right-to-cure statute, which can guide both sides of a defect claim. It provides an avenue to avoid litigation, but also creates traps for the unwary. At least 60 days prior to filing a construction defect action, a residential property owner must serve a notice on the construction professional. The notice must be sent via certified mail or served in person, according to the statute, and must describe the defect with sufficient detail to allow the construction professional to determine the general nature of the alleged defect. The construction professional receiving the notice has 21 days to serve a written response. The statute says an appropriate response may be a request to inspect the premises, an offer to settle the claim by payment without inspection, or a statement that the construction professional disputes the claim. If, as often happens, the construction professional makes a proposal to inspect, the homeowner must provide reasonable access to the property.
Fourteen days after the completion of the inspection, the construction professional must serve an offer to repair at no cost, an offer to settle with a monetary payment or a statement that the construction professional disputes the claim and will take no further action. The statute notes that the homeowner has 60 days to accept or reject a settlement offer. Litigation expense is avoided by encouraging the parties to talk before going to court.
A construction professional can get a claim dismissed if a homeowner fails to comply with the notice and opportunity to cure statute. A homeowner who unreasonably rejects a settlement offer or does not permit an inspection and an opportunity to repair can be liable for the builder’s attorney’s fees, the law says. Conversely, a construction professional who unreasonably disputes a homeowner’s claim, fails to settle the claim, fails to make repairs within a reasonable time, or fails to respond to a notice could be liable for the homeowner’s attorney’s fees and costs.
This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
Joseph C. Chapelle is a partner in the Litigation Department of Barnes & Thornburg LLP’s Indianapolis office.