SUMMARY OF ARIZONA LAW RELATED TO HOMEOWNER AND HOMEOWNER ASSOCIATION CONSTRUCTION DEFECT CLAIMS

1.      PRE-LITIGATION/NOTICE REQUIREMENTS.

a.      Purchaser Dwelling Actions Act, ARS § 12-1361, et seq., requires pre-lawsuit notice of claim to “seller” entities (which includes contractors), and allows seller an opportunity to make repairs.

b.      ARS § 33-2002, requires an association board to make certain disclosures to the members before initiation of a construction defect claim.

2.      POTENTIAL LEGAL THEORIES.

a.      Breach of contract, where the seller has not fulfilled some promise or obligation in the purchase contract for the property.

b.      Breach of warranty, where the seller or general contractor or third-party warranty company has not met some obligation owed pursuant to a written warranty.

c.      Breach of implied warranty of workmanship and habitability, where the construction and/or condition of the home is not “reasonable” under the circumstances.

i.     May be asserted against seller and the general contractor.

ii.     May be asserted by original and subsequent owners.

d.      Negligence, where the seller or general contractor or design professionals have not met the applicable “standard of care.”

i.     Arizona’s “economic loss rule” bars negligence claims between parties in contractual privity (such as the seller and buyer), except for personal property damage or personal injury.

ii.     Economic loss rule would not apply between homeowner and general contractor because of lack of privity, but general contractors have not been held to owe a duty of care to homeowners.

e.      Fraud/consumer fraud (see ARS § 44-1521, et seq.), where the developer or seller has made misrepresentations to the buyer.

f.       Breach of fiduciary duties, where the developer/declarant has not met its obligations and duties owed to an association and its members.

 

3.      STATUTE OF REPOSE – ARS §12-552.

a.      Bars all contract-based claims as of 8 years from date of substantial completion.

i.     Applies to breach of implied warranty claims.

ii.     Does not apply to tort claims.

b.      If a latent defect is discovered during the eighth year, an additional year is added from date of discovery.

4.      STATUTES OF LIMITATIONS.

a.      Contract and implied warranty claims; 6 years from “discovery.” ARS § 12-548.

b.      Tort claims; 2 years from “discovery.” ARS § 12-542.

c.      For purposes of the statutes of limitations, under Arizona law “discovery” of a claim accrues when the injured party knows or should know sufficient facts to understand that a claim exists.

 

5.      ATTORNEYS’ FEES.

a.      ARS § 12-341.01, for claims arising from contract.

i.     Prevailing party in civil action may recover reasonable attorneys’ fees, at the discretion of the court.

ii.     Applies to breach of implied warranty claims.

iii.     Settlement offers, if made, will be compared to the judgment amount, and may impact who is determined to be the “prevailing party.”

iv.     Does not apply to arbitration.

b.      ARS § 12-1364, for claims brought pursuant to the Purchaser Dwelling Actions Act.

i.     Prevailing party may recover reasonable attorneys’ fees, costs, and expert witness fees.

ii.     Applies to breach of implied warranty claims.

iii.     Settlement offers or repairs, if made, will be compared to the judgment amount, and may impact who is determined to be the “prevailing party.”

iv.     Applies in arbitration.

 

6.      REGISTRAR OF CONTRACTORS COMPLAINT.

a.      May be used as an alternative to, or in advance of, a lawsuit or arbitration proceeding.

b.      Only available for two years from completion of construction.

c.      If contractor found to be outside of acceptable tolerances for Registrar’s minimum workmanship standards, may be ordered to make repairs.

d.      If contractor fails to make repairs, there is a Recovery Fund available where the injured party may apply for compensation, up to $30,000.