The Arizona Purchaser Dwelling Actions Act (“PDA”) provides construction professionals with an opportunity to remedy an alleged defect before a homeowner may file a lawsuit. When faced with an alleged defect, a construction professional may attempt to avoid litigation by electing to repair or replace the alleged defect or provide monetary compensation to the homeowner. However, labor and material shortages, including those caused by the COVID-19 Pandemic, have made deciding how to use the PDA’s options more difficult.
Before a homeowner may file a lawsuit against a construction professional for a construction defect, the PDA requires that the homeowner give the professional detailed notice about the allege defect. A professional then has 60 days to respond as to whether the professional will repair or replace the alleged defect, provide alternative compensation, or decline to take any action. If a professional agrees to repair an alleged defect, the PDA requires a repair be completed within a “commercially reasonable time frame considering the nature of the repair or replacement, any access issues or unforeseen events that are not caused by the . . . professional.” (emphasis added) Current labor and material shortages probably affects what constitutes “commercially reasonable.” Additionally, the “foreseeability” of labor and material shortages is likely to become an even more contentious topic. Therefore, if using the PDA’s options to repair, professionals should consider documenting any labor or material shortage delays and their causes as they become known to be better prepared if a homeowner alleges that the professional failed to comply with the PDA.
In addition, if a professional foresees a repair or replacement taking longer than normal, the PDA does afford some options. The PDA allows a professional and homeowner to enter into a written agreement to extend the timeframe to comply with the PDA. When a professional expects or anticipates that a repair may take longer than “normal” the professional should consider extending the timeframe for repairs with the homeowner in writing before beginning repairs. On the other hand, if a professional’s failure to comply with the PDA’s timeframe results from an unforeseen condition, a homeowner may be required to give the professional more time to make the repair before filing a lawsuit.
If a professional opts to offer monetary compensation instead of repairing or replacing the alleged defect, a new issue arises: should the offer be for the amount it would have cost to repair or replace the defect when the work was first done (i.e. before material and labor prices increased) or the current prices? The difference in these costs is even more pronounced when the original construction was completed years ago for a fraction of what it would cost to perform repairs in today’s market. For example, Arizona’s statute of limitation for breach of contract allows a homeowner to bring an action for breach of construction contract for six years after the cause of action accrues. Therefore, it is possible a homeowner may seek to hold a professional liable for an alleged defective construction that occurred years ago.
The PDA does not provide guidance as to what offer amount is appropriate, particularly because a homeowner may reject any offer and instead sue to attempt to recover the current cost of repairing the alleged defect. Furthermore, a professional should consider giving an offer amount serious thought. An amount offered has consequences even if rejected by the homeowner. In a subsequent lawsuit, a professional could potentially be liable for the homeowner’s attorneys’ fees if the homeowner recovers more than the professional originally offered. Therefore, careful consideration is due before making an offer.