by Stephanie Dodson Dougherty
Homeowner’s Pre-litigation Requirements for Construction Defect Claims
The Georgia Legislature enabled the Right to Repair Act (O.C.G.A. § 8-2-35, et seq.) in 2004 to reduce construction-related litigation by providing resolution alternatives for legitimate construction disputes. Although the stated purpose of the Act is to protect the rights of homeowners, it actually heightens their burden by requiring precise pre-litigation procedures: the notice of claim process. Any suit filed before compliance with this process will be stayed on application by a party until these requirements are met (except for personal injury or death cause of actions included in the claim). However, if the statute of limitations period for a claim undergoing this process will expire during the process, the owner may file suit to preserve their claim. That action must be immediately stayed until this notice of claim process is complete. The homeowner and the contractor may alter this statutory notice of claim process by written mutual agreement. Without such agreement, the statutory process applies.
Pre-construction Notice to Homeowner
When entering into a contract, contractors are required to notify would-be homeowners of the contractor’s right to resolve alleged defects before initiating litigation. The notice, which may be in the contract, must be conspicuous, substantially match the following language:
GEORGIA LAW CONTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MAY FILE A LAWSUIT OR OTHER ACTION FOR DEFECTIVE CONSTRUCTION AGAINST THE CONTRACTOR WHO CONSTRUCTED, IMPROVED, OR REPAIRED YOUR HOME. NINETY DAYS BEFORE YOU FILE YOUR LAWSUIT OR OTHER ACTION, YOU MUST SERVE ON THE CONTRACTOR A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE. UNDER THE LAW, A CONTRACTOR HAS THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS OR BOTH. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY A CONTRACTOR. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER STATE LAW, AND FAILURE TO FOLLOW THEM MAY AFFECT YOUR ABILITY TO FILE A LAWSUIT OR OTHER ACTION.
Notice of Claim
The homeowner must give written notice of the claim to the builder at least 90 days before filing suit. The notice must indicate that it is intended to meet the statutory requirements and state that the homeowner asserting a construction defect claim. This notice must describe all claims and provide any evidence of the nature and cause of the defects.
Contractor’s Response to Claim
After receiving the notice, the contractor must provide a written response within 30 days that either offers to settle the claim or proposes an inspection of the area subject to the claim. If the contractor rejects the owner’s claim and refuses to remedy the defect or settle, or does not respond timely to the notice, then the owner may bring suit. Contractors should be aware that they are still required to respond timely to the notice, even if the notice was not accompanied by all the required documents.
The owner may reject the settlement offer in writing to the contractor.
Inspection
If the contractor proposes an inspection (instead of offering a settlement), the owner must provide prompt and reasonable access to the property within 30 days. This inspection may be done by the contractor, its subcontractors, agents, experts, or consultants. Once on site, the inspectors may document the alleged defects; perform tests to fully evaluate their nature, extent, and cause; and determine the necessary remedies. Destructive testing is allowed, but the contractor must provide advance notice and return the area to its pretesting condition.
If these inspections or tests are insufficient to allow the contractor to fully evaluate the defect, the contractor must again notify the owner in writing of the need for additional testing. Then, the owner must again provide prompt and reasonable access for the second round of inspections. These must be diligently pursued and, to the extent reasonable, completed within the original 30 day inspection period.
Contractor’s Post-Inspection Offer or Rejection
Once the necessary inspections are complete, the contractor has 14 days to serve on the homeowner one of the following:
– A written offer to fully or partially remedy the defect at no cost to the owner
– A written offer settle monetarily
– A written offer combining repairs and monetary payment
– A written rejection of the claim and supporting reasoning.
If the contractor rejects the claim or fails to serve any response, the owner may file suit for the claim in the original notice.
Owner’s Response to Post-Inspection Offer
If the homeowner accepts any of the first three offers above, the contractor must follow through within the agreed timeframe. If the contractor fails to make good on the accepted offer, the owner may file suit for the claim in the original notice. Contractors should be aware that their offer and the owner’s acceptance may be filed with the lawsuit to create a rebuttable presumption of a valid settlement agreement that should be enforced by the court.
If the contractor offers to remedy the defect, the owner must respond in writing within 30 days otherwise the offer is deemed accepted. Once the offer to repair is accepted, the owner must provide prompt and unfettered access to the area to complete the repairs.
If the owner rejects the offer to remedy or settle monetarily, the owner must provide written notice to the contractor. The contractor may make a supplemental offer within 15 days of receiving the rejection. If the owner rejects the supplemental offer, the owner must provide written notice.
If the owner rejects a reasonable offer or reasonable supplemental offer, their recovery is limited to the fair market value of the settlement offer or actual cost of repairs made, or the monetary settlement offer amount. The homeowner is precluded from recovering costs or attorneys’ fees incurred after the unreasonable rejection.
If the owner accepts the offer and the contractor completes the work or payment required by the offer, the owner is precluded from filing suit for the claim in the original notice.
Other Provisions
The contractor’s performance does not affect the parties’ rights and obligations under a liability insurance policy and should not be considered a payment of an insured lost. Subrogation of insurance is also provided for statutorily.
Additional procedures for an association to bring suit against a contractor for defects in the common area of a common interest community are also provided. In addition to the notice of claim process, these additional requirements involve the association vote, prior good faith efforts to resolve the claim, notice to owners, and permissible destructive tests.
The Act does not affect the contractor’s right to seek recovery from subcontractors or other professionals.
These requirements apply to contractors required to be licensed under Chapter 41 of Title 43.