Amendment SSA1-SB448

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2005 - 2006 LEGISLATURE

SENATE SUBSTITUTE AMENDMENT 1, TO 2005 SENATE BILL 448

January 25, 2006 - Offered by Senator Olsen.

SB448-SSA1,1,3 An Act to create 101.148 and 895.07 of the statutes; relating to: contractor notices, claims against certain contractors and suppliers of dwellings, and providing a penalty.

Analysis by the Legislative Reference Bureau

This substitute amendment requires contractors that contract to construct or remodel a person's residence to provide the dwelling's owner a brochure explaining the procedures created in this substitute amendment and giving written notice that he or she must follow those procedures before suing a contractor or window or door supplier. Under the substitute amendment, if the dwelling owner, which may be a condominium association, is concerned about a possible construction defect, the owner must give a written notice of claim to the contractor at least 90 working days before starting a court action against the contractor. The substitute amendment requires the written notice to detail the nature of the alleged construction defect, including any evidence that the owner of the dwelling has that substantiates the nature and cause of the defect.

After the contractor receives the notice, the substitute amendment gives the contractor time to respond to the notice with a written offer to inspect the property, make repairs, settle the claim with a monetary payment, or reject the claim. Under the substitute amendment, if the claim is rejected at this point, or if the contractor fails to respond timely to the claim, the owner can start a court action against the contractor. If the contractor makes a settlement offer and the owner rejects the offer, the owner must do so with a written statement that includes the reasons for the rejection. The substitute amendment requires the owner to allow the contractor reasonable access to the dwelling if the contractor wants to inspect the alleged construction defect. After inspection, the substitute amendment allows the contractor to submit a settlement offer or reject the claim. If the owner rejects an offer, the substitute amendment allows the contractor to submit a timely supplemental offer and requires the owner to respond to the supplemental offer under the same procedures as for the original offer.

If the property is inspected and requires some destructive testing, the substitute amendment requires the contractor to return the dwelling to its condition before the inspection. If the owner of a dwelling agrees to a contractor's settlement offer and the contractor does not follow through as agreed, the substitute amendment allows the owner to file in the court action the offer and acceptance as rebuttable evidence of an agreement.

Under the substitute amendment, if an owner of a dwelling rejects a reasonable settlement offer or does not permit the contractor to repair the defect under an agreed settlement offer, the owner's damages are limited to the fair market value of the costs of the repairs, or the amount of the monetary offer of settlement, and the owner may not recover punitive damages, costs, or attorney fees incurred after the rejection.

The substitute amendment allows an owner to repair a construction defect immediately without giving notice if the repair is necessary for health or safety.

If the dwelling owner begins a court action but fails to follow the procedures, and the contractor has provided the owner with the proper notice and brochure, under the substitute amendment the court must dismiss the action without prejudice. If the dwelling owner begins a court action but fails to follow the procedures, and the contractor does not provide the owner with the proper notice and brochure, under the substitute amendment the court stays the action and orders the parties to comply with the substitute amendment's provisions.

Under the substitute amendment, a contractor may obtain contribution from a window or door supplier for the cost of repairing the construction defect if the contractor follows procedures in the substitute amendment similar to those that apply to the contractor and owner regarding a defect, including notifying the supplier of the alleged defect and giving the supplier an opportunity to remedy the defect or to make an offer of settlement.

The substitute amendment requires the Department of Commerce to prepare a draft of a brochure that explains the process in this substitute amendment and to provide that draft to contractors. Contractors are required to give a copy of the brochure to the owner of a dwelling if the contractor and owner contract to construct or remodel a dwelling.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB448-SSA1, s. 1 Section 1. 101.148 of the statutes is created to read:

SB448-SSA1,3,2 101.148 Contractor notices. (1) Definitions. In this section:

SB448-SSA1,3,5 (a) "Consumer" means the owner, tenant, or lessee of a dwelling, or an association or other entity with control over the common areas appurtenant to a dwelling.

SB448-SSA1,3,7 (b) "Contractor" means a person who enters into a written or oral contract with a consumer to construct or remodel a dwelling.

SB448-SSA1,3,12 (c) "Dwelling" means any premises or portion of a premises that is used as a home or a place of residence and that part of the lot or site on which the dwelling is situated that is devoted to residential use. "Dwelling" includes other existing structures on the immediate residential premises such as driveways, sidewalks, swimming pools, terraces, patios, fences, porches, garages, and basements.

SB448-SSA1,3,14 (d) "Remodel" means to alter or reconstruct a dwelling. "Remodel" does not include maintenance work.

SB448-SSA1,3,19 (2) Notice required at time of contracting. (a) Before entering into a written contract to construct or remodel a dwelling, or, if the parties enter into an oral contract, as soon as reasonably possible, but before commencing any work to construct or remodel a dwelling, the contractor shall give the consumer a copy of the brochure prepared under s. 895.07 (13) and a notice worded substantially as follows:

SB448-SSA1,3,21 NOTICE CONCERNING CONSTRUCTION DEFECTS

SB448-SSA1,4,7 Wisconsin law contains important requirements you must follow before you may file a lawsuit for defective construction against the contractor who constructed your dwelling or completed your remodeling project or against a window or door supplier or manufacturer. For example, section 895.07 (2) and (3) of the Wisconsin statutes requires you to deliver to the contractor a written notice of any construction conditions you allege are defective before you file your lawsuit, and you must provide your contractor or window or door supplier the opportunity to make an offer to repair or pay for the construction defects. You are not obligated to accept any offer made by the contractor or window or door supplier, but failure to accept a reasonable offer may limit your recoverable damages. All parties are bound by applicable warranty provisions.

SB448-SSA1,4,9 (b) The notice required under par. (a) shall be conspicuous and in writing and may be included within the contract between the contractor and the consumer.

SB448-SSA1, s. 2 Section 2. 895.07 of the statutes is created to read:

SB448-SSA1,4,12 895.07 Claims against contractors and suppliers. (1) Definitions. In this section:

SB448-SSA1,4,13 (a) "Action" means a civil action or an arbitration under ch. 788.

SB448-SSA1,4,15 (b) "Claim" means a request or demand to remedy a construction defect caused by a contractor or supplier related to the construction or remodeling of a dwelling.

SB448-SSA1,4,18 (c) "Claimant" means the owner, tenant, or lessee of a dwelling, or an association, such as a condominium association or homeowners association, who has standing to sue a contractor or supplier regarding a construction defect.

SB448-SSA1,4,23 (d) "Construction defect," in those cases when the contractor or supplier has provided a warranty, means the definition of "defect" in the warranty. In all other cases, "construction defect" means a deficiency in the specifications, planning, supervision, construction, or remodeling of a dwelling that results from any of the following:

SB448-SSA1,4,24 1. Defective material.

SB448-SSA1,4,25 2. Violation of applicable codes.

SB448-SSA1,5,1 3. Failure to follow accepted trade standards for workmanlike construction.

SB448-SSA1,5,3 (e) "Contractor" means a person that enters into a written or oral contract with a potential claimant to construct or remodel a dwelling.

SB448-SSA1,5,8 (f) "Dwelling" means any premises or portion of a premises that is used as a home or a place of residence and that part of the lot or site on which the dwelling is situated that is devoted to residential use. "Dwelling" includes other existing structures on the immediate residential premises such as driveways, sidewalks, swimming pools, terraces, patios, fences, porches, garages, and basements.

SB448-SSA1,5,10 (g) "Remodel" means to alter or reconstruct a dwelling. "Remodel" does not include maintenance work.

SB448-SSA1,5,12 (h) "Serve" or "service" means personal service or delivery by certified mail, return receipt requested, to the last-known address of the addressee.

SB448-SSA1,5,14 (i) "Supplier" means a person that manufactures or provides windows or doors for a dwelling.

SB448-SSA1,5,16 (j) "Working day" means any day except Saturday, Sunday, and holidays designated in s. 230.35 (4) (a).

SB448-SSA1,6,4 (2) Notice and opportunity to repair. (a) No later than 90 working days before initiating an action against a contractor or supplier, a claimant shall serve written notice of claim on the contractor. Before initiating an action against a contractor or supplier, a claimant shall provide the contractor or supplier with the opportunity to respond to the claim and repair the construction defect under this section. The notice of claim shall state that the claimant asserts a construction defect claim. The notice of claim shall describe the claim in sufficient detail to explain the nature of the alleged construction defect and the results of the construction defect and shall offer the opportunity to correct the construction defect. The claimant shall include in the notice of claim a description of the alleged construction defect and include a comprehensive description of all evidence that the claimant knows or possesses, including expert reports, that substantiates the nature and cause of the alleged construction defect.

SB448-SSA1,6,8 (b) Within 15 working days after the claimant serves notice of claim under par. (a), or within 25 working days if the contractor makes a claim for contribution from a supplier under sub. (7) (a), each contractor that has received the notice of claim shall serve on the claimant any of the following:

SB448-SSA1,6,12 1. A written offer to remedy fully or partially the construction defect at no cost to the claimant. The offer shall include a description of any additional construction necessary to remedy the construction defect and a timetable for the completion of the construction.

SB448-SSA1,6,13 2. A written offer to settle the claim by monetary payment.

SB448-SSA1,6,14 3. A written offer including a combination of repairs and monetary payment.

SB448-SSA1,6,20 4. A written statement that the contractor rejects the claim, and the contractor shall state in the written response to the claim the reason for rejecting the claim and include a comprehensive description of all evidence the contractor knows or possesses, including expert reports, that substantiates the reason for rejecting the claim. The contractor shall also include in the written response to the claim any settlement offer received from a supplier.

SB448-SSA1,6,21 5. A proposal for the inspection of the dwelling under par. (c).

SB448-SSA1,7,18 (c) If a proposal for inspection is made under par. (b), the claimant shall, within 15 working days of receiving the contractor's proposal, provide the contractor and any supplier on whom a contribution claim has been made and its agents, experts, and consultants reasonable access to the dwelling to inspect the dwelling, document any alleged construction defects, and perform any testing required to evaluate fully the nature, extent, and cause of the claimed construction defects and the nature and extent of any repairs or replacements that may be necessary to remedy them. If destructive testing is required, the contractor shall give the claimant and all persons on whom a notice of claim or contribution claim has been served advance notice of the testing at least 5 working days before commencement of the testing and shall, after completion of the testing, return the dwelling to its pre-testing condition within a reasonable time after completion of the testing, at the contractor's expense. If any inspection or testing reveals a condition that requires additional testing to allow the contractor to evaluate fully the nature, cause, and extent of the construction defect, the contractor shall provide notice to the claimant and all persons on whom a notice of claim or contribution claim has been served of the need for the additional testing and the claimant shall provide reasonable access to the dwelling. If a claim is asserted on behalf of the owners of multiple dwellings, then the contractor shall be entitled to inspect each of the dwellings. The claimant shall either provide a specific day for the inspection upon reasonable notice for an inspection or require the contractor to request in writing a date for the inspection, at least 3 working days before the inspection.