SB448: Bill Text

2005 Senate BILL 448

November 22, 2005 - Introduced by Senators Olsen, Stepp, Harsdorf, Schultz, Zien, Kedzie, Lazich, Leibham, Roessler, S. Fitzgerald, Darling, Brown and Kanavas, cosponsored by Representatives Wieckert, Loeffelholz, Shilling, Owens, Musser, Kestell, Jeskewitz, F. Lasee, Montgomery, Gard, Albers, Townsend, Davis, Petrowski, Pettis, Nelson, Kreibich, Ott, Hahn, Suder, Lamb, J. Fitzgerald, Vos, LeMahieu, Gundrum, Rhoades, Gronemus, Vruwink and Huebsch. Referred to Committee on Housing and Financial Institutions.

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

Analysis by the Legislative Reference Bureau

This bill requires contractors and subcontractors who contract to construct a home or to remodel a home or manufactured home to provide a notice to the homeowner telling the homeowner that he or she must follow the procedure in this bill before suing a contractor, subcontractor, or door or window supplier. Under the bill, if a homeowner, which includes condominium associations, is concerned about a possible construction defect, the homeowner must give written notice of the claim to the contractor at least 90 working days before starting an action against the contractor. The bill requires the written notice of the claim to detail the nature of the alleged defect, including any evidence and information the homeowner has that depicts the nature and cause of the defect.

After the contractor receives the notice, the bill 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 bill, if the claim is rejected at this point, the homeowner can start an action against the contractor. The bill requires the homeowner to allow the contractor access to the home if the contractor wants to inspect the alleged defect. If the contractor makes a settlement offer and the homeowner rejects the offer, the homeowner must do so with a written statement that includes the factual reasons for the rejection and any known legal reasons for the rejection. The bill allows the contractor to submit a timely supplemental offer in response to the homeowner's rejection and requires the homeowner to respond to the supplemental offer under the same procedures as he or she responds to an original offer.

If the property is inspected and requires some destructive testing, the bill requires the contractor to return the dwelling to its preinspection condition after finishing the inspection and testing. After the inspection, the bill gives the contractor an opportunity to remedy the defect, settle the claim with a monetary settlement, or refuse to remedy the alleged defect. Under the bill, if the contractor refuses to remedy the alleged defect, after notification the homeowner may start an action regarding the defect. If the homeowner agrees to a contractor's settlement offer, and the contractor does not follow through as agreed, the bill allows the homeowner to include in its court action the offer and acceptance as rebuttable evidence of an agreement.

Under the bill, if a homeowner rejects a reasonable settlement offer or does not permit the contractor to repair the defect, the homeowner's damages are limited to the fair market value of the offer of settlement or the actual costs of the repairs, whichever is less, or the amount of the monetary offer of settlement.

The bill allows a homeowner to repair a defect immediately without giving notice if the repair is necessary for health or safety.

The bill also provides that the contractor or supplier may not be liable for damages for a defect if the damage is caused by normal shrinkage or settlement of the construction, if the contractor or supplier relied on written information from a public agency, if the defect was known by or disclosed to the homeowner before the purchase, the dwelling was purchased "as is," the defect could have been discovered by the homeowner with due diligence before purchasing the dwelling, or the contractor or supplier was not allowed to perform warranty service work.

Condominium associations and other homeowner associations are required by the bill to follow additional procedures before bringing an action for a construction defect, including receiving approval from each unit's owner who is affected by that action, the majority of the unit owners vote for the action, and the association's board of directors negotiated in good faith with the contractor to resolve the defect.

Under the bill, a contractor may obtain contribution from a window or door supplier for the cost of repairing the defect if the contractor follows procedures in the bill similar to those that apply to the contractor and homeowner 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 bill requires the Department of Commerce to prepare a draft of a brochure that explains the process in this bill and provide that draft to contractors. Contractors are required to give a copy of the brochure to homeowners.

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

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

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

SB448,3,3 (a) "Claimant" has the meaning given in s. 895.07 (1) (c).

SB448,3,8 (b) "Contractor" means a person that enters into a contract with a potential claimant to construct a dwelling on the potential claimant's land, to complete a remodeling project on a dwelling on the potential claimant's land, or to complete a remodeling project on the potential claimant's manufactured home. "Contractor" includes a subcontractor.

SB448,3,11 (c) "Dwelling" means any structure or part of a structure that is intended for use as a home, residence, or sleeping place by one or more persons maintaining a common household, to the exclusion of all others.

SB448,3,12 (d) "Manufactured home" has the meaning given in s. 101.91 (2).

SB448,3,13 (e) "Remodel" does not include maintenance and repair work.

SB448,3,15 (f) "Supplier" means a person that manufactures or supplies windows or doors for a dwelling.

SB448,3,20 (2) Notice required at time of contracting. (a) Upon entering into a contract to construct a dwelling, to complete a remodeling project on a dwelling, or to complete a remodeling project on a manufactured home, the contractor shall give the potential claimant, if any, a copy of the brochure prepared under s. 895.07 (12) and a notice worded substantially as follows:

SB448,3,22 NOTICE CONCERNING CONSTRUCTION DEFECTS

SB448,4,8 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 window or door suppliers. 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 suppliers 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 suppliers, but failure to accept a reasonable offer may limit your recoverable damages. All parties are bound by applicable warranty provisions.

SB448,4,11 (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 potential claimant.

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

SB448,4,14 895.07 Claims against contractors and suppliers. (1) Definitions. In this section:

SB448,4,15 (a) "Action" means a civil action or an arbitration under ch. 788.

SB448,4,17 (b) "Claimant" means a homeowner, other than a developer or builder, who asserts a claim against a contractor or supplier concerning a construction defect.

SB448,4,22 (c) "Construction defect" has the meaning assigned by a written, express warranty provided by the contractor or, if no such meaning is assigned by warranty, means a deficiency in the specifications, planning, supervision, construction, or remodeling of a dwelling or in the remodeling of a manufactured home that results from any of the following:

SB448,4,23 1. Defective material.

SB448,4,24 2. Violation of applicable codes.

SB448,4,25 3. Failure to follow accepted trade standards for workmanlike construction.

SB448,5,3 (d) "Contractor" means a person including a subcontractor, that enters into a contract with a potential claimant to construct a dwelling or to complete a remodeling project on a dwelling or manufactured home.

SB448,5,6 (e) "Dwelling" means any structure or part of a structure that is intended for use as a home, residence, or sleeping place by one or more persons maintaining a common household, to the exclusion of all others.

SB448,5,7 (f) "Manufactured home" has the meaning given in s. 101.91 (2).

SB448,5,9 (g) "Serve" or "service" means personal service or delivery by certified mail, return receipt requested, to the last-known address of the addressee.

SB448,5,11 (h) "Supplier" means a person that manufactures or supplies windows or doors for a dwelling.

SB448,5,13 (j) "Working day" means any day except Saturday, Sunday, and holidays designated in s. 230.35 (4) (a).

SB448,5,20 (2) Action; dismissal without prejudice. Before filing an action against a contractor or supplier for a construction defect, the claimant shall serve the contractor with a written notice of the claim that describes the claim in sufficient detail to determine the general nature of the construction defect. If the claimant files an action but fails to serve the notice of claim, the circuit court shall dismiss the action without prejudice, and the action may not be refiled until the claimant has complied with the requirements of this subsection.

SB448,6,7 (3) Notice and opportunity to repair. (a) No later than 90 working days before initiating an action against a contractor or supplier under this section, the claimant shall serve written notice of claim under sub. (2) on the contractor. The notice of claim shall state that the claimant asserts a construction defect claim or claims and is providing notice under this paragraph. The notice of claim shall describe the claim or claims in sufficient detail to explain the nature of the alleged construction defect and the results of the construction defect. The claimant shall provide to the contractor all evidence the claimant knows or possesses, including expert reports, photographs, electronic mail, and videotapes that depict the nature and cause of the alleged construction defect. In addition, the claimant shall provide to the contractor any evidence discoverable under ch. 804 that depicts the nature and cause of the construction defect, including expert reports, photographs, and videotapes.

SB448,6,15 (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. (9) (a), each contractor that has received the notice of claim may serve on the claimant, and on any other contractor that has received the notice of claim and on any supplier that has received a claim for contribution under sub. (9) (a), a written response to the claim or claims that either offers to settle the claim by monetary payment, the making of repairs, or a combination of both, without inspection, or proposes to inspect the dwelling that is the subject of the claim.

SB448,6,23 (c) Within 15 working days after a supplier has received notice that a contractor is seeking contribution under sub. (9) (a), the supplier may serve the contractor with a written response that offers to settle the contribution claim by payment, by repair, or by both payment and repair without inspection or that offers to inspect the dwelling that is the subject of the contribution claim. If a contribution claim is made, the contractor shall forward all responses from the supplier to the claimant. The supplier and contractor shall use their best efforts to coordinate their responses to claims and contribution claims.

SB448,7,2 (d) If the contractor wholly rejects the claim and will neither remedy the alleged construction defect nor settle the claim, or does not respond to the claimant's notice of claim within the time under par. (b), the claimant may bring an action against the contractor for the claims described in the notice of claim without further notice.

SB448,7,11 (e) If the claimant rejects a settlement offer made by the contractor, the claimant shall provide written notice of the claimant's rejection to the contractor. The notice shall include the specific factual and, if known, legal reasons for the claimant's rejection of the contractor's proposal or offer. If the claimant believes that the settlement offer omits reference to any portion of the claim, or was unreasonable, the claimant shall in its written notice include those items that the claimant believes were omitted and set forth in detail all reasons why the claimant believes the settlement offer is unreasonable. The contractor shall forward the claimant's response to a supplier upon whom a contribution claim has been made.

SB448,8,8 (f) 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 prompt and complete 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. 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 access under this paragraph. If a claim is asserted on behalf of the owners of multiple dwellings, or multiple owners of units within a multifamily complex, then the contractor shall be entitled to inspect each of the dwellings or units. 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 day, at least 3 working days before the inspection.

SB448,8,11 (g) Within 10 working days following completion of the inspection and receipt of all testing results under par. (f), the contractor may serve on the claimant any of the following:

SB448,8,15 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.

SB448,8,16 2. A written offer to settle the claim by monetary payment.

SB448,8,17 3. A written offer including a combination of repairs and monetary payment.

SB448,8,19 4. A written statement that the contractor will not proceed further to remedy the construction defect.

SB448,9,3 (h) If a claimant accepts a contractor's offer made under par. (g) within 15 working days after receipt of the offer, or if the offer is deemed accepted under par. (n), and the contractor does not proceed to make the monetary payment or remedy the construction defect within the agreed timetable, the claimant may bring an action against the contractor for the claim described in the notice of claim without further notice. The claimant may also file the contractor's offer and claimant's acceptance in the circuit court action, and the offer and acceptance creates a rebuttable presumption that a binding and valid settlement agreement has been created and should be enforced by the court.

SB448,9,7 (i) If a claimant receives a written statement that the contractor will not proceed further to remedy the construction defect, the claimant may bring an action against the contractor for the claim described in the notice of claim without further notice.

SB448,9,15 (j) If the claimant rejects the offer made by the contractor to remedy the construction defect or to settle the claim by monetary payment or a combination of each, the claimant shall serve written notice of the claimant's rejection on the contractor within 15 working days after receipt of the offer. The notice shall include the specific factual and, if known, legal reasons for the claimant's rejection of the contractor's offer. If the claimant believes the contractor's settlement offer is unreasonable, the claimant shall set forth in detail all reasons why the claimant believes the settlement offer is unreasonable.

SB448,9,18 (k) Upon receipt of a claimant's rejection and the reasons for the rejection, the contractor may, within 5 working days after receiving the rejection, make a supplemental offer of repair or monetary payment to the claimant.

SB448,9,25 (L) If the claimant rejects the supplemental offer made by the contractor under par. (k) to remedy the construction defect or to settle the claim by monetary payment or a combination of each, the claimant shall serve written notice of the claimant's rejection on the contractor within 15 working days after receipt of the supplemental offer. The notice shall include the specific factual and, if known, legal reasons for the claimant's rejection of the contractor's supplemental settlement offer. If the claimant believes the contractor's supplemental settlement offer is unreasonable, the claimant shall set forth in detail all reasons why the claimant believes the supplemental settlement offer is unreasonable. If the contractor declines to make a supplemental offer, or if the claimant rejects the supplemental offer, the claimant may bring an action against the contractor for the claim described in the notice of claim without further notice.

SB448,10,15 (m) If a claimant rejects a reasonable offer or reasonable supplemental offer made under this subsection, or does not permit the contractor to repair the construction defect pursuant to an accepted offer of settlement, the claimant may not recover an amount in excess of the fair market value of the offer of settlement, or the actual cost of the repairs made, whichever is less, or the amount of a monetary offer of settlement. For purposes of this paragraph, the trier of fact shall determine the reasonableness of an offer of settlement. If the claimant has rejected a reasonable offer or reasonable supplemental offer, and any other law allows the claimant to recover costs and attorney fees, then the claimant may recover no costs or attorney fees incurred after the date of its rejection.

SB448,10,24 (n) A claimant accepting the offer of the contractor to remedy a construction defect shall do so by serving the contractor with a written notice of acceptance within a reasonable period of time after receipt of the contractor's settlement offer, but no later than 15 working days after receipt of the offer. If no response is served upon the contractor within the 15-working day period, then the offer shall be deemed accepted. If all requirements under this section have been fulfilled, and if the claimant has rejected any outstanding offers, the claimant may bring an action against the contractor for the claim described in the notice of claim without further notice.

SB448,11,5 (o) If a claimant accepts a contractor's offer to repair a construction defect described in a notice of claim, the claimant shall provide the contractor and its agents, experts, and consultants prompt and unfettered access to the dwelling to perform and complete the construction by the timetable stated in the settlement offer.

SB448,11,11 (p) If, during the pendency of the notice, inspection, offer, acceptance, or repair process, an applicable limitation period would otherwise expire, the limitation period is tolled pending completion of the notice of claim process described in this section. This paragraph shall not be construed to revive a limitation period that has expired before the date on which a claimant's written notice of claim is served or extend any applicable statute of repose.

SB448,11,14 (q) After the sending of the initial notice of claim and initial contribution claim, a claimant, a contractor, and a supplier may, by written mutual agreement, alter the procedure for the notice of claim process described in this section.

SB448,11,17 (4) Contractor or supplier not liable for certain damages. In an action relating to a dwelling involving a construction defect, a contractor or supplier shall not be liable for damages involving or caused by any of the following:

SB448,11,19 (a) Normal shrinkage due to drying or settlement of construction components within the tolerance of construction standards.

SB448,11,22 (b) The contractor's or supplier's reliance on written information relating to the dwelling that was obtained from official government records or provided by a government entity.

SB448,11,24 (c) Any construction defect known by or disclosed to a claimant in writing before his or her purchase of the dwelling.

SB448,11,25 (d) Any construction defect in a dwelling that is purchased in "as is" condition.

SB448,12,3 (e) If the claimant is not the first owner of the dwelling, any construction defect known by the claimant or that could have been discovered by the claimant through the exercise of reasonable diligence before the claimant's purchase of the dwelling.

SB448,12,5 (f) Refusal of anyone to allow the contractor or supplier or the contractor's or supplier's agents to perform their warranty service work.

SB448,12,8 (5) Warranty terms. The claimant and contractor or supplier are bound by any contractor or supplier warranty terms pertaining to products or services supplied for the dwelling.

SB448,12,17 (6) Additional construction defects and notice and opportunity to repair. A construction defect that is discovered after an initial claim or contribution claim notice has been provided may not be alleged in an action until the claimant or contractor has given the contractor or supplier who performed the original construction work or provided supplies written notice of the new claim or contribution claim regarding the alleged new construction defect based on the claimant's or contractor's most current records. The contractor or supplier shall have an opportunity to resolve the notice of the new claim or contribution claim in the manner provided in subs. (3) and (9).

SB448,12,25 (7) Release; insurance. If a claimant or contractor accepts an offer made in compliance with this section and the contractor or supplier fulfills the offer in compliance with this section, an action brought by the claimant or contractor for the claim described in the notice of claim shall be dismissed with prejudice and the contractor or supplier is, for insurance purposes, legally obligated to make the repairs or the monetary payment as if the claimant or contractor had recovered a judgment against the contractor or supplier in the amount of the cost of the repairs or the amount of the monetary payment.

SB448,13,5 (8) Action of associations. (a) In this subsection, "association" means a homeowner's association, condominium association under s. 703.02 (1m), unit owner's association, or a nonprofit corporation created to own and operate portions of a planned community that may assess unit owners for the costs incurred in the performance of the association's obligations.

SB448,13,10 (b) A person may not provide or offer to provide anything of value, directly or indirectly, to a property manager of an association or to a member or officer of an association to induce the property manager, member, or officer to encourage the association to file or discourage the association from filing a claim for damages arising from a construction defect.

SB448,13,14 (c) A property manager retained by an association or a member or officer of an association may not accept anything of value, directly or indirectly, in exchange for encouraging to file or discouraging from filing a claim for damages on behalf of the association arising from a construction defect.

SB448,13,16 (d) A person who knowingly violates par. (b) or (c) may be fined not more than $500 or imprisoned not more than 30 days, or both.

SB448,13,20 (e) An association may bring an action against a contractor to recover damages resulting from construction defects in any of the common elements or limited common elements of a condominium, as defined in s. 703.02 (2) and (10). Such an action may be maintained only after all of the following occur:

SB448,13,23 1. The association first obtains the written approval of each unit's owner whose interest in the common elements or limited common elements will be subject of the action.

SB448,13,25 2. A vote is held of the units' owners to which at least a majority of the votes of the members of the association are allocated.

SB448,14,4 3. The full board of directors of the association and the contractor have met in person and conferred in a good faith attempt to resolve the association's claim, or the contractor has definitively declined or ignored the requests to meet with the board of directors of the association.

SB448,14,6 4. The association has otherwise satisfied all of the pre-action requirements for a claimant to commence an action under this section.

SB448,14,11 (f) At least 3 working days in advance of any vote to commence an action by an association to recover damages resulting from construction defects in any of the common elements or limited common elements of a condominium, the attorney representing the association shall provide to each unit's owner a written statement that includes, in reasonable detail all of the following:

SB448,14,13 1. The construction defects and damages or injuries to the common elements or limited common elements.