LATENT DEFECTS

Can We Get the Stucco Repaired by the Original Contractor?

We are the second owners of a home in Prescott Valley and have been in our home for three years.  The home was built for the first owner six years ago.  Our stucco is now cracking and falling off.  No one has been injured and we have no damage to the inside of our house.  We are aware of the two-year complaint deadline within which a buyer can file a complaint with the Registrar of Contractors and now we are beyond that deadline.   Can we get the stucco repaired by the original contractor??
- Sean and Kathy, Prescott Valley


Your situation might involve a hidden defect, also known as a "latent" defect: there may have been an original problem with the application of the stucco which remained hidden until just recently. On the other hand the stucco problem may be due to ordinary weathering which is not considered a "defect."

Issues involving latent defects involve some of the most complex and rapidly developing issues in Arizona law today. Most latent defects are discovered many years after the home is built and many are beyond the various time limits to make a claim for a repair. Many such defects are discovered by homeowners, often not the original homeowner.

However, Arizona law recognizes that the effect of a latent defect, even discovered later by a subsequent homeowner, is financially damaging and under the right circumstances a homeowner may be legally entitled to a repair from the contractor.

Seeking a latent defect repair can be made in four general ways: (1) a contractual warranty claim under the original construction contract, (2) a complaint to the Registrar of Contractors, (3) an implied warranty claim and (4) simply ask the contractor to make the repairs. Keep in mind, if a complaint is made after the applicable time limits, the contractor is under no obligation to make the repairs.

Repairing defects under option (1) Contractual Warranty Claim; most contracts limit the time period to make a claim for a repair to one or two years and in some cases three years. However, only the original homeowner who directly contracted with the builder is entitled to make a contractual warranty claim. Because you are not the original homeowner who contracted with the builder, you cannot make a contractual warranty claim. A contractual warranty claim by the original homeowner against the builder must be brought up within the contractually stated period, or if none is stated within six years.

Repairing defects under option (2) Registrar of Contractors; repairs of defective workmanship can be made provided the complaint is made within two years after (a) close of escrow or (b) actual occupancy, whichever occurred first. Because the complaint deadline of two years has passed, you cannot make a complaint to the Registrar. It is also important for homeowners to remember that when filing a complaint through the ROC, the complaints can only be made against a licensed contractor.

Repairing defects under option (3) implied warranty; Arizona's appellate courts have over the past several decades applied the concept of "implied warranty" to construction defects. An "implied warranty" means that it is not a warranty appearing in a construction contract: it is "implied" that the home will be built within “workmanlike manner” and it will serve its intended purpose. The implied warranty doctrine applies only to subsequent purchasers, i.e. not the original owners who had the house built. And, this doctrine applies only to latent defects, i.e. those defects not discoverable during a reasonable inspection made prior to your purchase.

Whether a problem is truly a latent defect will be determined by looking at the age of the home, the amount of ordinary wear and tear, maintenance or lack thereof, changes made by prior homeowners, etc. The burden is upon you as the current homeowner to show that the newly discovered problems were defects in the original construction. Furthermore, the doctrine is limited: a contractor is not responsible for the house to be in good condition forever.

There are time limits within which the request for repair of a latent defect must be made. The time period is not indefinite. These time periods are called statutes of limitations. The statute of limitations is determined by the nature of the claim, be it for breach of contract or implied warranty.

Your situation involves an implied warranty claim. Here the clock does not begin to run until the "date of discovery" of the defect. But this does not mean that the clock runs indefinitely on your time to request a repair. In the mid-1980s Arizona's appellate courts decided that the time limit within which to bring a claim was "reasonable time." This decision was not very helpful, and in 1992 the Arizona legislature passed a special type of statute of limitations called a "statute of repose." Under this statute a contractor is only responsible for defects discovered eight years after completion of construction, or if the defect is discovered in the eighth year, the homeowner has one additional year to bring the claim. But, you must bring the claim within two years after you discover it, or within one year if discovered within the ninth year of the statute of repose. However, be aware, a prior owner's knowledge of the defect starts the clock running and not with the current owner's discovery. The law involving implied warranties is evolving quickly and dramatically. It is therefore important for you to contact an attorney and discuss your specific facts and current case law. In your situation if it is actually a defect, it is quite possible the contractor would be obligated to make the repairs because the defect was discovered by you and because the eight year statute of repose has not yet expired.

Keep in mind, you also need to look beyond the law and look at real life factors such as the current economic crisis which has been particularly hard on the construction industry, and it is possible the contractor may no longer be in business. If the original contractor is unwilling to make the repairs and before you consider a lawsuit, you must also ask yourself whether the cost of repair justifies the cost of litigation which is usually expensive.

This answer is intended to provide general information only and is not intended to take the place of consulting with an attorney who will advise you based on the specific facts of your case and the most current Arizona law.

Phone: (928) 778-0040

Address:
810 E. Sheldon Street, Prescott, AZ 86301

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