Posted: 21 Jul 2008
Date Written: July 17, 2008
The U.S. home building industry has been in a financial crisis fueled by a rise in construction defect litigation. During the past two decades, insurance carriers have pulled out of the market in many areas of the country or raised premiums precipitously, blaming increased risks from construction defect litigation. With insurance either unavailable or prohibitively costly, many builders have gone out of business, stopped building certain types of housing projects, or passed the increased costs along to consumers - all of which threatens the availability and affordability of housing. State legislatures have attempted to address the crisis by prohibiting homeowners from bringing legal action until after they have provided the builder with notice of a construction defect and an opportunity to repair it. More than two dozen states have jumped on this industry-driven legislation since 2000.
This article critiques the efficacy of "notice and opportunity to repair" (NOR) as a response to the industry's problems. After examining the history and causes of the crisis, the article concludes that NOR statutes are, at best, only a partial remedy to a problem of multiple dimensions and that legislatures need to develop a more comprehensive solution. The article discusses some of the most promising strategies, which include enactment of a statutory warranty with clear liability and performance standards.
Keywords: construction defects, notice and opportunity to repair, builder, contractor, new home, condominium, legislation
JEL Classification: K11
Suggested Citation: Suggested Citation
Noble-Allgire, Alice M., Notice and Opportunity to Repair Construction Defects: An Imperfect Response to the Perfect Storm (July 17, 2008). Available at SSRN: https://ssrn.com/abstract=1162395