72nd OREGON LEGISLATIVE ASSEMBLY--2003 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 1161
House Bill 2389
Sponsored by Representative BUTLER; Representatives CLOSE, KNOPP,
SCHAUFLER, SCOTT, Senator MORSE (at the request of Oregon
Building Industry Association, Professional Insurance Agents of
Oregon/Idaho)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Establishes notice of condition procedure as prerequisite to
compelling arbitration or commencing court action to recover
damages for residential construction defect.
A BILL FOR AN ACT
Relating to residential construction claims.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Definitions. As used in sections 1 to 8 of
this 2003 Act:
(1) 'Contractor' means a person, or the successor thereto, that
performed services for the construction, alteration or repair of
a residence pursuant to a contract with the owner.
(2) 'Owner' means the possessor of an interest in a residence
or in land that is a residential site, or a person that has
entered into a contract for the purchase of an interest in the
residence or land. 'Owner' includes an association formed under
ORS 94.625 and other groups that represent the common interests
of the possessors of residences or land regarding construction
defects.
(3) 'Residence' means residential structure, as defined in ORS
701.005.
(4) 'Secondary notice' means a copy of an owner's notice of
condition that a contractor, subcontractor or supplier sends to
another contractor, subcontractor or supplier that may be
responsible for a construction defect.
(5) 'Subcontractor' means a person that performed services for
the construction, alteration or repair of a residence, without
having a contractual relationship with the owner.
(6) 'Supplier' means a person that furnished systems,
components or materials that are incorporated into a
residence. + }
SECTION 2. { + (1) An owner of a residence may not compel
arbitration or commence a court action against a contractor,
subcontractor or supplier to recover damages for a construction
defect in a residence unless the owner has followed the procedure
set forth in this section and section 4 of this 2003 Act.
(2) The owner must send a notice of condition by registered
mail, return receipt requested, to:
(a) A contractor or subcontractor at the last known address for
the contractor or subcontractor as shown in the records of the
Construction Contractors Board; and
(b) A supplier at the business address of the supplier.
(3) A notice of condition sent by an owner must include:
(a) The name and mailing address of the owner;
(b) A statement that the owner may seek to compel arbitration
or bring a court action against the contractor, subcontractor or
supplier to recover damages for a construction defect;
(c) The address and location of the affected residence;
(d) A description of:
(A) Each defect being complained of;
(B) The remedial action the owner believes is necessary; and
(C) Any incidental damages resulting from the defect that
cannot be remedied by remedial action; and
(e) Any report or other supporting documentation regarding the
defects and incidental damages. + }
SECTION 3. { + (1) If a contractor, subcontractor or supplier
receives a notice of condition sent under section 2 of this 2003
Act and believes that another contractor, subcontractor or
supplier may be responsible for the defect, the contractor,
subcontractor or supplier that received the notice of condition
shall, no later than 14 days after receiving the notice of
condition, send the other contractor, subcontractor or supplier a
secondary notice by registered mail, return receipt requested,
accompanied by a statement describing the basis for believing
that the other contractor, subcontractor or supplier may be
responsible.
(2) A contractor, subcontractor or supplier that receives a
notice of condition or secondary notice may send the owner a
written request to inspect the residence. The written request
must be sent no later than 14 days after the requesting
contractor, subcontractor or supplier first receives a notice of
condition or secondary notice for the alleged defect. The written
request to inspect the residence must state the nature and scope
of the inspection, whether any testing is to be performed and the
estimated time required for the inspection.
(3) A contractor, subcontractor or supplier that receives a
notice of condition or secondary notice shall send a written
response to the owner no later than 90 days after the contractor,
subcontractor or supplier first receives a notice of condition or
secondary notice of the alleged defect. A contractor,
subcontractor or supplier that received a secondary notice shall
also send a copy of the written response to the sender of the
secondary notice. The written response must be sent by registered
mail, return receipt requested. The written response:
(a) Must include one or more of the following for each defect
listed in the notice of condition:
(A) An acknowledgement of the existence, nature and extent of
the defect as set forth in the notice of condition, without
regard to responsibility for the defect.
(B) An acknowledgement of the existence of a defect differing
in nature or extent from the allegations in the notice of
condition, without regard to responsibility for the defect.
(C) A denial of the existence of the defect.
(b) Must include a copy of any report or documentation
described in section 4 (4) of this 2003 Act.
(c) May include one or more of the following:
(A) An offer to remedy some or all of the acknowledged defects.
The offer must specify a date by which all remedial action is to
be completed.
(B) An offer to pay a stated amount of monetary compensation to
the owner for some or all of the acknowledged defects and
incidental damage. The offer must specify a date by which full
payment of compensation is to be completed.
(C) A denial of responsibility for some or all of the
acknowledged defects or incidental damage.
(4) If a contractor, subcontractor or supplier receives a
secondary notice under subsection (1) of this section and fails
to provide the owner with a timely written response, the
contractor, subcontractor or supplier may not contest the
reasonableness or necessity of the remedial action or monetary
compensation in any subsequent action for contribution or
indemnity brought by the sender of the secondary notice. + }
SECTION 4. { + (1) An owner sending a notice of condition
under section 2 of this 2003 Act shall make the residence
available for inspection pursuant to any written request under
section 3 of this 2003 Act. The owner shall make the residence
available for inspection, during normal business hours or as
otherwise agreed, not later than 20 days after receiving the
written request for an inspection.
(2) An inspection by a contractor, subcontractor or supplier
may include any reasonable measures, including testing, for
determining the nature, cause and extent of the alleged defects,
necessary remedial action and incidental damages. Except as
provided in subsection (3) of this section, the contractor,
subcontractor or supplier conducting the inspection shall restore
the property to the same condition as prior to the inspection.
Any damage resulting from the inspection of the property or a
failure to restore the property to preinspection condition may be
included as incidental damages in any subsequent arbitration or
court action to recover damages for the construction defect.
(3) With the written consent of the owner, a contractor,
subcontractor or supplier may remedy a defect or arrange for the
remedying of a defect. A contractor, subcontractor or supplier is
not required to file a written response to a notice of condition
or secondary notice for a defect remedied pursuant to this
subsection if the owner accepts completion of the repair in
writing prior to expiration of the time for filing a written
response. If the contractor, subcontractor or supplier that
remedies or arranges for remedying of a defect received a
secondary notice, the contractor, subcontractor or supplier shall
send a copy of the repair acceptance to the sender of the
secondary notice.
(4) The contractor, subcontractor or supplier that requests to
inspect a residence must include any report or other supporting
documentation resulting from that inspection as part of the
contractor, subcontractor or supplier's written response under
section 3 of this 2003 Act. + }
SECTION 5. { + (1) An owner may accept an offer contained in a
written response under section 3 of this 2003 Act by delivering a
written acceptance to the offering contractor, subcontractor or
supplier within 30 days after receiving the offer. If an owner
fails to accept an offer on or before 30 days after receipt, the
offer is deemed rejected.
(2) If the owner accepts a contractor, subcontractor or
supplier's offer to remedy a defect or to pay monetary
compensation for a defect or incidental damage, completion of the
work or payment and written acceptance of the work or payment by
the owner fully satisfies all claims by the owner arising out of
that defect or incidental damage. Except as provided in
subsection (4) of this section, if the owner accepts an offer by
a contractor, subcontractor or supplier that received a secondary
notice under section 3 of this 2003 Act, completion of the work
or payment and written acceptance of the work or payment by the
owner fully satisfies all claims for contribution or indemnity
against the contractor, subcontractor or supplier by the sender
of the secondary notice.
(3) Except as provided in subsection (4) of this section, if a
contractor, subcontractor or supplier fails to perform in
accordance with an accepted offer, there is a conclusive
presumption that the failure to perform has resulted in
additional damages of not less than 10 percent of the fair market
value of the remedial work offered but not performed or 10
percent of the unpaid monetary compensation offered for the
defect and incidental damage.
(4) If a contractor, subcontractor or supplier that received a
secondary notice fails to perform in accordance with an accepted
offer, the sender of the secondary notice may, upon receiving
written consent of the owner, perform remedial work or pay
monetary compensation as described in the offer of the
nonperforming contractor, subcontractor or supplier. Consent of
the owner under this subsection waives any claim for the
presumptive additional damages described in subsection (3) of
this section. In any subsequent action against the nonperforming
contractor, subcontractor or supplier for contribution or
indemnity, the full value of the work or payment that was offered
by the nonperforming contractor, subcontractor or supplier is
attributable to the fault of the nonperforming contractor,
subcontractor or supplier.
(5) An owner that sends a notice of condition under section 2
of this 2003 Act may compel arbitration or commence a court
action for damages resulting from the construction defects listed
in the notice of condition if:
(a) The contractor, subcontractor or supplier that receives the
notice of condition under section 2 of this 2003 Act does not
send a timely written response;
(b) The written response by a contractor, subcontractor or
supplier that received the notice of condition or a secondary
notice does not offer remedial work or monetary compensation for
all of the listed defects or incidental damage; or
(c) The owner rejects the written offer.
(6) If an owner compels arbitration or commences a court action
against a contractor, subcontractor or supplier that received a
notice of condition, and the owner has rejected an offer by any
contractor, subcontractor or supplier to provide remedial work or
pay monetary compensation for a defect or incidental damage that
is a subject of the arbitration or action, the arbitrator or
court shall determine the fair market value of the rejected
offer. The arbitrator or court shall compare the fair market
value of the rejected offer to the value of the defect or
incidental damage as of the performance completion date specified
in the offer. If the value of the defect or incidental damage as
of the performance completion date does not exceed the fair
market value of the rejected offer, the arbitrator or court may
not award the owner:
(a) Any damages resulting from the defect on or after the
performance completion date specified in the offer; or
(b) Costs, prevailing party fees, disbursements or any
available attorney fees to the extent those costs, fees and
disbursements are attributable to the defect or incidental damage
and are incurred after the date the offer was received. + }
SECTION 6. { + (1) Notwithstanding ORS 12.135 and 30.905, the
expiration of the time for an owner to commence a court action
against a contractor, subcontractor or supplier for a
construction defect is tolled by the contractor, subcontractor or
supplier's receipt of a notice of condition under section 2 of
this 2003 Act until the later of:
(a) One hundred twenty days after the owner receives a written
response from the contractor, subcontractor or supplier that
received the notice of condition if the written response does not
contain a written offer to remedy or pay monetary compensation
for one or more defects or incidental damage listed in the notice
of condition;
(b) One hundred twenty days after the owner accepts or rejects
a written offer by any contractor, subcontractor or supplier to
remedy or pay monetary compensation for one or more of the
defects or incidental damage listed in the notice of condition;
or
(c) Thirty days after the last date specified in an accepted
written offer by which the offering contractor, subcontractor or
supplier is to complete the remedial work for one or more defects
or complete payment of monetary compensation for one or more
defects or incidental damage listed in the notice of condition.
(2) Delivery of a secondary notice sent by a contractor,
subcontractor or supplier under section 3 of this 2003 Act does
not act to toll the expiration of any right of the owner to
commence a court action against the recipient of the secondary
notice.
(3) When remedial work is performed pursuant to a written offer
under section 4 of this 2003 Act and accepted in writing by the
owner, the remedial work relates back for purposes of ORS 12.135
to the date the contractor or subcontractor substantially
completed work on the structure and does not constitute a new
performance. + }
SECTION 7. { + If an owner brings a court action to recover
damages for a construction defect and the owner has not followed
the procedure set forth in sections 2 and 4 of this 2003 Act, the
court must dismiss the action without prejudice. The owner may
not commence a new action unless the owner follows the procedure
set forth in sections 2 and 4 of this 2003 Act. If an owner seeks
to compel arbitration to recover damages for a construction
defect and the owner has not followed the procedure set forth in
sections 2 and 4 of this 2003 Act, the arbitrator shall not
schedule or continue the arbitration until the owner has followed
the procedure set forth in sections 2 and 4 of this 2003 Act. + }
SECTION 8. { + (1) A contractor, subcontractor or supplier
that receives a notice of condition under section 2 of this 2003
Act or secondary notice under section 3 of this 2003 Act must
notify any insurer that may be liable for payment of the claim on
or before the earlier of:
(a) The date the contractor, subcontractor or supplier sends a
written response under section 4 of this 2003 Act; or
(b) Ninety days after the contractor, subcontractor or supplier
receives a notice of claim or secondary notice.
(2) A notice is not required under subsection (1) of this
section for any claim resolved by the contractor, subcontractor
or supplier without filing a claim against the insurer. + }
SECTION 9. { + Sections 1 to 8 of this 2003 Act do not apply:
(1) To personal injury or death claims.
(2) To claims filed pursuant to ORS 701.139. + }
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