New Construction Dispute Law isn’t Perfect

Last updated on May 13th, 2019 at 02:37 pm

Building a new home can be nerve-racking, and when something doesn’t go right, it could result in a bitter dispute between the homeowner and contractor. However, a new law that takes effect this fall will attempt to relieve some of the stress by providing an efficient way to resolve construction disputes. Despite good intentions, this new law has some flaws, and in some cases, could make the process of resolving disputes more expensive. Nevertheless, both contractors and homeowners need to understand the new law.

For various reasons, things happen during the building of a new home – a foundation crack, building materials arrive late or Mother Nature delays it. In most cases, the contractor will work with the homeowner to resolve issues and get the homeowner in their new or remodeled home on schedule. However, sometimes there may be a serious defect or an issue that a homeowner wants fixed, but the contractor fails to accept responsibility. In this case, a homeowner-contractor dispute may get ugly and turn into a lengthy legal battle resulting in more costs, hard feelings and more delays.

The law, which goes into effect Oct. 1, is aimed at reforming current practices and provides a new, detailed method to resolve residential construction disputes – without going into court. The law details a new process homeowners must follow before filing a lawsuit for defective construction. Lawmakers believed this new process will provide a better chance to have disputes resolved in a fast and efficient manner, and avoid the high costs and delays of a lawsuit.

Under the new law, a homeowner – including a condo owner, condo association or apartment building owner – with a contractor disagreement is required to send the contractor a letter specifically spelling out the problem. The contractor, homeowner and window and door suppliers (but curiously not other suppliers or subcontractors) must meet various deadlines regarding their demands, offers and counteroffers.

Initially, the contractor must respond with: 

  •  A written offer to fix the defect. 
  • A payment to cover repairs.
  • Some combination of repair and payment.
  • A rejection of the claim.
  • A request to inspect the defect.

Other deadlines stem from the contractor’s response. At some point, if no resolution is reached, the homeowner is then allowed to bring legal action. Statutes of limitations are suspended during this process. As with most new laws, there are some pluses and minuses. While some feel it will benefit homeowners, it also could serve as another bureaucratic hurdle to clear before going to court. For example, the homeowner may be required to provide documentation and get expert opinions to fully comply with the law. The documents required are similar to what would be needed if the issue were in court. But under the new law, this information would be needed sooner.

Additionally, if the problem is with a subcontractor other than a window or door supplier, there is no requirement that subcontractors participate in the process. Depending upon the contract, there is a possibility that no suit against the subcontractor could be brought until a claim against the contractor is started. While many construction defects aren’t known until the project is completed, proactive protective steps can be taken.

Both homeowners and contractors should document all work progress so that information is available if there is a future dispute. In addition, prior to work beginning, it will help to have a lawyer ensure that the contract’s dispute resolution and other key provisions are appropriate. Additionally, confirming there is proper insurance is critical to ensuring resources are available for correcting possible problems. This new law is a major change to the current system, and homebuilders and contractors will benefit from a thorough understanding of what this means for those on all sides of the homebuilding equation.

In addition, homebuilders and their customers need time to get used to the new law. The law requires contractors to inform customers of this change at the start of construction and also directs the Wisconsin Department of Commerce to publish a brochure explaining the new procedures.  While this law has some significant flaws, in certain situations, it can benefit both sides and, if implemented effectively, lessen the stress on an already crowded court system.

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