A new law, effective Jan. 1, 2006, requires that homeowners give residential contractors 60-days’ notice of construction defects and an opportunity to respond before a legal action can be filed. Governor Lynch signed HB 469 on June 21, 2005; the new law will be codified at RSA 359-G.

Kendall Buck, vice president of the Homebuilders and Remodelers Association of New Hampshire, speaking at a recent CLE, described the new law as providing a “cooling off period – designed to get the homeowner and builder together before anybody calls a lawyer.”

The Homebuilders’ group wrote HB 469, based on similar laws in 24 other states, in response to what it perceives as unnecessary construction defect litigation. Buck referred to a national study suggesting that such litigation costs the homebuilding industry nearly $3,000 per house.

According to Buck, reputable contractors would much rather avoid litigation by returning and repairing construction defects.  But critics of the new law question whether it offers enough protection to homeowners who may not be dealing with reputable contractors, or who have a legitimate claim which is rejected by a contractor.

HB 469 requires that any legal action filed by a homeowner be stayed for 60 days, until the homeowner has provided the contractor with notice of the claim, including supporting evidence, and has given the contractor 30 days to respond directly to the homeowner.

No attachments may be granted within that 60-day period.  An earlier version of the bill stated that a prematurely filed action would be dismissed. The stay provision that is part of the final language is a definite improvement, according to Nashua attorney Anna Barbara Hantz, a member of the New Hampshire Trial Lawyers Association, who has followed the bill through the legislative process.

Hantz notes that the new law does not prevent the immediate filing of a legal action, or a request for attachment during the 60-day period, which could then form the basis for a fraudulent transfer action. Early in the legislative process, there had been some discussion of a bonding requirement, Hantz said, but none was incorporated into the final bill.

“The good news about this law,” Hantz said, “is that it requires a response from contractors, and that’s usually what homeowners are looking for.”  The response must be (1) an offer of settlement without inspection, (2) a request for an inspection, or (3) an outright rejection of the claim.  Homeowners are not required to allow the contractor to inspect or repair the defect. Nor are homeowners barred from contracting around the notice provisions of the statute, Hantz said.

Further Provisions

Several provisions in the bill extend well beyond the 60-day notice period.  For example, if a homeowner rejects a settlement offer that turns out to be greater than a later judgment, the contractor “shall be deemed the prevailing party” for taxation of costs purposes. Also, finding new and unrelated defects seems to trigger a new 60-day notice period, whether or not litigation has been commenced on the initial defect.

The bill also lists several items for which contractors shall not be held liable, including:

1) Normal shrinkage or settlement;

2) Reliance on information from governmental entities;

3) Reliance on building codes;

4) Normal wear and tear.

“Contractor” is defined in the new law as any entity providing design, new construction, or repair services on a new or existing residence.

The statute requires that all residential construction contracts with a value of more than $5,000 contain a “conspicuous” notice describing the new process for defective construction complaints.

Also this session: the legislature established a study committee to consider a licensing requirement for contractors, and to develop a standard residential construction contract.