Dealing with construction defects

The Washington State Legislature recently enacted new laws that aim to decrease construction defect claims involving multi-unit residential buildings. The new laws apply to all projects beginning on or after August 1, 2005. In addition to efforts to ensure multi-unit residential buildings are constructed in a water tight manner, the new legislation also provides a framework to deal with construction defect claims in a more economical manner to reduce the expensive multi-party litigation.

At the permitting and construction phase, new procedures are in place. When applying for a building permit for a multi-unit residential building, the contractor is required to submit building enclosure design documents. The building department will not issue a permit unless the building enclosure design documents are approved by an engineer or architect to comply with the new building requirements.

A qualified inspector is also required to inspect the building enclosure of all multi-unit residential buildings during the course of construction. A "qualified inspector" must be a person with substantial and verifiable training and experience in building enclosure design and construction, and may not be an employee or related to the declarant, developer, association or any party providing services or materials to the project.

The inspection is expected to be independent to ensure that the multi-unit structure is constructed in a water tight manner to avoid claims in years to follow. The building department will not issue a final certificate of occupancy until the inspector submits a letter certifying that the building enclosure was inspected during the course of construction and that it was constructed in substantial compliance with the design.

Mediation is mandatory under the new legislation. Mediation is required to commence within seven months of the latter of the filing or service of the complaint. The act also contains a mandatory arbitration provision that requires the parties to engage in private arbitration. Private arbitration is generally faster and less expensive than litigating construction defect claims in court. Generally, the arbitration hearing must commence within 14 months from the latter of filing or service of the complaint. Under the new laws, the primary parties to the dispute may join subcontractors in the arbitration.

A party that is not satisfied with the arbitration award may file a request for trial. However, a party that requests a trial but does not obtain a more favorable result than at the arbitration is required to pay the party that did not request a trial its costs and fees, including reasonable attorney fees.

The new legislation contains many other important provisions, which developers must be aware of if engaged in the construction and development of multi-unit residential buildings in Washington. Although the act will not guarantee that newly constructed multi-unit developments are free from water intrusion related construction defects, the legislature has made a large step in the right direction.