A near miss

Lawmakers are often better appreciated for the laws they don’t pass.

That was true when, for the third consecutive year, the state Legislature barely rejected a construction warranty bill that would have hurt an already besieged building and housing industry. Because of the close call, and the likelihood it will resurface next year, an autopsy of House Bill 1393/Senate Bill 5895, and its potential ramifications is worthwhile.
The bill, if passed, would have created a new agency funded by increased building costs. Its mandatory warranties would have also exposed builders to an unbearable degree of liability to cause most insurance carriers to abandon or impose much higher premiums on building professionals.

This agency, the Office of Consumer Education for Home Construction, would have overseen a “recovery fund” – also funded by builders – to pay homeowners for construction defects.

The agency would have also investigated and presided over all claims filed by homeowners before either side could go to court. No one can predict the added costs or headaches this agency would have caused, but involving a government agency to oversee what has always been governed by private contract would have certainly presented some unprecedented challenges for the industry.

 The second part of the bill would have mandated new “implied” warranties, despite the expressed intent of the parties. These warranties would have granted contract rights to persons that were not even parties to the contract.
The law would have also permitted builders to be sued, in some cases for up to 10 years – long after they had completed their work.

These added warranty provisions have been referred to as “condominium-like” in reference to those warranties that were imposed on condominium builders several years ago. That industry is still struggling to overcome that legislation.

The lesson learned from that legislation: exposing builders to unrealistic risks serves mostly to drive up insurance costs and increase the risk of litigation, which in turn means less affordable housing.

The third part of the bill would have allowed the Department of Labor and Industries to better scrutinize builders by requiring more information about their qualifications. It would have also required contractors to be certified to understand foundations, siding, roofing and windows. Industry leaders have long embraced rules to cull out unskilled and unreliable builders that give the industry a black eye.

Reputable contractors provide their customers sufficient warranties or other written promises to protect homeowners. With the exception of rules to tighten up licensing requirements for contractors, this bill was, as the legislature concluded, unnecessary.

Creating another regulatory agency, or mandating unrealistic warranties, will only increase construction cost and harm an industry vital to our economy. While the building industry dodged a bullet this year, it must remain vigilant and on its toes to respond when the bill resurfaces next year.

Brad Andersen is an attorney in the Vancouver law office of Schwabe, Williamson and Wyatt, focusing his practice in the areas of commercial litigation, construction and land use permitting and development. He can be reached at 360-905-1431 or bandersen@schwabe.com.

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