BILL REQ. #:  S-1725.3 

READ FIRST TIME 02/16/07.   

     AN ACT Relating to real property; adding a new chapter to Title 64 RCW; creating a new section; providing an effective date; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Appliances, fixtures, and items of equipment" means furnaces, boilers, oil tanks and fittings, air purifiers, air handling equipment, ventilating fans, ceiling fans, air conditioning equipment, water heaters, pumps, stoves, ranges, ovens, refrigerators, garbage disposals, compactors, dishwashers, automatic door openers, washers and dryers, bathtubs, sinks, toilets, faucets and fittings, lighting fixtures, lighting control and energy management systems, security systems, circuit breakers, and other similar items.
     (2) "Builder" means any person, corporation, general contractor, or other legal entity that:
     (a) Is engaged in the business of erecting or otherwise constructing a new home; or
     (b) Purchases a completed new home for resale in the course of its business.
     (3) "Defect" means any violation or nonconformity with applicable building codes, regulations, or permits that has an adverse effect or will have an adverse effect on the new home or component of the new home alleged to be in violation of the new home warranty. As used in this subsection, an "adverse effect" must be more than technical and must be significant to a reasonable person. To establish an adverse effect, the person alleging the breach is not required to prove that the breach renders the unit or common element uninhabitable or unfit for its intended purpose.
     (4) "Electrical systems" means all wiring, electrical boxes, switches, outlets, and connections to the public utility system.
     (5) "Heating, cooling, and ventilating systems" means all duct work, gas, steam, water and refrigerant lines, registers, convectors, solar panels, radiation elements, and dampers.
     (6) "Load-bearing portions of the home" means the load-bearing portions of the:
     (a) Foundation system and footings;
     (b) Beams;
     (c) Girders;
     (d) Lintels;
     (e) Columns;
     (f) Walls and partitions;
     (g) Floor systems; and
     (h) Roof framing systems.
     (7)(a) "New home" means every newly constructed private dwelling unit in the state and the appliances, fixtures, and items of equipment and structure that are made a part of a newly constructed private dwelling unit at the time of construction. Newly constructed private dwelling units include substantial remodels. "Substantial remodel" means a remodel of a residence, for which the total cost exceeds one-half of the assessed value of the improvements for property tax purposes at the time the contract for remodel was made.
     (b) "New home" does not include:
     (i) A condominium, as defined in RCW 64.34.020, used for residential purposes, as defined in RCW 64.34.020;
     (ii) A residential timeshare as defined in RCW 64.36.010;
     (iii) A manufactured home or mobile home as defined in RCW 65.20.020;
     (iv) Outbuildings, including detached garages and carports, except outbuildings that contain plumbing, electrical, heating, cooling, or ventilation systems serving the new home, and then only to the extent that defects to the outbuildings could affect these systems;
     (v) Driveways;
     (vi) Walkways;
     (vii) Boundary walls;
     (viii) Retaining walls not necessary for the structural stability of the new home;
     (ix) Landscaping;
     (x) Sprinkler or irrigation systems;
     (xi) Fences;
     (xii) Off-site improvements;
     (xiii) Appurtenant recreational facilities; and
     (xiv) Other similar items as determined by the director of the department of labor and industries by rule.
     (8) "New home warranty" means the warranty created in section 2 of this act.
     (9) "Nonprofit or public affordable homeownership program" means a program operated by: A public entity, such as a housing authority, public development authority, or community action agency; or a nonprofit charitable organization exempt from taxation under section 501(c)(3) of the internal revenue code of 1986 (26 U.S.C. Sec. 501(c)(3)), as having a purpose related to the development or production of housing affordable to persons of low or moderate-income or special needs populations, and that is developing, building, constructing, rehabilitating, substantially remodeling, or otherwise providing housing primarily for persons that could not otherwise afford to own a home. These programs often include a sweat equity provision where the persons obtaining a home through the program provide a portion of the labor to build or rehabilitate the home in return for purchasing the home at a lower price. Examples of these programs in Washington state include, but are not limited to, programs operating under the United States department of agriculture self-help housing grant program, the department of housing and urban development's self- help housing opportunity program, local chapters of habitat for humanity, community land trusts, homesight, and the low income housing institute.
     (10) "Owner" means the purchaser of a new home or any subsequent owner of a home to which the warranty created in section 2 of this act applies.
     (11) "Plumbing systems" means:
     (a) Gas supply lines and fittings;
     (b) Water supply, waste, and vent pipes and their fittings;
     (c) Septic tanks and their drain fields; and
     (d) Water, gas, and sewer service piping and their extensions to the tie-in of a public utility connection, or on-site wells and sewage disposal systems.
     (12)(a) "Structural defect" means any defect in the load-bearing portions of a new home that adversely affects its load-bearing function to the extent that the home becomes or is in danger of becoming unsafe, unsanitary, or otherwise not reasonably safely inhabitable.
     (b) "Structural defect" also includes damage due to subsidence, expansion, or lateral movement of soil that has been disturbed or relocated by the builder.
     (c) "Structural defect" does not include damage caused by movement of the soil:
     (i) Resulting from a flood or earthquake; or
     (ii) For which compensation has been provided.
     (13) "Warranty date" means the first day on which the owner occupies the new home, closes on the new home, makes the final contract payment on the new home, or obtains an occupancy permit for the new home if the home is built on the owner's property, whichever is earlier.

NEW SECTION.  Sec. 2   (1)(a) Except as excluded under (b) of this subsection, every contract for the construction or sale of a new home includes, as a matter of law, a warranty from the residential builder that shall warrant at a minimum that:
     (i) For two years, beginning on the warranty date, the new home is free from any defects in materials and workmanship;
     (ii) For three years, beginning on the warranty date, the new home is free from any defects in the electrical, plumbing, heating, cooling, and ventilating systems, except that in the case of appliances, fixtures, and items of equipment, the warranty need not exceed the length and scope of the warranty offered by the manufacturer, and the warranty of merchantability, fitness, and all other implied warranties with respect to appliances, fixtures, and items of equipment shall be governed by the Washington uniform commercial code;
     (iii) For five years, beginning on the warranty date, the new home is free from any defects that permit or, without repair, will lead to water penetration; and
     (iv) For ten years, beginning on the warranty date, the new home is free from any structural defects.
     (b) The new home warranty excludes the following:
     (i) Damage to real property that is not part of the home covered by the warranty or that is not included in the purchase price of the home;
     (ii) Bodily injury or damage to personal property;
     (iii) Any defect in materials supplied or work performed by anyone other than the builder or the builder's employees, agents, or subcontractors;
     (iv) Any damage that the owner knew or had reason to know existed but has not taken reasonable action to mitigate;
     (v) Normal wear and tear or expiration of normal useful life;
     (vi) Insect damage, except where the builder has failed to use proper materials or construction methods designed to prevent insect infestation;
     (vii) Any loss or damage that arises while the home is being used primarily for nonresidential purposes;
     (viii) Any damage to the extent it is caused or made worse by negligence, improper maintenance, or improper operations by anyone other than the builder or its employees, agents, or subcontractors;
     (ix) Any damage to the extent it is caused or made worse by changes of the grading of the ground by anyone other than the builder, its employees, agents, or subcontractors; and
     (x) Any loss or damage caused by acts of God.
     (2) The warranty created by this section runs from the builder to the owner. This warranty entitles the owner to recover from the builder all costs associated with repairing the defects, including all incidental and consequential damages. The liability of a builder under the new home warranty shall be limited to the fair market value of the home. Absence of privity of contract between the owner and the builder is not a defense to the enforcement of this warranty.
     (3) If the defect is the result of work performed by a subcontractor, the builder has a right of contribution from that subcontractor for amounts paid to the owner as a result of the new home warranty.
     (4) No action to enforce the new home warranty created by this section may be commenced after six years have passed from the time the defect is discovered or, with reasonable diligence, should have been discovered. However, an action may not be brought under this section more than ten years after the warranty date, and actions against a nonprofit or public affordable housing program may not be brought more than six years after the warranty date. Providing written notice and a reasonable description of a defect to the builder has the effect of tolling the limitation periods established by this subsection and subsection (5) of this section. Tolling continues until the builder completes the repair to the owner's satisfaction, or the builder gives the owner written notice that the builder refuses to make the repair or has completed as much of the repair as the builder intends to complete.
     (5) Except as provided in subsection (4) of this section, no action to enforce the new home warranty created by this section may be filed later than the time periods described in subsection (1)(a) of this section.
     (6) The new home warranty is a cumulative remedy, and shall not have the effect of diminishing or replacing any other remedy or warranty created by law or equity or agreement between the parties. The new home warranty is in addition to the warranties created under chapter 64.34 RCW.
     (7) The new home warranty does not expire on the subsequent sale of a new home by the owner to a subsequent purchaser, but continues to protect later purchasers until the warranties provided in subsection (1)(a) of this section expire.
     (8) The new home warranty created in this section may not be omitted, waived, or disclaimed in any way.
     (9) All new homes must include in the purchase and sale agreement between the builder and the buyer the following statement: "This home was built in compliance with all applicable building codes and is governed by a statutory warranty set forth in chapter 64.-- RCW (sections 1 and 2 of this act), which representation and warranty may not be omitted, waived, or disclaimed in any way."
     (10) This chapter is not intended to create an independent right to maintain a class action against any builder.

NEW SECTION.  Sec. 3   (1) A committee on residential construction is created. The committee consists of the following members who have experience and expertise in residential construction law or residential construction:
     (a) One member from each caucus of the senate, appointed by the president of the senate;
     (b) One member from each caucus of the house of representatives, appointed by the speaker of the house of representatives;
     (c) The following seven members jointly appointed by the speaker of the house of representatives and the president of the senate:
     (i) One builder of single-family homes;
     (ii) One residential construction defense attorney with experience representing builders in single-family construction defect actions;
     (iii) One residential construction plaintiff attorney with experience representing homeowners in single-family construction defect actions;
     (iv) One representative of the Washington homeowners coalition;
     (v) One third-party private building inspector;
     (vi) One architect; and
     (vii) One expert in water penetration issues affecting residential construction; and
     (d) One person appointed by the governor to serve as chair of the committee.
     (2) The committee shall:
     (a) Study the cause, extent, and type of construction defects currently existing with single-family residential construction;
     (b) Evaluate the existing remedies for homeowners in Washington for single-family residential construction defects;
     (c) Examine what contractors and their industry groups can do to improve the quality of construction to minimize construction defects and, as a result, reduce contractors' liability costs as well as reduce problems for their customers;
     (d) Examine the issue of contractor licensing including, but not limited to, whether contractors should be licensed and what education and training requirements should exist;
     (e) Evaluate whether current surety bond requirements are sufficient or if increased or additional bonding requirements are necessary to protect both construction professionals and homebuyers;
     (f) Determine whether there should be increased standards for city and county building inspectors and examine if changes are needed to the permit sign off process;
     (g) Assess whether changes to the building code are necessary to avoid water penetration problems; and
     (h) Examine the costs and benefits of the statutory warranty created in section 2 of this act, including availability of insurance, efficient access to justice, and potential application of alternative dispute resolution, and evaluate whether there is a more cost-effective way to protect both the homeowners and the residential construction industry in Washington state. Within this evaluation, the committee shall examine other states that have implemented statutory home warranties including, at a minimum, Maryland and California.
     (3) Staff support for the committee must be provided by senate committee services and the house of representatives office of program research.
     (4) Legislative members of the committee must be reimbursed for travel expenses in accordance with RCW 44.04.120.
     (5) By December 31, 2007, the committee shall deliver to the consumer protection and housing committee of the senate and the judiciary committee of the house of representatives a report of the findings and conclusions of the committee and any proposed legislation.
     (6) This section expires on January 1, 2008.

NEW SECTION.  Sec. 4   Sections 1 and 2 of this act constitute a new chapter in Title 64 RCW.

NEW SECTION.  Sec. 5   Sections 1 and 2 of this act take effect July 1, 2008.