Overview
Amends A.R.S. § 12-552 and adds a new A.R.S. § 33-1242.01 to reduce the statute of repose for construction defect claims from eight years to four years, with a two-year extension for claims related to injuries or latent defects discovered in the fourth year. Additionally, condominium associations would need to follow a specific process before initiating a construction defect action, including obtaining a professional engineer’s inspection, notifying the developer, and holding a meeting where unit owners vote on the action. Approval would require at least a two-thirds vote of participating unit owners. The association must also provide disclosures to unit owners about potential risks and financial implications of the claim.
Key Changes
Current Law
Condominium associations may bring construction defect actions within eight years of substantial completion. No specific procedural requirements exist for unit owner notification, voting thresholds, or pre-litigation engineering inspections.
Proposed Amendment (Inactive)
- Statute of Repose Reduction: The time limit for bringing construction defect actions is reduced from eight years to four years after substantial completion, with a two-year extension available for claims involving injuries or latent defects discovered in the fourth year.
- Engineer Inspection Requirement: Condominium associations must obtain a professional engineer’s inspection of the alleged defects before initiating legal action.
- Developer Notification: Associations must notify the developer of construction defect claims and the proposed legal action before proceeding.
- Unit Owner Meeting and Vote: Associations must hold a meeting where unit owners vote on whether to pursue the construction defect action. Approval requires at least a two-thirds vote of participating unit owners.
- Financial Disclosure Requirements: Associations must provide unit owners with disclosures about the potential risks and financial implications of pursuing construction defect claims, including litigation costs, assessment impacts, and possible outcomes.
Legislative Timeline
- January 28, 2025 – House Second Read
- January 27, 2025 – House First Read; Assigned to the House Committee on Government and the House Committee on Rules
Impact
These proposed changes would fundamentally alter how condominium associations pursue construction defect claims. The shortened four-year statute of repose requires associations to identify defects much earlier, potentially before issues fully manifest.
The mandatory pre-litigation process—engineer inspections, developer notification, financial disclosures, and two-thirds unit owner approval—creates significant procedural hurdles that could reduce the number of construction defect lawsuits. Boards would need to budget for professional engineering services before seeking owner approval and provide detailed financial projections about litigation costs and potential special assessments.
The two-thirds voting threshold is substantially higher than typical board action requirements and may be difficult to achieve, particularly in larger communities or those with owner apathy. Unit owners would gain direct control over major litigation decisions but would also bear increased responsibility for understanding complex construction and legal issues.