Overview
Amends A.R.S. §§ 12-552 and 33-2002 to reduce the statute of repose for construction defect actions from eight years to four years, with a two-year extension for claims related to injuries or latent defects discovered in the fourth year; to require associations to provide certain disclosures to sellers and construction professionals against whom construction defect actions are proposed prior to bringing such action; to require associations to make a presentation of the construction defects at a members’ meeting to the association prior to bringing such action; to give sellers and construction professionals against whom construction defect actions are proposed an opportunity to present at such members’ meeting; to require the approval of at least two-thirds of the association’s members to bring a construction defect action; to require an association to engage an engineer to inspect the property that is subject to a construction defect action prior to holding the member vote to approve the construction defect action; to require certain information in said engineer’s inspection report; to require notice of such engineer’s inspection to the members and the seller; to allow the seller to attend the engineer’s inspection; and to clarify that the right to repair or replace process set forth in A.R.S. § 12-1363 follows the member vote in favor of bringing a construction defect action; among other minor changes.
Key Changes
Current Law
Associations may bring construction defect actions within eight years of substantial completion. No specific procedural requirements exist for member 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.
- Pre-Action Disclosure Requirements: Associations must provide written disclosures to sellers and construction professionals before filing construction defect actions, including the nature of defects, estimated repair costs, and intent to pursue legal action.
- Mandatory Member Meeting: Associations must present construction defect claims at a members’ meeting before filing suit. Sellers and construction professionals have the right to present their response at this meeting.
- Two-Thirds Member Approval: Associations must obtain approval from at least two-thirds of voting members before pursuing construction defect litigation.
- Engineer Inspection Requirement: Associations must engage a licensed engineer to inspect the property and prepare a detailed report before the member vote. The inspection report must include specific findings about defects, their causes, and estimated repair costs.
- Seller Participation Rights: Sellers must receive notice of the engineer’s inspection and have the right to attend. Members must also be notified of the inspection.
- Right to Repair Process: The existing right to repair or replace process under A.R.S. § 12-1363 occurs after the member vote approving the construction defect action.
Legislative Timeline
- February 5, 2025 – House Second Read
- February 4, 2025 – House First Read; Assigned to the House Committee on Government and the House Committee on Rules
Impact
These proposed changes would alter how HOAs pursue construction defect claims. The shortened four-year statute of repose creates urgency for associations to identify and act on defects earlier in a development’s lifecycle.
The new procedural requirements—including mandatory engineer inspections, member disclosure meetings, and two-thirds approval thresholds—establish substantial barriers that could reduce the number of construction defect lawsuits filed by associations. Boards would need to budget for engineer inspections before seeking member approval and would face increased scrutiny from members who must now vote on litigation.
The requirement to allow sellers and construction professionals to present at member meetings introduces an adversarial element into the decision-making process. Associations would need to carefully document defects and communicate effectively with members to achieve the higher voting threshold, while also managing tighter timelines for discovering and addressing construction issues.