By Kurt Faux

On June 3, 2019 Governor Sisolak signed AB 421 into law. While AB 421 retains some of the 2015 reforms, a number of significant changes have gone into effect on October 1, 2019. AB 421 amends provisions of Nevada Revised Statute 11 and 40. Here is the legislative modifications of the enrolled act.

Below is a summary of some of the most significant changes:

Statute of Repose

The new law increases the time for bringing an action for construction defects from six years to ten years after the substantial completion. (NRS 11.202(1)). Substantial completion in essences occurs upon the later of final building inspection, issuance notice of completion or certification of occupancy. NRS 11.2055. The Nevada Supreme Court holds that a notice of completion is “issued” on the date it is recorded with the County Recorder’s office. Dykema v. Del Webb Communities, Inc., 132 Nev. Adv. Op. 82 (Dec. 2016).

Retroactive Statute

The ten year limitation period is retroactive to actions in which the substantial completion of the improvement occurred before October 1, 2019.

Fraud Claims

NRS 11.202(2) allows a claim to be brought at any time after substantial completion, for “any act of fraud in causing a deficiency in the design, planning, supervision or observation of construction or the construction of such an improvement.” There is arguably no limitation period. Please note that lower-tiered subcontractors are exempt if they did not know and should not have reasonably known of the defect at the time of performance.

Warranty Claims

Claimants need to “diligently pursue” a claim under the Builder’s Warranty, but is no longer a pre-condition to giving a Chapter 40 notice. Claimants are no longer required to disclose information to the contractor about home warranties applicable to the claim (NRS 40.687); and provisions tolling the statutes of limitations and repose from the time a warranty claim is made until it is denied are eliminated (NRS 40.650).

Recoverable Damages

The prior law required that costs, such as expert fees, reasonably incurred by the claimant are limited to those construction defects proven by the claimant (NRS 40.655(1)(e)). This requirement is eliminated. Claimants are now arguably entitled to recover expert fees and testing costs that were not proven if the judge finds there was a reasonable investigation. AB 421 did not reinstate the recovery of attorneys’ fees as a recoverable damage under NRS 40.655.

HOA Standing

Under the previous law an HOA is only able to bring a Chapter 40 claim pertaining exclusively to the common elements. Under AB 42, an HOA can also bring claims relating to any portion of the common interest community that the Association owns (NRS 11.3102(d)(2)) or that it does not own but has an obligation to maintain, repair, insure or replace because the Association’s governing documents expressly make such an obligation the Association’s responsibility (NRS 11.3102(d)(3)).

Notices

The degree of specificity required in a Chapter 40 notice has been scaled back. Notices under AB 421 only require that the claimed defects be identified with “reasonable detail” rather than “specific detail” (NRS 40.645(2)(b)).

Inspections

AB 421 retains the requirement that the claimant must be present at the inspection but incorporates the option to have “a representative of the claimant” attend and “to the extent possible” to “reasonably identify the proximate locations of the defects, damages or injuries specified in the notice” (NRS 40.647(1)(b)). Further, the amendments eliminate the requirement that an expert who provided an opinion concerning the alleged construction defect or his/her representative must be present during the Chapter 40 inspection (NRS 40.647(1)(b)).