LGC Prevails Against New Construction Defect Theory
LGC Staff
Thu November 21, 2013
6:20 AM UTC
Richard J. Reese

By Richard J. Reese

LGC Partners Randy Gustafson and Shannon Splaine recently prevailed on a critical Motion for Summary Judgment against an expansive new theory of liability in construction defect cases.

In the case, a time share owners' association in Las Vegas sued a client of LGC for alleged construction defects. The attorney for the association tried to argue that the time share units were subject to Nevada’s residential construction defect laws, commonly known as “Chapter 40,” in order to obtain an award of attorneys' fees – an argument that had no precedent.

LGC filed a motion for summary judgment, arguing that Chapter 40 did not apply. The motion was based on the argument that Chapter 40 only applies to residences, and time shares are not residences. Chapter 40 defines "residence" as “any dwelling in which title to the individual units is transferred to the owners.” The term "dwelling" is not defined in Chapter 40, and LGC argued that the term applies only to a unit where a person lives.

The term "time share," meanwhile, is likewise not used or defined in Chapter 40, but is defined elsewhere under Nevada law as "the right to use and occupy a unit on a recurrent periodic basis according to an arrangement allocating this right among various owners.” LGC used this definition of the term to argue that a time share is more like a hotel than a residence because a time share is essentially the right to use a unit for a limited time, rather than a free-and-clear ownership interest in the unit.

In this case, the time share owners used the units for vacation purposes on a transient basis. The owners owned 1/52, 1/104, or 1/156 of each unit and were generally only allowed to use a unit for up to one week per year. The owners were also required to abide by a “vacation plan” that limited their use of the time shares and required the owners to make reservations well in advance of their stay. LGC used these facts to support its argument that the time share units were more like hotel rooms than residences.

The Court agreed with LGC and granted its motion for summary judgment, holding that the time shares did not qualify as residences under Chapter 40. This ruling has significant implications. Chapter 40 allows a plaintiff to recover damages that are not otherwise permitted, most notably attorneys' fees. Attorneys' fees generally add about one-third to a plaintiff’s total damages, often accounting for millions of dollars in extra recovery against the builder.

The court’s decision marks a significant victory for developers and contractors who build time shares in the Las Vegas area, as well as their insurance carriers. Congratulations to Randy and Shannon.

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