By Dillon Coil

On the heels of Nevada Assembly Bill 125, a new construction defect bill, AB 418, was recently referred to the Committee on Judiciary on March 20, 2015.  While little is known regarding the bill’s origins, it appears the bill’s proponents are looking to add teeth to construction defect disclosure requirements by forcing disclosure when the claims are made. NRS 40.688 currently requires homeowners who attempt to sell a residence that is or has been the subject of a claim for constructional defects to disclose certain information regarding the defect claims to prospective buyers.  For various reasons, often ignorance of the law or lack of enforcement, homeowners fail to disclose claims, thereby avoiding potential title issues and loss of property value, even when legitimate defects go unrepaired. However, AB 418 would potentially obviate the requirements of NRS 40.688 in two significant ways.

First, AB 418 would require homeowners who give notice of constructional defects under NRS Chapter 40 to record a document identifying the affected property with an attached copy of the Chapter 40 Notice, and well as any supplemental notices.  Failure to record the notice would result in the claim being dismissed pending compliance with the statute.  Second, the recorded notice must remain recorded against the property until the claimant obtains an inspection from a building inspector, building official or other similar government authority and the authority issues a report, record of inspection or other document certifying that the alleged defects identified either do not constitute defects or have been repaired according to applicable codes and ordinances.  Notably, county recorders would be prohibited from collecting fees to record the required documents.

If passed, AB 418 would apply to claims commenced after October 1, 2015.  It is unclear at this time what amendments, if any, will be proposed and when the bill will be submitted for a vote.  Although the current law requires homeowners to disclose construction defect claims to potential buyers, AB 418 would force homeowners to make such disclosures in order to maintain claims and could pose serious financial consequences for homeowners who make construction defect claims and fail to repair the alleged defects.