Efforts are now underway in both houses of the Washington legislature to improve the legal landscape for residential construction defect litigation by adding a mediation option similar to what has been common in commercial and public works contracts.
The House Judiciary Committee is considering House Bill 2475, a bill introduced by Representative Cindy Ryu (D-Shoreline). Meanwhile, Senator Mark Mulle (D-Issaquah) has filed a similar proposal, Senate Bill 6523. Both bills propose several changes to RCW 64.50, the statutes governing the prerequisites for filing a residential construction defect lawsuit. As currently written, the statute requires a homeowner or a condominium association to serve a written notice on any construction professional (defined to include any contractor, subcontractor, developer, declarant, architect, engineer and/or inspector) detailing the defect at issue 45 days before filing suit. The construction professional then has 21 days to serve a written response to the notice proposing one of three options:
- Propose to inspect the residence within a specified period of time and based upon the inspection offer to remedy the defect, compromise by making a cash payment or dispute the claim;
- Offer to compromise and settle the claim with a monetary payment without inspection. The offer may include a proposal to purchase the residence that is subject of the claim and pay the claimant’s reasonable relocation costs; or
- State that the construction professional disputes the claim and will not remedy the construction defect or offer to compromise and settle the claim.
The bills would revise the notice and opportunity to cure process and they would add mediation as a fourth option. Thus, a construction professional could respond to a notice of construction defect by offering to mediate, which would give the claimant 30 days to serve an acceptance or rejection of the offer to mediate. If the claimant rejects the mediation offer, then the notice and opportunity to cure process is terminated. If the mediation is accepted, then the parties have 30 days to do the following:
- Select a mediator;
- Agree on a mediation date;
- Agree on what materials will be submitted at mediation;
- Complete their respective investigation of the alleged defects;
- Disclose each party’s proposed repair plan and the estimated costs of repair; and
- Any other deadlines mutually agreed to by the parties.
The parties can mutually agree to modify the deadlines and the selected mediator is permitted to unilaterally extend deadlines by no more than 90 days.
The bills currently have a provision that allows either party to terminate the mediation process without cause and without costs. Given the time and expense that the parties may have incurred preparing for a construction defect mediation, including the mediator’s time, investigation and expert costs, it only would be fair to require that the party who terminates the mediation should pay at least the cost of any lost deposits for the mediator’s services. Although not currently in the proposed legislation, such an amendment would be reasonable.
The bills also extend the applicable statutes of limitations and repose following service of a claim under RCW 64.50.020 from 60 days after the period of time which the filing of an action is barred until 105 days after termination of the notice and opportunity to cure process; however, the new tolling period applies to claims by one construction professional against another construction professional only if the construction professional serves the claimant’s notice of claim upon the other construction professional within 60 days of receipt of the notice of claim or the amended notice of claim.
Many construction contracts for commercial or public works projects attempt to encourage early claim resolution by requiring the parties to engage in mediation before they can commence litigation. This bill seeks to extend this practice to the field of residential construction. The objective is that the mediation option will encourage early case assessments and timely resolution of disputes.