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Minnesota Lawmaker Address Warranties
Wednesday, 22 March 2006

Measure forces builders to honor claims on warranties
A proposed bill would address a conflict in state law that is proving costly for some home owners who bring warranty claims against their home builders. Rep. Barb Goodwin, DFL-Columbia Heights, wants home builders to honor their 10-year warranties even after they have ceased doing business and have dissolved their corporation. “Currently builders are dissolving and then coming back under a different name, and when they do that, the warranty is no good on the home,” Goodwin said.

Finance and Commerce
Measure forces builders to honor claims on warranties
By Charley Shaw, Special to Construction Tuesday
March 21, 2006 

A proposed bill would address a conflict in state law that is proving costly for some home owners who bring warranty claims against their home builders.

Rep. Barb Goodwin, DFL-Columbia Heights, wants home builders to honor their 10-year warranties even after they have ceased doing business and have dissolved their corporation.

“Currently builders are dissolving and then coming back under a different name, and when they do that, the warranty is no good on the home,” Goodwin said.

Goodwin and Sen. Ellen Anderson, DFL-St. Paul, also want to add an attorney fee provision for home owners who prevail against their builders in court.

Lending support to the legislation is home owner Ed Seifert. He said he has been fighting a home warranty claim for the last three years stemming from water damage to his stucco home in Shoreview.

The repairs, which were not covered under his home-owner’s insurance policy, were completed last fall. The legal costs of pursuing the claim have piled up on top of the costs to repair the home.

Minnesota laws regarding home warranty claims need to be changed to allow plaintiffs who prevail in home warranty claims to recover both the legal expenses and the cost of repairs,” Seifert said.

Home owners and attorneys are looking to the Legislature for help after a Minnesota Supreme Court ruling last year.

Scott Andresen of the Minneapolis law firm Bassford Remele represented home owners Arturo and Kristi Camacho in a lawsuit against home builder Todd and Leiser Homes Inc.

In 1999, Andresen’s clients bought their Vadnais Heights home and later discovered significant water intrusion and mold damage. The home, which was purchased by the Camachos for $305,000, cost more than $200,000 to repair.

The Camachos discovered the builder had dissolved his company after completing the house in 1993.

“Despite the fact that they were within the 10-year warranty period, they were told by the builder’s attorneys and the builder’s insurance company that they weren’t going to pay any money because the dissolution statute in Minnesota … allows corporations to dissolve, and two years later no lawsuits can be filed against the corporation,” Andresen said.

Andresen said the law conflicts with state law that says the warranties can’t be waived under any circumstances.

An opinion written by Justice Alan Page said it “is the province of the Legislature, not this court, to provide a remedy to those home owners who may be foreclosed from bringing an action.”

“The Supreme Court basically threw up a red flag to the Legislature,” Andresen said, “and in a couple of different places in the opinion said this is a really harsh result. It takes away a recovery from a home owner, but the way the law is written, it’s the Legislature’s job to correct it.”

The Builders Association of Minnesota (BAM), which represents the home building and remodeling industry, said it is unusual for home builders to dissolve in order to shirk their warranties. Nonetheless, the organization doesn’t defend the tactic.

“The Builders Association of Minnesota does not support the practice of builders dissolving their corporations in order to avoid their warranty obligations. We believe that’s a bad business practice,” said Pam Perri Weaver, BAM executive vice president.

Weaver said she plans to work with the authors of the bill to find a remedy during the legislative session. Lawmakers convened March 1 and are scheduled to adjourn on May 22.

Weaver said one problem is that state laws don’t allow home owners to seek redress by going directly to the builder’s general liability insurer.

BAM doesn’t favor the approach of paying attorney fees to the prevailing home owner. As a way to address the cost issue, Weaver said legislation has been introduced by Rep. Dan Severson, R-Sauk Rapids, and Sen. Linda Scheid, DFL-Brooklyn Park, that would require a builder to offer to repair damages to a home.

The legislation addresses a difficult situation for home builders. While builders don’t want their customers left in the lurch with expensive repairs, Weaver said insurance companies often aren’t willing to come to the table unless a lawsuit has been filed.

“I’m looking forward to solving this problem at the Legislature,” Weaver said.

 

 

 http://www.finance-commerce.com/item.cfm?recID=124438

 
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