HB157: Developers Ask For and Utah Law Makers Deliver More Legal Protection in Utah

Tuesday, June 27, 2017 | posted by Mindy Knudsen 12:27 PM

Article by John Morris, LAC member and attorney at Morris Sperry Law.

In a time when we are dealing with rampant construction defects in Utah, Utah Developers including Daybreak, asked for and the Utah legislature and the Governor delivered more legal protection for Utah developers and builders. HB157 was the mechanism to deliver that protection and it was sponsored by Representative John Knotwell and Senator Curtis Bramble. Somewhat amazingly, this legislation was presented as a way to “protect” Utah homeowners from the pain of construction defect litigation. Apparently, it is better for Utah homeowners to suffer the debilitating financial effects of construction defects with no recourse to anyone, rather than being involved in a lawsuit to try to get compensation for those defects. The developers involved in pushing this bill actually made that argument, and the Utah legislature didn’t laugh. Not surprisingly, not a single Utah homeowner with a construction defect supported the developers in their effort.

Fortunately, the Utah CAI Legislative Action Committee and other HOA lawyers jumped into action in opposing the bill. After serious negotiation and a tremendous effort by these people, the bill was modified to remove some of the more offensive and restrictive provisions, some of which would have probably been unconstitutional anyway. The bill as passed is still terrible for Utah community associations, but it is far less terrible than as it was originally proposed.

As passed, the bill is focused on making it harder for HOAs to file lawsuits against developers and their employees, although it has a wide reach based on its wording. Lawyers dealing with the language are encouraged to carefully review the legislative history, particularly the comments made by the bill sponsor at legislative hearings, when attempting to rein in the scope of the bill in actual practice. The Bill accomplishes its goal primarily by imposing hurdles that an HOA must jump through to initiate a lawsuit. The hurdles include: (1) requiring votes of the owners before filing, (2) giving the developer or builder a reasonable opportunity cure any defects, (3) requiring written notices and legal assessments to the owners, and (4) requiring an HOA to set up a “trust” that requires the deposit of money in an account prior to commencing a lawsuit. Read the bill carefully for the details.

This law is another example of why it is extremely difficult for Utah homeowners to bring a lawsuit against any developer or builder who sells them a defective home. It is part of a constant stream of legislation over the last twenty years from Utah builders and developers that unfortunately encourages and protects shoddy and defective construction. One has to wonder when the pendulum on this issue will start to swing back the other direction toward protecting Utah home buyers. With hundreds of homeowners facing financial devastation in Daybreak communities and other communities around the state because of construction defects, sooner or later the Utah legislature must deal with this issue in a way that protects homeowners, not developers.

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