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TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 47 TO TITLE 15 SO AS TO ENACT THE SOUTH CAROLINA NOTICE AND OPPORTUNITY TO CURE DWELLING CONSTRUCTION DEFECTS ACT TO ESTABLISH PROCEDURES FOR A HOMEOWNER OR PURCHASER TO ASSERT A CLAIM AGAINST A CONTRACTOR, SUBCONTRACTOR, SUPPLIER, OR DESIGN PROFESSIONAL FOR A CONSTRUCTION DEFECT IN A RESIDENTIAL DWELLING, TO REQUIRE A CLAIMANT TO COMPLY WITH THESE PROCEDURES BEFORE COMMENCING LITIGATION FOR A CONSTRUCTION DEFECT, AND TO PROHIBIT A PERSON FROM PROVIDING ANYTHING OF MONETARY VALUE TO A PROPERTY MANAGER OR A MEMBER OR OFFICER OF AN EXECUTIVE BOARD OF A HOMEOWNER'S ASSOCIATION TO INDUCE THE INDIVIDUAL TO ENCOURAGE OR DISCOURAGE THE ASSOCIATION TO FILE A CLAIM FOR CONSTRUCTION DEFECTS AND TO PROVIDE PENALTIES FOR SUCH VIOLATION.
Whereas, the General Assembly finds that South Carolina needs an alternative method to resolve legitimate construction disputes that would reduce the need for litigation, while adequately protecting the rights of homeowners; and
Whereas, the General Assembly declares that an effective alternative dispute resolution mechanism in certain construction defect matters should involve the claimant filing a notice of claim with the construction professional that the claimant asserts is responsible for the defect and providing the construction professional with the opportunity to resolve the claim without litigation. Now, therefore,
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 15 of the 1976 Code is amended by adding:
Section 15-47-10. This chapter may be cited as the 'South Carolina Notice and Opportunity to Cure Construction Dwelling Defects Act'.
Section 15-47-20. As used in this chapter:
(1) 'Action' means any civil lawsuit or action or arbitration proceeding for damages or indemnity asserting a claim for injury or loss to a dwelling or personal property caused by an alleged defect arising out of or related to the design, construction, condition, or sale of the dwelling or a remodel of a dwelling.
(2) 'Association' means a homeowners' association organized and operated to provide for the acquisition, construction, management, and maintenance of real property
(3) 'Claimant' means a homeowner, including a subsequent purchaser, or association who asserts a claim against a contractor, subcontractor, supplier, or design professional concerning a defect in the design, construction, condition, or sale of a dwelling or in the remodel of a dwelling.
(4) 'Construction defect' means a deficiency in, or a deficiency arising out of, the design, specifications, surveying, planning, supervision, or observation of construction or construction of residential improvements that results from any of the following:
(a) defective material, products, or components used in the construction of residential improvements;
(b) violation of the applicable codes in effect at the time of construction of residential improvements;
(c) failure of the design of residential improvements to meet the applicable professional standards of care at the time of governmental approval of the design of residential improvements;
(d) failure to construct residential improvements in accordance with accepted trade standards for good and workmanlike construction at the time of construction. Compliance with the applicable codes in effect at the time of construction conclusively establishes construction in accordance with accepted trade standards for good and workmanlike construction, with respect to all matters specified in those codes.
(5) 'Contractor' means a person, firm, partnership, corporation, association, or other organization that is engaged in the business of designing, developing, construction or selling dwellings.
(6) 'Design professional' means:
(a) a person licensed in this State as an architect, landscape architect, engineer, or surveyor;
(b) an interior designer.
(7) 'Dwelling' means a single-family house or duplex or a multifamily unit designed for residential use in which title to each individual unit is transferred to the owner under a condominium or cooperative system and includes common areas and improvements that are owned or maintained by an association or by members of an association. A dwelling includes the systems and other components and improvements that are part of a single or multifamily unit at the time of construction.
(8) 'Service' means personal service or delivery by certified mail, return receipt requested, to the last known address of the addressee.
(9) 'Subcontractor' means a contractor who performs work on behalf of another contractor in the construction of a dwelling.
(10) 'Supplier' means a person who provides materials, equipment, or other supplies for the construction of dwelling.
Section 15-47-30. If a claimant files a dwelling action without first complying with the provisions of this chapter, on motion of a party to the action, the court shall dismiss the action, without prejudice, and the action may not be refiled until the claimant has complied with the requirements of this chapter.
Section 15-47-40. (A) In an action brought against a contractor arising out of the construction of a dwelling, the claimant, no later than ninety days before filing the action shall serve written notice of claim on the contractor. The notice of claim must state that the claimant asserts a construction defect claim and the notice of claim must describe the claim or claims in reasonable detail sufficient to determine the general nature of any alleged construction defects and a description of the results of the defects, if known.
(B) Within fifteen days after the initial service of the notice of claim required pursuant to subsection (A), the contractor shall forward a copy of the notice to each subcontractor, supplier, and design professional who the contractor reasonably believes is responsible for a defect specified in the notice and include with the notice the specific defect for which the contractor believes the subcontractor, supplier, or design professional is responsible.
(C) On the request of the contractor, subcontractor, supplier, or design professional who has received a notice pursuant to subsection (A) or (B), the claimant shall provide to the contractor, subcontractor, supplier, or design professional any evidence that depicts the nature and cause of the defect and the nature and extent of repairs necessary to remedy the defect including, but not limited to, expert reports, photographs, and videotapes, if that evidence would be discoverable under state law or South Carolina rules of evidence.
(D) Within thirty days after service of the notice of claim pursuant to subsection (A) or (B), each contractor, subcontractor, supplier, or design professional who has received a notice of claim shall serve a written response on the claimant by registered mail or personal service. The written response shall;
(1) offer to compromise and settle the claim by monetary payment without inspection;
(2) propose to inspect the dwelling that is the subject of the claim;
(3) state that the contractor, subcontractor, supplier, or design professional disputes the claim and will neither remedy the alleged construction defect nor compromise and settle the claim.
(E) If the contractor, subcontractor, supplier, or design professional disputes the claim pursuant to subsection (D) and will neither remedy the alleged construction defect nor compromise and settle the claim or does not respond to the claimant's notice of claim within the time stated in subsection (D), the claimant may bring an action against the contractor, subcontractor, supplier, or design professional for the claim described in the notice of claim without further notice.
(F) If the claimant rejects the settlement offer or the inspection proposal made by the contractor, subcontractor, supplier, or design professional pursuant to subsection (D), the claimant shall serve written notice of the claimant's rejection on the contractor, subcontractor, supplier, or design professional. The notice must include the basis for the claimant's rejection of the offer or proposal made by the contractor, subcontractor, supplier, or design professional.
(G) After service of the rejection pursuant to subsection (F), the claimant may bring an action against the contractor, subcontractor, supplier, or design professional for the claim described in the initial notice of claim made pursuant to subsection (A) or (B) without further notice.
(H) If the claimant elects to allow the contractor, subcontractor, supplier, or design professional to inspect the dwelling in accordance with the proposal made by the contractor, subcontractor, supplier, or design professional's proposal pursuant to subsection (D), the claimant shall provide the contractor, subcontractor, supplier, or design professional and its contractors or other agents reasonable access to the claimant's residence during normal working hours to inspect the premises and the claimant defect to determine the nature and cause of the alleged defects and the nature and extent of any repairs or replacements necessary to remedy the alleged defects.
(I) Within fourteen days following completion of the inspection, the contractor, subcontractor, supplier, or design professional shall serve on the claimant:
(1) a written offer to:
(a) remedy the construction defect at no cost to the claimant, including a report of the scope of the inspection, the findings and results of the inspection, a description of the additional construction necessary to remedy the defect described in the claim, and a timetable for the completion of the construction;
(b) compromise and settle the claim by monetary payment; or
(2) a written statement that the contractor, subcontractor, supplier, or design professional will not proceed further to remedy the defect.
(J) If a claimant accepts the offer of a contractor, subcontractor, supplier, or design professional made pursuant to item (1) of subsection (I) and the contractor, subcontractor, supplier, or design professional does not proceed to remedy the construction defect within the agreed timetable or make the monetary payment, the claimant may bring an action against the contractor, subcontractor, supplier, or design professional for the claim described in the initial notice of claim made pursuant to subsection (A) or (B) without further notice.
(K) If a claimant receives a written statement that the contractor, subcontractor, supplier, or design professional will not proceed further to remedy the defect, as provided for in item (2) of subsection (J), the claimant may bring an action against the contractor, subcontractor, supplier, or design professional for the claim described in the initial notice of claim made pursuant to subsection (A) or (B) without further notice.
(L) If the claimant rejects the offer made pursuant to item (1) of subsection (J) by the contractor, subcontractor, supplier, or design professional to remedy the construction defect or to compromise and settle the claim by monetary payment, the claimant shall serve written notice of the claimant's rejection on the contractor, subcontractor, supplier, or design professional. The notice must include the basis for the claimant's rejection of the offer of the contractor, subcontractor, supplier, or design professional. After service of the rejection, the claimant may bring an action against the contractor, subcontractor, supplier, or design professional for the claim described in the initial notice of claim made pursuant to subsection (A) or (B) without further notice.
(M) If a claimant unreasonably rejects an offer made as provided by this section or does not permit the contractor, subcontractor, supplier, or design professional a reasonable opportunity to repair the defect pursuant to an accepted offer of settlement, the claimant may not recover an amount in excess of:
(1) the reasonable cost of the offered repairs which are necessary to cure the construction defect and which are the responsibility of the contractor, subcontractor, supplier, or design professional; or
(2) the amount of the monetary settlement offered by the contractor, subcontractor, supplier, or design professional.
(N) If a claimant accepts the offer made pursuant to item (1) of subsection (J) by the contractor, subcontractor, supplier, or design professional to remedy the construction defects, the claimant shall serve the contractor, subcontractor, supplier, or design professional with a written notice of acceptance within a reasonable period of time after receipt of the offer, but no later than thirty days after receipt of the offer.
(O) If a claimant accepts the offer made pursuant to item (1) of subsection (J) by a contractor, subcontractor, supplier, or design professional to repair a defect, the claimant shall provide the contractor, subcontractor, supplier, or design professional and its contractors or other agents reasonable access to the claimant's residence during normal working hours to perform and complete the construction by the timetable stated in the offer.
(P) A claimant's failure to comply with any of the following is admissible in a dwelling action and creates a rebuttable presumption that the claimant's damages could have been mitigated:
(1) allow a reasonable inspection requested by the contractor, subcontractor, supplier, or design professional;
(2) provide a good faith, written response to a contractor, subcontractor, supplier, or design professional's offer.
(Q) Absent good cause, the failure of a contractor, subcontractor, supplier, or design professional to respond, pursuant to subsection (D), in good faith to the claimant's initial notice of claim made pursuant to subsection (A) or (B) precludes the contractor, subcontractor, supplier, or design professional from asserting that the claimant did not comply with the provisions of this chapter.
(R) A claimant's written notice made pursuant to subsection (A) tolls the applicable statute of limitations until ninety days after the contractor, subcontractor, supplier, or design professional receives the notice.
Section 15-47-50. A construction defect which is discovered after a claimant has provided a contractor with the notice of claim pursuant to Section 15-47-30(A) may not be alleged until the claimant has given the contractor, subcontractor, supplier, or design professional who performed the original construction:
(1) written notice of the alleged defect pursuant to Section 15-47-40; and
(2) a reasonable opportunity to repair the alleged construction defect in the manner provided for in Section 15-47-40.
Section 15-47-60. (A) A contractor, subcontractor, supplier, or design professional who receives notice of a construction defect pursuant to Section 15-47-40 may present the notice to an insurer that issued a policy of insurance covering all or part of the conduct or business of the contractor, subcontractor, supplier, or design professional.
(B) A notice provided to an insurer pursuant to subsection (A):
(1) constitutes the making of a claim under the policy; and
(2) requires the contractor, subcontractor, supplier, or design professional and the insurer to perform any obligations or duties required by the policy upon the making of a claim.
Section 15-47-70. (A) Upon entering into a contract for sale, construction, or substantial remodel of a dwelling, the contractor, subcontractor, supplier, or design professional shall provide notice to the owner of the dwelling of the right of the contractor, subcontractor, supplier, or design professional to offer to cure construction defects before a claimant may commence litigation against the contractor, subcontractor, supplier, or design professional. This notice must be conspicuous and may be included as part of the underlying contract.
(B) The notice required by subsection (A) must be in substantially the following form.
'South Carolina law contains important requirements you must follow before you may file a lawsuit for an alleged defect arising out of or related to the design, construction or condition or sale of your home. Ninety days before you file your lawsuit, you must deliver to the contractor a written notice of any construction conditions you allege are defective and provide your contractor and any subcontractors, suppliers, or design professionals the opportunity to make an offer to repair or pay for the defects. You are not obligated to accept any offer made by the contractor or any subcontractors, suppliers, or design professionals. There are strict deadlines and procedures under state law, and failure to follow them may affect your ability to file a lawsuit.'
Section 15-47-80. A contractor who constructs a new residential dwelling shall, within thirty days after the close of the sale, provide in writing to the initial purchaser of the residence:
(1) the name, license number, business address, and telephone number of each subcontractor, supplier, and design professional who performed any work related to the design or construction of the dwelling;
(2) a brief description of the work performed by each subcontractor, supplier, and design professional.
Section 15-47-90. (A) A person may not provide or offer to provide anything of monetary value to a property manager of an association or to a member or officer of an executive board to induce the property manager, member, or officer to encourage or discourage the association to file a claim for damages arising from a construction defect.
(B) A property manager may not accept anything of value given to him in exchange for encouraging or discouraging the association that he manages to file a claim for damages arising from a construction defect.
(C) A member or officer of an executive board may not accept anything of value given to him in exchange for encouraging or discouraging the association, of which he is a member or officer of the executive board, to file a claim for damages arising from a construction defect.
(D) A person who wilfully violates subsection (A), (B), or (C) is guilty of a misdemeanor.
(E) An association may bring an action to recover damages resulting from construction defects in any of the units, common elements, or limited common elements of the common-interest community only:
(1) if the association first obtains the written approval of the owner of each unit whose unit or interest in the common elements or limited common elements will be the subject of the action or claim;
(2) upon a vote of the owners of the units to which at least a majority of the votes of the members of the association are allocated; and
(3) upon a vote of the executive board of the association.
(F) If an action is brought by an association to recover damages resulting from construction defects in any of the units, common elements, or limited common elements of the common-interest community, the attorney representing the association shall provide the executive board of the association and the owner of each unit a statement that includes, in reasonable detail:
(1) the defects and damages or injuries to the units, common elements, or limited common elements;
(2) the cause of the defects, if the cause is known;
(3) the nature and the extent that is known of the damage or injury resulting from the defects;
(4) the location of each defect within the units, common elements, or limited common elements, if known;
(5) a reasonable estimate of the cost of the action or mediation, including reasonable attorney's fees;
(6) an explanation of the potential benefits of the action or mediation and the potential adverse consequences if the association does not commence the action or submit the claim to mediation or if the outcome is not favorable to the association; and
(7) all disclosures that a unit owner is required to make upon the sale of the property.
(G) An association or an attorney for an association may not employ a person to perform destructive tests to determine any damage or injury to a unit, common element, or limited common element caused by a construction defect unless the:
(1) person is licensed as a contractor pursuant to state law;
(2) association has obtained the prior written approval of the owner of each unit whose unit or interest in the common element or limited common element will be affected by the testing;
(3) person performing the tests has provided a written schedule for repairs;
(4) person performing the tests is required to repair all damage resulting from the tests in accordance with state law and local ordinances; and
(5) association or the person employed to perform the tests obtains all permits required to conduct the tests and to repair any damage resulting from the tests.
(H) An association may commence an action only upon a vote or written agreement of the owners of the units to which at least a majority of the votes of the members of the association are allocated. In such a case, the association shall provide the owner of each unit written notice of the meeting at which the commencement of an action is to be considered or action is to be taken within twenty-one calendar days before the meeting.
(I) The executive board of an association may, without giving notice to the owner of each unit, employ a contractor and other persons necessary to make repairs to a unit or common element within the common-interest community as are required to protect the health, safety, and welfare of the owners of the units.
Section 15-47-100. Nothing in this chapter applies to actions arising out of claims for personal injury or death, or both."
SECTION 2. This act takes effect upon approval by the Governor and applies to claims arising on or after this act's effective date.
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