Practice Areas | Construction Defects
Construction Defect Litigation
Montana has experienced an incredible amount of residential and commercial construction activity in the past twenty years. There are many competent contractors to choose from; but there are many incompetent contractors out there masquerading as the real deal. Oftentimes, you can’t tell until it’s too late. Other times, you are purchasing a new or almost-new home that was built before you ever saw it, meaning you had no choice.
We have handled construction defect claims involving structural problems, failure to follow building plans, roofing issues, expansive and clayey soils, water intrusion, mold, code violations, exterior siding, interior finish work, exterior flatwork, grading and drainage, and landscaping issues. Our professional relationships extend to structural, geotechnical, and civil engineers; building contractors; flooring and carpentry experts; architects; and others in the building industry.
Construction defect litigation is fact-intensive work that requires significant front-end expert involvement, and may seem overwhelming. But the longer you wait, the longer your defect exists and causes you damage. If you wait too long, you may blow the statute of limitations or be accused by the defense of having caused your own damage (this is called a “failure to mitigate damages”). The longer you wait, the better the defense case becomes. So, you must be proactive.
Several potential claims exist against the contractor responsible for having caused or created defects in your residential or commercial structure. Montana’s construction defect statutes provide a framework for noticing, rectifying, and suing over construction defects. See M.C.A. §§ 70-19-426 through 428. These statutes apply only where the property owner has been given written notice of their requirements, following which a claimant is entitled to somewhat limited damages and attorney’s fees. Our experience is that most construction professionals fail to provide the written notice; however, if you received written notice (or believe that you did) you should consult the statutory framework to ensure that you are making the right claims in the right way.
Other construction defect claims include negligence, negligent misrepresentation, breach of contract, warranty claims, and violation of the Montana Consumer Protection Act. Like any other case, whether these claims apply to any given situation depends on the unique facts involved.
Depending upon the case, damages include costs of repair, temporary housing, general damages including emotional distress, and stigma damages.
“Stigma” damages refer to a diminution of property value because of a construction defect or adverse condition even after that defect is rectified. Montana has long recognized diminution of value as a recoverable damage, even when problems have been resolved or do not impact structural stability. See Vinion v. Wood Yard, Inc., 232 Mont. 110, 112, 755 P.2d 31, 33 (1988). Montana’s sister jurisdictions likewise recognize that diminution of value damages remain recoverable even after repair. See e.g., Ince v. Money’s Bldg. & Develop., Inc., 135 S.W.3d 475, 479 (Mo. App. 2004) (“[t]he plaintiffs’ damages constitute the costs to repair the roof and the diminution in value of plaintiffs’ home after 1998 because of the mold problems”); Ludt v. McCollum, 762 S.W.2d 575, 576 (Tex. 1988); Horsch v. Terminix Int’l Co., 865 P.2d 1044, 1049 (Kan. App. 1993); Bassett, New Mexico LLC v. United States, 55 Fed.Cl. 63, 75-76 (2002); Allgood v. Meridian Security Ins. Co., 836 N.E.2d 243, 245-46 (Ind. 2005) (recognizing that a tortfeasor is liable for diminution of value above and beyond costs of repair where required to make the plaintiff whole). In Horsch, the Kansas Court of Appeals reasoned:
The rules for measuring damages are subordinate to the aim of making good the injury done. The determination of damages rests in good sense rather than a mechanical application of a single formula . . . The trial court did not err in its ruling that the jury could consider the award of cost of repair damages and diminution in value damages. Terminix’s negligent act in failing to observe visible termite damage at the initial inspection and failing to note the damage in the report submitted to the Horsches caused them to proceed with the purchase of the farmhouse. There was testimony that, as a result of the purchase, the Horsches must now repair the known, existing termite damage. In addition, there was testimony that the stigma of termite damage had caused a permanent reduction in the value of the property . . .
* * *
The damage to the Horsches was both the cost of repair and the diminution of value of the property. These damages were the natural and probable result of Terminix’s negligent act. There was testimony that the cost of repair would not restore the property to the value paid by the Horsches. In order to make them whole, the trial court properly ruled the jury could consider both types of damages. There was no windfall to the Horsches.
865 P.2d at 1049 (emphasis added); see also Parkway Co. v. Woodruff, 857 S.W.2d 903, 913-14 (Tex. App. 1993) (permitting recovery of repair costs and diminution of value damages where neither, standing alone, would fully compensate the plaintiff for damages sustained); Rosenfield v. Choberka, 529 N.Y.S.2d 455 (1988).
When a property has been repaired and marketed for sale, the prospective buyer is going to ask (among other things): How do I know that there aren’t other problems with this house that have not been discovered? How do I know that the quality of construction issues you experienced will not continue to manifest over time? The answer, of course, is “you don’t know.” Any individual purchasing a home with a history of construction defects is purchasing risk far in excess of that ordinarily associated with residential property transactions. This, in turn, drives down the available pool of buyers, and drives down price. Not all construction defects cause stigma damages; it depends, and your attorney should understand the facts and law well enough to advise you regarding your options.
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