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Construction Laws-Wisconsin Residential
Wisconsin Residential Construction Laws
Right to Cure Act:
The Wisconsin Legislature's primary goal was to facilitate resolution of construction defect disputes without litigation by implementing a system that requires contractors and consumers to attempt to systematically address problems before commencing a court action or arbitration.1 In March, Wisconsin became the 28th state to enact a contractor "right to cure" (also known as "right to repair") law.2
In general, Wisconsin's new Right to Cure Act requires homeowners and other specified claimants to give contractors written notice of alleged construction defects and an opportunity to cure them as a prerequisite to filing suit. It is comprised of two new statutes. Section 101.148, entitled "Contractor notices," requires contractors to supply consumers with notice of the defect claim procedures before, and at the time of, contracting. Section 895.07, entitled "Claims against contractors and suppliers," contains those claim procedures. The Act states that the term "construction defect" means the definition of "defect" contained in a warranty or, if there is no warranty, a deficiency resulting from defective material, violation of applicable codes, or failure to follow accepted trade standards for workmanlike construction.3
The Right to Cure Act applies to written or oral contracts to construct a new dwelling or remodel an existing one. It applies to any premises used as a home or residence and includes existing structures on or adjacent to the dwelling, such as driveways, sidewalks, swimming pools, patios, garages, and basements.
Contractor Notice to Consumers:
Before entering into a contract, a contractor is required to deliver to a consumer a brochure prepared by the Wisconsin Department of Commerce (DOC) that explains the process of handling construction defects.
Also requires contractors to provide consumers a written notice that alerts consumers of their obligation to follow the notice and right to cure process before filing a lawsuit against a contractor or door or window supplier for defective construction.
Notice and Opportunity to Repair:
At least 90 days before commencing any action against a contractor or door or window supplier relating to a construction defect, a claimant must give the contractor or supplier written notice of the alleged defect and an opportunity to repair it. The notice must "contain a description of the claim in sufficient detail to explain the nature of the alleged defect and a description of the evidence that the claimant knows or possesses, including expert reports, that substantiates the nature and cause of the alleged construction defect."7
A contractor has 15 days to serve the claimant with a written response to the claimant's notice.
If the contractor makes an offer to repair or pay money (or a combination of the two), the claimant has 15 days to accept or reject the offer. If he or she rejects the offer, within 15 days the claimant must serve a written rejection notice on the contractor, specifying the reasons for the rejection.
The contractor then has five days to respond by serving a written supplemental offer to repair or remedy the defect or a notice that no additional offer will be made.
Contribution Claims Against Door and Window Suppliers:
The Act mandates that a contractor intending to make a contribution claim against a window or door supplier must serve the supplier with a written notice of the original claimant's claim and the contractor's own contribution claim within five days after the contractor's receipt of the original claim.
The supplier has 15 days within which to reject the claim, serve a written offer to repair or pay money (or a combination of the two), or request an inspection.
Consequences of Noncompliance:
If a claimant proceeds with litigation or arbitration without giving notice and a right to cure, the new law requires the judge or arbitrator to either dismiss or stay the proceedings. If the claimant received a brochure and notice from the contractor but failed to give the contractor notice and an opportunity to cure, the action will be dismissed without prejudice. If a claimant did not receive the brochure and notice, the action is to be stayed pending compliance with the notification requirements.10
Some critics of right to cure laws stress that their protections may be somewhat illusory. For example, under Wisconsin's new law, contractors are not penalized for failing to provide the initial brochure or notice. Contractors also are not penalized for ignoring claims or reneging on agreements with claimants that arise from the right to cure process. Likewise, claimants are not required to respond to or accept any offer from a contractor. In other words, the law imposes no penalty on claimants who do nothing more than give the required notice and an opportunity to repair or remedy the alleged defects. However, while the law imposes no penalty, claimants who reject reasonable settlement offers may nonetheless face in ensuing litigation the affirmative defense of failure to mitigate damages.
Practical Considerations for Consumers:
However, the new law poses an opportunity for contractors to review and, if necessary, tweak or overhaul their written agreements. Toward this end, although the law does not require that the notice to the consumer be included in the contract, and allows contractors to provide the notice via a separate writing, it is prudent to include the notice to consumers in the contract.
The Right to Cure Act provides that after service of the initial notice of claim, a claimant, contractor, or supplier may agree to alter the notice of claim process.
Practical Considerations for Suppliers:
Suppliers technically have no legal obligation to respond to a claim once they receive notice. Suppliers should be aware, however, that if they do respond and their offer is accepted but they do not follow through, the contractor may pursue the contribution claim in circuit court and "may also file the supplier's offer and contractor's acceptance in the circuit court action, and the offer and acceptance create a rebuttable presumption that a binding and valid settlement agreement has been created and should be enforced by the court.Ã¢??
Construction Lien Law Changes:
The Act became effective on April 11, 2006. While the Act provides that it "applies to improvements that visibly commence on the effective date of this subsection (April 11, 2006),"25 it is reasonable to assume that the law applies to improvements that visibly commence on or after April 11, 2006.\par
The Act expands the definition of "improvement," which previously was defined as including "any building, structure, erection, fixture, demolition, alteration, excavation, filling, grading, tiling, planting, clearing or landscaping which is built, erected, made or done on or to land for its permanent benefit." "Repairing or remodeling" done on or for the land's benefit is now added to the list. The Act eliminates the requirement that the improvement be done for the land's permanent benefit.29
To make a lien claim, a claimant must file the claim for a lien with the circuit court within six months after the claimant last performed work or furnished materials. Although the lien claimant previously was required to deliver to the owner a notice of intention to file claim for a lien at least 30 days before filing the lien claim, a lien claimant was not required to serve the owner with the claim for a lien once it was filed. The new law changes that situation, mandating that "a lien claimant shall serve a copy of the claim for lien on the owner of the property on which the lien is placed within 30 days after filing the claim."36
Contractor Education Act:
Under Wisconsin law, a contractor needs a certificate of financial responsibility from the DOC to engage in residential construction and get most necessary permits.40 To obtain the certificate contractors previously only had to meet certain insurance and bonding requirements. The DOC's new rules will require that to obtain a building permit for residential construction, in addition to obtaining insurance and bonding, a person also must annually complete at least six hours of continuing education relevant to the person's professional area of expertise and attend at least one professional meeting or seminar designed for both building contractors and building inspectors.41 Persons applying for a certificate of financial responsibility for the first time will have to pass a DOC examination on the required continuing education courses.
Some people tout the new Right to Cure Act as establishing a process that will promote construction defect dispute resolution and thereby avoid the complexity and cost attendant to construction litigation. Other people believe that the Act's maze of deadlines and procedures may be counterproductive to that goal, because all parties may need attorneys to help interpret the Act. While it is true that contractors, consumers, and their attorneys may need time to become familiar with this law, its salutary effect of promoting dispute resolution short of litigation should outweigh any perceived burden of a learning curve.
As with all new legislation there may be glitches and periodic need for judicial interpretation. In the meantime, the Right to Cure Act, the lien law changes, and the Contractor Education Act will have the laudable collective effect of modernizing residential construction law in Wisconsin.
Please contact The Better Business Bureau toll free at 1-800-273-1002 or 414-847-6000. You can also find further info info at http://www.wisbar.org/AM/Template.cfm?Section=Search&template=/CM/HTMLDisplay.cfm&ContentID=60563 .