By Jones Osborn II

You buy a house and three years later the stucco starts falling off the walls. So you call the Registrar of Contractors to complain. The Registrar says he can't help you because the house is more than two years old. Are you out of luck? Not necessarily.

It is true that the Registrar of Contractors can't help if the defective work was done more than two years before. However, this does not mean that the homeowner is without a remedy. In some cases he may still have the right to sue for as long as nine years after the work was done.

But first, a word about the Registrar of Contractors. If the two year limitation has not expired, a complaint to the Registrar is often the cheapest and most effective way of forcing a contractor to correct improper construction. This is true regardless of whether the defect is in a residential or commercial structure--the procedure is the same for both. The Registrar, at its own expense, will investigate and attempt to resolve the matter. However, if the complaint is not filed within two years, the Registrar has no authority to take action and the owner is left only with his other remedies.

Residential Property. The law treats the owners of homes differently than the owners of commercial structures (for this purpose, apartments are apparently consider commercial). A recent Arizona case is a good illustration. This case allowed a homeowner to recover from the contractor for defective stucco twelve years and two owners after the stucco had been applied. The court held that the length of the warranty depended only on how long the particular component ordinarily would last if properly constructed. In the case of stucco, the court extended the warranty to at least twelve years because it found that stucco should ordinarily last from 30 to 50 years in Arizona. And it made no difference that the house had been sold twice since the stucco was applied; the homeowner could sue a contractor he had never dealt with. In the case of a subsequent owner, the only additional qualification is that the defect must not have been apparent from a reasonable inspection at the time the home was purchased. For this purpose, a reasonable inspection is an inspection by a lay person--it is not necessary that an expert be hired to inspect the home.

After that case, the Arizona legislature enacted a statute limiting the liability of contractors and builders to eight years (which may be extended for up to nine years if the defect is discovered during the eighth year). A.R.S. § 12-552.

Therefore, for residential construction, the rules can be summarized as follows:

1. A complaint may be filed within the Registrar of Contractors within two years of the time the work was done.

2. Suit may be filed until the shorter of (a) eight years (nine if the defect is discovered during the eighth year), or (b) the expected life of the defective component. This time limitation may be extended by an express warranty for a longer period.

3. Subsequent owners may sue the builder or contractor, but only if the defect was not apparent from a reasonable inspection at the time the property was acquired.

Non-Residential Property. The remedies available to the owners of non-residential structures are not quite so broad. Rules 1 and 2 above are the same for commercial structures as they are for houses. But rule 3 is not. This is because the courts have not extended the implied warranty of good workmanship to subsequent owners. That is, if the owner hired the contractor himself, or bought a new building from a developer, he has all the same rights as the purchaser of a home. However, if he bought the building used, the rule today (at least in the absence of outright fraud) is caveat emptor--let the buyer beware. The Arizona courts have not established an implied warranty for used commercial buildings. It is always possible, of course, that future decisions may extend such protections to the owners of commercial structures, as they have for residential buildings, and the trend is clearly in that direction. However, it hasn't happened yet.

So, if you are buying an existing commercial building, have it thoroughly inspected by a professional, and get whatever warranties you need from the seller in writing.