Bill Text: NJ S2370 | 2018-2019 | Regular Session | Introduced


Bill Title: Expands new home warranty protections.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Introduced - Dead) 2018-04-05 - Introduced in the Senate, Referred to Senate Commerce Committee [S2370 Detail]

Download: New_Jersey-2018-S2370-Introduced.html

SENATE, No. 2370

STATE OF NEW JERSEY

218th LEGISLATURE

 

INTRODUCED APRIL 5, 2018

 


 

Sponsored by:

Senator  JEFF VAN DREW

District 1 (Atlantic, Cape May and Cumberland)

 

 

 

 

SYNOPSIS

     Expands new home warranty protections.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning new home warranties and amending and supplementing P.L.1977, c.467.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    Section 2 of P.L.1977, c.467 (C.46:3B-1 et al.) is amended to read as follows:

     As used in this act:

     a.     "Department" means the Department of Community Affairs.

     b.    "Commissioner" means the Commissioner of Community Affairs.

     c.     "Warranty" means the warranty prescribed by the commissioner pursuant to P.L.1977, c.467 (C.46:3B-1 et seq.).

     d.    "New home" means any dwelling unit not previously occupied, excluding dwelling units constructed solely for lease. 

     e.     "Owner" means any person for whom the new home is built or to whom the home is sold for occupation by him or his family as a home and his successors in title to the home or mortgagee in possession.  Owner does not mean any development company, association or subsidiary company of the builder or any person or organization to whom the home may be sold or otherwise conveyed by the builder for subsequent resale, letting or other purpose. 

     f.     "Builder" means any individual corporation, partnership or other business organizations engaged in the construction of new homes. 

     g.    "Major construction defect" means:

     (1) any actual damage to the load bearing portion of the home including damage due to subsidence, expansion or lateral movement of the soil (excluding movement caused by flood or earthquake) which affects its load bearing function and which vitally affects or is imminently likely to vitally affect use of the home for residential purposes; and

     (2) a defect in residential construction subject to a warranty that affects its intended use as habitation, or will require the expenditure of funds for repair in order for its owners to restore the property to its condition as it existed at the time of the granting of the certificate of occupancy and which defect is a direct consequence of the violation by the builder of any portion or requirement of the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.), or regulations promulgated thereto.   

     h.    "Warranty date" means the first occupation or settlement date, whichever is sooner. 

     i.     "Approved claim" means, for the purposes of P.L.1991, c.202 (C.46:3B-13 et al.), a claim examined and approved by the commissioner in accordance with section 3 of P.L.1991, c.202 (C.46:3B-15).

     j.     "Approved method" means, for the purposes of P.L.1991, c.202 (C.46:3B-13 et al.), a method of remediation approved by the commissioner in accordance with section 3 of P.L.1991, c.202 (C.46:3B-15). 

     k.    "Fund" means the new home warranty security fund established in the department pursuant to section 7 of P.L.1977, c.467 (C.46:3B-7). 

     l.     "Warranty guarantor" means, for the purposes of P.L.1991, c.202 (C.46:3B-13 et al.), (1) the new home warranty program established in the department pursuant to P.L.1977, c.467 (C.46:3B-1 et seq.) or (2) any alternate new home warranty security program approved pursuant to section 8 of P.L.1977, c.467 (C.46:3B-8). 

     m.  "Board" means the Board of Trustees established pursuant to section 2 of P.L.2001, c.147 (C.46:3B-7.2).

(cf: P.L.2001, c.147, s.4)

 

     2. Section 7 of P.L.1977, c.467 (C.46:3B-7) is amended to read as follows:

     7.    a.  There is hereby established a new home warranty security fund to be maintained by the State Treasurer in a trust account, separate and apart from other funds and administered by the commissioner.  The purpose of the fund is (1) to provide moneys sufficient to pay claims by owners against builders participating in the fund for defects in new homes covered by the new home warranty; and (2) to pay the costs of administering the new home warranty program established in the department, including the costs of obtaining sufficient reinsurance to prudently protect the fund against unanticipated risks and costs incurred by the board in the discharge of its duties.  The amounts payable by participating builders shall be established and may be changed from time to time, as the experience of the fund shall require, by the commissioner, and shall be sufficient to cover anticipated claims, to provide a reasonable reserve and to cover the costs of administering the fund.  Amounts paid by participating builders shall be forwarded to the State Treasurer and shall be accounted for and credited by him  to the new home warranty security fund.

     b.    The State Treasurer shall hold, manage and, through the Division of Investment, invest and reinvest moneys in the fund and credit all income earned  thereon to the fund in the same manner as provided by law for the investment of  pension and retirement funds administered by the State.  The department shall keep the State Treasurer and the board advised of anticipated cash demands for payment of  claims against the fund.  No funds shall be spent, appropriated or transferred from the fund other than for the express purposes of paying claims or costs related to administering the program or the fund as enumerated in subsection a, c, or e of this section.  In the event funds are spent, appropriated or transferred from the fund for other purposes in violation of this subsection, the obligation of participating builders to contribute to the fund shall be suspended until such time as the funds are replenished, and if the amount in the fund shall become insufficient thereafter to pay claims or make awards, the payment of claims and making of awards shall be made from the General Fund.  The Joint Budget Oversight Committee, or its successor, shall have the authority to investigate complaints of violative fund transfers under this section, and shall order the Commissioner of Community Affairs to suspend collection from participating builders if it determines that the provisions of this subsection have been violated.

     c.     (1) Prior to making a claim against the fund for defects covered by the warranty, an owner shall notify the builder of such defects and allow a reasonable time period for their repair.  If the repairs are not made within a reasonable time or are not satisfactory to the owner, he may file a claim against the fund in the form and manner prescribed by the commissioner. The commissioner shall investigate each claim to determine the validity thereof, and the amount of the award that shall be made thereon, and shall hold a hearing if requested by either party, in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) applicable to contested cases.  Reasonable hearing fees shall be assessed against the unsuccessful party.  The amount of the award shall be sufficient to cover the reasonable costs necessary to correct any defect or defects covered under the warranty, but the total amount of awards from the fund for any new  home shall not exceed the purchase price of the home in the first good faith  sale thereof or the fair market value on the home on its completion date if  there is no good faith sale.  All claims submitted by an owner shall first be reviewed through a conciliation or arbitration procedure by the department, and in the event that the owner is found to be in the right, then the builder shall be required to correct such claims as determined through the conciliation or arbitration procedure.

     If a builder is unable or willfully refuses to correct such deficiency, then an amount sufficient to cure the problem shall be paid from the fund to the owner. In such cases, the commissioner may then proceed against the builder in accordance with subsection b. of section 6 of P.L.1977, c.467 (C.46:3B-6).  Upon certification from the commissioner of the amount of an award, the State Treasurer shall make payment to the claimant from the fund.

     (2) Notwithstanding the provisions of paragraph (1) of this subsection, once a claim has been filed, an owner shall be permitted to repair a defect included in the claim, prior to the conciliation or arbitration procedure, if the defect requires immediate repair to prevent further damage or poses a serious safety hazard. The commissioner shall establish standards for determining whether a defect requires immediate repair. Prior to making the repair, the owner shall notify the commissioner of the defect and reason for repair. The commissioner shall establish standards for determining whether a defect requires immediate repair, and a process by which an owner with a successful claim shall be reimbursed the reasonable costs necessary to correct the defect.

     d.    (Deleted by amendment, P.L.2001, c.147).

     e.     If the board determines that fund reserves and reinsurance may be insufficient to cover anticipated claims, the board shall recommend steps to the commissioner to restore fund resources to sufficiency, which may include increases in premiums and fees, expanded reinsurance and changes in standards and claims adjudication procedures.

     f.     The commissioner may provide for surcharges against those builders who are responsible for a significant number of awards against the fund and may discontinue the participation in the fund of any builder who is responsible for an excessive number of awards against the fund after a hearing in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c. 410 (C.52:14B-1 et seq.) applicable to contested cases.  At no time shall the State be required to contribute any moneys to the fund, nor shall the State have any liability to any person having any right to or claim against the fund over and above the amount therein except in those instances where it is determined by the Joint Budget Oversight Committee that the provisions of subsection b. of this section have been violated concerning amounts spent, appropriated or transferred from the fund.

     g.    The commissioner may order the return of funds to owners of enrolled homes as may be recommended by the board pursuant to section 3 of P.L.2001, c.147 (C.46:3B-7.3).

(cf: P.L.2001, c.147, s.5)

 

     3. Section 8 of P.L.1977, c.467 (C.46:3B-8) is amended to read as follows:

     a.     The commissioner is authorized and directed to review and approve alternate new home warranty security programs which provide for payment of claims against builders for defects covered under the new home warranty and financial security adequate to cover the total amount of claims that may be reasonably anticipated against participating builders at least equivalent to that provided by the new home warranty security fund.  However, any new home warranty insurance program approved by the Commissioner of Insurance prior to the adoption of this act  shall:  (1) Constitute an approved alternate new home warranty security program  and shall be deemed in accordance with this section and in compliance with this  act in the form and substance heretofore approved by the Commissioner of  Insurance, (2) not be subject to any rules and regulations adopted by the  Commissioner of the Department of Community Affairs pursuant to this act when  such rules and regulations are in conflict with said previously approved new  home warranty program.  Any person desiring approval of a new home warranty security program shall make application to the commissioner in such form and manner as he shall prescribe.  He may establish and charge reasonable fees to cover the costs incurred in reviewing and approving such applications.  The commissioner shall review each application and conduct any investigation he deems necessary with respect to an application.  The commissioner may, and if an applicant so requests, he shall, hold a hearing on an application in accordance with the provisions of the Administrative Procedures Act (P.L.1968, c.410, C.52:14B-1 et seq.) applicable to contested cases.  If the commissioner finds that a new home warranty security program provides coverage and financial security at least equivalent to the new home warranty security fund, he shall approve the program, provided that it meets the criteria set forth in subsection b. and c. of this section.  The commissioner may revoke or suspend the approval for such a program after a hearing in accordance with the same procedures applicable to hearings on applications if he finds that the program no longer provides coverage and financial security equivalent to the new home warranty security fund, or if the program violates any of the provisions of subsection b. or c. of this section.

     b.    An alternate new home warranty security program shall include a complaint, claims, and payment procedure, which:

     (1) provides an attempt at informal settlement of any claim arising out of the warranty between the builder and the owner and requires that any owner desiring to make a claim provide written notice of the complaint to the builder;

     (2) provides conciliation, arbitration, or both, of any warranty claim dispute by an independent third party selected and appointed in a manner approved by the department and disclosed to the owner on or before the warranty date;

     (3) provides the owner with an opportunity to accept or reject a conciliation decision in satisfaction of the claim and notice of the opportunity to appeal that decision to a court of competent jurisdiction and to request a review of the decision by the department;

     (4) permits an owner to repair a defect included in a claim under the warranty, after an unsuccessful informal settlement, but prior to the conciliation or arbitration procedure, if the defect requires immediate repair to prevent further damage or poses a serious safety hazard;      

     (5) provides that a determination as to whether a defect required immediate repair, pursuant to subparagraph (d) of this paragraph, shall be made in accordance with the standards established by the commissioner pursuant to paragraph (2) of subsection c. of section 7 of  P.L.1977, c.467, and that an owner may file an appeal of the determination to the commissioner;

     (6) provides a process by which a successful owner shall be reimbursed the reasonable costs necessary to correct the defect requiring immediate repair; and

     (7) provides fixed periods of time for action by either party pursuant to the arbitration or conciliation decision.

     c. In accordance with section 9 of P.L.1977, c.467 (C.463B-9), an alternate new home warrant security program shall not:

     (1) restrict the right of an owner to seek any remedies available under the law, including, but not limited to, mandating arbitration as the exclusive remedy for a claim of a defect; and

     (2) restrict the right of an owner to file an appeal, as applicable to the remedy elected.

(cf: P.L.1977, c.467, s.8)

 

     4.    Section 9 of P.L.1977, c.467 (C.46:3B-9) is amended to read as follows:

     9.    Nothing contained herein shall affect other rights and remedies available to the owner.  The owner shall have the opportunity to pursue any remedy legally available to the owner.  However, initiation of procedures to enforce a remedy [shall constitute an election which shall bar the owner from all other remedies] under P.L.1977, c.467 (C.46:3B-1 et seq.) shall require the court to stay any decision concerning claims pending before it regarding the same defect, pending the outcome of the administrative procedure.  Nothing contained herein shall be deemed to limit the owner's right of appeal as applicable to the remedy elected.

(cf: P.L.1977, c.467, s.9)

 

     5.    (New section) a.  Any person serving as an arbitrator for a dispute under the "New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.), whether under the plan created by the Commissioner of Community Affairs pursuant to the provisions of section 3 of P.L.1977, c.467 (C.46:3B-3), or any private plan for that same purpose approved by the commissioner, shall: possess proof of satisfactorily passing the course of study for building inspector certified by the department; be licensed as a professional engineer or registered or licensed as an architect in New Jersey or in any other state; or hold a license as a State subcode official; provided, however, that no person shall serve as an arbitrator in any matter involving a major structural defect claim who is not either a licensed professional engineer or a registered or licensed architect.

     b.    (1)  In addition to the requirements of subsection a. of this section, as a condition of serving as an arbitrator for a dispute under P.L.1977, c.467 (C.46:3B-1 et seq.), a person shall be required to complete a training program, created by or approved by the commissioner, of not less than eight hours in length, that is designed to clarify the role, and the duties, of an arbitrator under P.L.1977, c.467 (C.46:3B-1 et seq.), and to develop standards for the arbitration of warranty claims under P.L.1977, c.467 (C.46:3B-1 et seq.).

     (2)   The training program shall be established not later than the 90th day next following the enactment of P.L.    , c.    (C.      ) (pending before the Legislature as this bill).  The training program shall be provided by the Department of Community Affairs or Rutgers, The State University, with the approval of the commissioner.

     (3)   A person who has served as an arbitrator under P.L.1977, c.467 (C.46:3B-1 et seq.) prior to the effective date of P.L.      , c.       (C.       ) (pending before the Legislature as this bill) shall complete the training program not later than the first day of the seventh month next following the enactment of P.L.   , c.    (C.       ) (pending before the Legislature as this bill).

     (4)   Any person who does not complete the training program required under this subsection shall be prohibited from serving as an arbitrator for disputes under P.L.1977, c.467 (C.46:3B-1 et seq.) until they have completed the training program required by this subsection.

     c.     The commissioner shall adopt a written policy and procedures governing conflicts of interest on the part of arbitrators for disputes under the "New Home Warranty and Builders' Registration Act."  The written policy and procedures adopted pursuant to this subsection shall include, at a minimum, requirements for:

     (1)  the disclosure by an arbitrator of any perceived or actual conflict of interest on the arbitrator's part with respect to any dispute under P.L.1977, c.467 (C.46:3B-1 et seq.) for which they have been appointed the arbitrator;

     (2)  the lodging of a complaint by any owner of any perceived or actual conflict of interest on an arbitrator's part with respect to any dispute under P.L.1977, c.467 (C.46:3B-1 et seq.);

     (3)  the disclosure of any arbitrator's previous employment or affiliation with a builder or an owner who may be party to a dispute under P.L.1977, c.467 (C.46:3B-1 et seq.);

     (4)  the maintenance by the department of a record of any claim by any party to a dispute under P.L.1977, c.467 (C.46:3B-1 et seq.) of a perceived or actual conflict of interest; and

     (5)  the procedure for granting a second arbitration of a dispute under P.L.1977, c.467 (C.46:3B-1 et seq.) if a conflict of interest has been verified.

     d.    The commissioner shall disseminate the written policy developed pursuant to subsection c. of this section to all active arbitrators upon its adoption.

     e.     The commissioner shall establish a reporting requirement for any arbitrator or business entity arbitration organization that administers or otherwise is involved in arbitration of new home warranty claims under P.L.1977, c.467 (C.46:3B-1 et seq.). The commissioner shall collect, publish at least quarterly, and make available to the public on the department's Internet website, all of the following information regarding each new home warranty arbitration within the preceding five years:

     (1)   the name of any corporation or other business entity that is party to the arbitration;

     (2)   whether the consumer was the prevailing party;

     (3)   the number of occasions, if any, a business entity which is a party to an arbitration, has previously been a party in an arbitration or mediation administered by the arbitration organization;

     (4)   whether the consumer was represented by an attorney;

     (5)   the date the arbitration organization received the demand for arbitration, the date the arbitrator was appointed, and the date of disposition by the arbitrator or arbitration organization;

     (6)   the type of disposition of the dispute, if known;

     (7)   the amount of the claim, the amount of the award, and any other relief granted, if any; and

     (8)   the name of the arbitrator, his or her total fee for the case, and the percentage of the arbitrator's fee allocated to each party.

 

     6.    (New section) a.  The Bureau of Homeowner Protection, Division of Codes and Standards in the Department of Community Affairs shall create a "New Home Buyer's Bill of Rights" which shall include an overview of all the rights afforded to homeowners under the "New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.), as well as a guide to warranty coverage and claim filing, a guide to State building codes, a list of approved warranty plans, an explanation of the builder registration process, and a detailed discussion of the dispute process, including the arbitration of disputes.

     b.    The Bureau of Homeowner Protection, Division of Codes and Standards in the department shall publish the "New Home Buyer's Bill of Rights" on the department's Internet website.

 

     7.    This act shall take effect on the first day of the seventh month next following enactment, except the commissioner may take any anticipatory administrative action in advance as shall be necessary for the implementation of this act.

STATEMENT

 

     This bill expands protections for owners of new homes under the "New Home Warranty and Builders' Registration Act," P.L.1977, c.467 (C.46:3B-1 et seq.).

     Under current law, a new home warranty only provides 10 years' worth of coverage for a "major construction defect," which is limited to "actual damage to the load bearing portion of the home on of the home including damage due to subsidence, expansion or lateral movement of the soil affecting the load bearing function and which vitally affects or is imminently likely to vitally affect use of the home for residential purposes." The bill expands the definition to include, "a defect in residential construction subject to a warranty that affects its intended use of habitation, or will require the expenditure of funds for repair in order for its owners to restore the property to its condition as it existed at the time of the granting of the certificate of occupancy and which defect is a direct consequence of the violation by the builder of the residential construction of any portion or requirement of the "State Uniform Construction Code Act," P.L.1975, c.217 (C.52:27D-119 et seq.), or regulations promulgated thereto."  

     Current law requires every builder of new homes to be registered and enrolled in either the State warranty plan, established by the Commissioner of Community Affairs or an alternate new home warranty security program, approved by the commissioner. The bill expands current law to provide that in order to qualify for approval, an alternate program is required to include a complaint, claims, and payment procedure, which:

     (1) provides an attempt at informal settlement of any claim arising out of the warranty;

     (2) provides conciliation, arbitration, or both, of any warranty claim dispute by an independent third party selected and appointed in a manner approved by the department;

     (3) provides the owner with an opportunity to accept or reject a conciliation decision in satisfaction of the claim and notice of the opportunity to appeal that decision to a court of competent jurisdiction and to request a review of the decision by the department;

     (4) permits an owner to repair a defect included in a claim under the warranty, if the defect requires immediate repair to prevent further damage or poses a serious safety hazard;   

     (5) provides that a determination as to whether a defect required immediate repair, will be made in accordance with standards to be established by the commissioner, and that an owner may file an appeal of the determination to the commissioner;

     (6) provides a process by which a successful owner will be reimbursed the reasonable costs necessary to correct the defect requiring immediate repair; and

     (7) provides fixed periods of time for action by either party pursuant to the arbitration or conciliation decision.

     Additionally, the bill specifies that an alternate new home warrant security program will not be approved if it:

     (1) restricts the right of an owner to seek any remedies available under the law, including, but not limited to, mandating arbitration as the exclusive remedy for a claim of a defect; and

     (2) restricts the right of an owner to file an appeal, as applicable to the remedy elected.

     The bill also establishes qualifications for any person serving as an arbitrator for a dispute under the "New Home Warranty and Builders' Registration Act," whether under the State warranty plan or an approved private warranty plan.  Under the bill, an arbitrator is required to complete a training program, created by or approved by the commissioner, of not less than eight hours in length, that is designed to clarify the role, and the duties, of an arbitrator under the "New Home Warranty and Builders' Registration Act," and establishes deadlines for its completion.  The bill also requires the commissioner to develop standards for the arbitration of warranty claims under that law. Additionally, the bill provides that the commissioner will establish a reporting requirement for arbitrators and the information collected will be made available to the public on the department's Internet website.

     Finally, the bill requires the Bureau of Homeowner Protection, Division of Codes and Standards in the Department of Community Affairs to create a "New Home Buyer's Bill of Rights" which will include an overview of all the rights afforded to owners under the "New Home Warranty and Builders' Registration Act," as well as a guide to warranty coverage and claim filing, a guide to State building codes, a list of approved warranty plans acceptable in the State, an explanation of builder registration, and a detailed discussion of the dispute process, including the arbitration of disputes.  The department must publish the "New Home Buyer's Bill of Rights" on the department's Internet website.

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