Construction law in Indiana provides protections for both contractors and property owners when disputes arise. The best protection for all involved parties is a written contract that establishes expectations and steps for resolving disputes. However, when disputes can’t be resolved without further action, an experienced Indiana construction attorney can provide valuable assistance in filing or responding to a construction defect claim in Indiana.
What Is the Process for a Construction Defect Claim in Indiana?
Before bringing a construction defect claim in Indiana, an owner must provide the contractor with notice of the defect and an opportunity to repair the defect, as provided in Indiana Code §§ 32-27-3-1 to -14.
Specifically, Indiana Code § 32-27-3-2 requires that a property owner, at least 60 days prior to filing a claim for a construction defect, must provide notice of the claim in writing to the contractor. This notice must provide a reasonable description of the alleged defect. Then, the contractor has 21 days to respond, in writing, proposing a remedy:
- Inspection of the residence, a timeline for the inspection, and an offer to “remedy the defect, compromise by payment, or dispute the claim.”
- Compromise and settlement without inspection by monetary payment, which may include an offer to purchase the property and pay the owner’s relocation costs.
- Dispute of the claim and assertion that the contractor will not correct the alleged construction defect or settle the claim.
Identifying Construction Defects in Indiana
“Defect” or “construction defect” under Indiana Code § 32-27-3-1 means “damage or deficiency in the residential construction, design, specifications, surveying, planning, supervision, testing, inspection, or observation of construction.” This is a very broad definition, under which a defect could potentially include a contractor’s failure to supervise subcontractors or observe the work of its own employees.
In addition to defects in construction, the statute includes defects in planning, design, and soil testing. Homeowners are not required to determine the cause of a defect; rather, they must give notice of the “general nature” of the defect.
When Notice and Opportunity to Repair is Not Required
Indiana’s notice and opportunity to repair statute requires a contractor to include a written notice of the procedures to the homeowner. If the contractor does not provide this notice, under Indiana Code § 32-27-3-9(c), the statutory scheme does not apply, and the owner is entitled to file suit against the contractor without giving notice of the claim or an opportunity to repair the defect.
Indiana Construction Defect Resolution
If the contractor does not respond, or the steps provided in Indiana Code § 32-27-3-1 to -14 do not result in a resolution of a homeowner’s construction defect claim, the homeowner may proceed to file a court action under the circumstances specified in the statute.
Deadline for a Construction Claim in Indiana
Because construction defects may take years to reveal themselves, Indiana provides a 10-year statute of limitations for deficiency of design or construction of improvements to real property. Any action to recover damages for a defect in design or construction must be brought within 10 years of the date of substantial completion of the improvement or within 12 years after the completion of drawings if related to design deficiency.
Under Indiana Code § 32-27-3-14, this limitations period is tolled, or suspended, if a written notice of claim is served under Indiana Code § 32-27-3-2 from the day on which the notice of claim is served until 60 days after the period of time during which the filing of an action is barred under the statute.
Shifting Attorney’s Fees on Construction Defect Claims
If an owner, without cause, rejects a contractor’s written offer of settlement or does not permit the contractor to inspect or repair the defect or settle the claim, when these offers are reasonably made, the court may deny a suit filed against the contractor. Additionally, the owner may be held responsible for the attorney’s fees of the contractor. However, if a defect is related to noncompliance with building codes by the contractor, the property owner is not compelled to accept the contractor’s offers to settle or repair.
On the other hand, if a contractor unreasonably disputes a homeowner’s claim; does not offer to compromise, remedy, or correct the problem; or does not respond to the property owner’s notice, the court may award attorney’s fees and costs to the property owner.
Use of Mechanics’ Liens to Compel Payment
A homeowner may withhold payment under a construction contract on the basis that the owner has a pending construction defect claim. What if the owner fails to comply with the procedures provided in the statute for notice and an opportunity to repair, or those procedures do not apply? In such cases, the contractor may seek to compel payment and resolve the claim through the use of a mechanic’s lien. The detailed procedures and deadlines provided in Indiana Code § 32-28-3-1 and following statutes would then apply.
Alternative Dispute Resolution
In addition to providing the notice of claim and the right to an opportunity to repair as provided in Indiana Code § 32-27-3-12, the contract may provide for alternative methods of resolving disputes. Under Indiana Code § 32-27-3-13, the statutory scheme does not usurp the parties’ right to make their own agreement about how to resolve disputes.
Construction disputes have been arbitrated and mediated for many years. Both methods are usually less expensive and more final than court litigation. Mediation is significantly less expensive than arbitration. A contract could provide for mediation first and then, if the mediation is unsuccessful, arbitration. The contract should provide that both parties agree to the dispute resolution methods outlined as well as a forum for the methods chosen.
Know the Law before You File or Defend a Construction Defect Claim in Indiana
Both contractors and owners should be aware of the statutory scheme for remedying construction defect claims in Indiana. Failure to abide by the scheme can result in confusion, expensive litigation, and the imposition of attorney’s fees on the noncompliant party. Before entering into a construction contract, both owner and contractor should anticipate and provide for the need for resolution of disputes. If a dispute has already arisen, know your statutory rights and obligations. Camden & Meridew attorney Corey Meridew is an experienced Indiana construction law attorney who can help you file or defend a construction defect claim in Indiana. Call Corey at 317-770-0000, email the firm at firstname.lastname@example.org, or complete the firm’s online contact form.