75th OREGON LEGISLATIVE ASSEMBLY--2010 Special Session

NOTE:  Matter within  { +  braces and plus signs + } in an
amended section is new. Matter within  { -  braces and minus
signs - } is existing law to be omitted. New sections are within
 { +  braces and plus signs + } .

LC 138

                         House Bill 3658

Sponsored by COMMITTEE ON CONSUMER PROTECTION AND GOVERNMENT
  ACCOUNTABILITY

                             SUMMARY

The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.

  Requires general contractor constructing new residential
dwelling unit to provide original owner of unit with warranty of
unit workmanship and materials. Makes violation subject to civil
penalty, not to exceed $5,000.
  Applies to construction pursuant to written contracts entered
into on or after September 1, 2010, and to construction commenced
without written contract on or after September 1, 2010.
  Declares emergency, effective on passage.

                        A BILL FOR AN ACT
Relating to warranties; creating new provisions; amending ORS
  701.305, 701.330, 701.335, 701.560 and 701.600; repealing ORS
  701.320; and declaring an emergency.
Be It Enacted by the People of the State of Oregon:
  SECTION 1.  { + Sections 2 to 5 of this 2010 Act are added to
and made a part of ORS chapter 701. + }
  SECTION 2.  { + As used in sections 2 to 5 of this 2010 Act:
  (1) 'Common elements' means the general common elements and
limited common elements for a multiunit building and the building
property.
  (2) 'Defect':
  (a) Means a deficiency, inadequacy or insufficiency arising out
of the construction of a residential dwelling unit:
  (A) That substantially impairs the ordinary use, market value
or safety of the dwelling unit; or
  (B) That results in the dwelling unit not meeting a
specification of the state building code at the time of
substantial completion or not meeting a specification of a
construction contract for the dwelling unit.
  (b) Does not mean a condition arising from the failure of a
residential dwelling unit owner or occupant to follow a
manufacturer's maintenance requirements after the general
contractor substantially completes construction.
  (3) 'General common elements,' unless otherwise provided in a
condominium declaration, means the following portions of the
building if not part of a residential dwelling unit or a limited
common element:
  (a) The land, whether fee simple, leasehold, easement, other
interest or combination of interests, together with any rights
and appurtenances;
  (b) The foundations, columns, girders, beams, supports, bearing
and shear walls, roofs, halls, corridors, lobbies, stairs, fire
escapes, entrances and exits;
  (c) The basements, yards, gardens, parking areas and outside
storage spaces;
  (d) Installations of central services such as power, light,
gas, hot and cold water, heating, refrigeration, air
conditioning, waste disposal and incinerating;
  (e) The elevators, tanks, pumps, motors, fans, compressors,
ducts and all apparatus and installations existing for common
use;
  (f) The premises for the lodging of janitors or caretakers of
the property; and
  (g) All other elements of a building and property necessary or
convenient to the existence, maintenance and safety of the
building or property, or normally in common use.
  (4) 'Limited common elements' means those common elements of a
multiunit building or property that are reserved for the use of a
certain dwelling unit or number of units, to the exclusion of the
other units.
  (5) 'Multiunit building' means a building that has three or
more residential dwelling units.
  (6) 'Original owner' means a person:
  (a) Who is the record owner of real property at the time of
entering into a contract for the construction of a new
residential dwelling unit and is not the general contractor,
residential developer or declarant of the dwelling unit or an
agent of the contractor, developer or declarant; or
  (b) Who purchases a residential dwelling unit from the general
contractor, residential developer or declarant of the dwelling
unit or from an agent of the contractor, developer or declarant.
  (7) 'Preassembled product' means an appliance, furnace, air
conditioner, heat pump, electric motor or other manufactured item
assembled as a completed unit using closed construction prior to
the item being sold for installation in a residential dwelling
unit.
  (8) 'Rental unit' means any dwelling unit that does not qualify
as a residential dwelling unit.
  (9)(a) 'Residential dwelling unit' means:
  (A) A site-built one or two family dwelling;
  (B) A zero-lot-line dwelling;
  (C) A dwelling unit in a multiunit building if the dwelling
unit is subject to a legally recorded bylaw, declaration,
covenant or similar document restricting or prohibiting the
renting out of the dwelling unit; or
  (D) For a multiunit building, except as provided in paragraph
(b) of this subsection, the common elements of the building
containing a dwelling unit described in subparagraph (C) of this
paragraph.
  (b) 'Residential dwelling unit' does not mean:
  (A) A manufactured structure as defined in ORS 446.003 or
floating home as defined in ORS 830.700;
  (B) Any limited common elements of a multiunit building that
are reserved for use only by rental units; or
  (C) Any part of a mixed-use building that is used or designed
for use for commercial purposes.
  (10) 'Substantial completion' has the meaning given that term
in ORS 12.135. + }
  SECTION 3.  { + (1) A general contractor who is required to be
licensed under this chapter and who constructs a new residential
dwelling unit shall warrant to the original owner of the dwelling
unit:
  (a) For a period of two years that the dwelling unit is free
from any defect in workmanship or materials; and
  (b) For a period of five years that the plumbing, electrical,
heating, cooling and ventilation delivery and distribution
systems, building envelope and structural components of the
dwelling unit are free from defects in workmanship or materials.
  (2)(a) Notwithstanding subsection (1) of this section, if the
residential dwelling unit includes a preassembled product that is
covered by a manufacturer's warranty, a general contractor that
complies with this subsection may limit the period for which the
general contractor warrants the preassembled product to coincide
with the period of the manufacturer's warranty. The general
contractor may limit the warranty period for the preassembled
product by making a written disclosure that specifically
identifies the preassembled product, states the manufacturer
warranty period for the preassembled product and states the
period for which the contractor warrants the preassembled
product.
  (b) If the dwelling unit has an original owner at the start of
the warranty period, the general contractor shall provide a copy
of the written disclosure to the original owner. The general
contractor shall include the written disclosure when recording
the warranty for the residential dwelling unit as required under
section 4 of this 2010 Act.
  (c) This subsection does not relieve a contractor from
responsibility for ensuring the provision of warranty services
for a preassembled product. A general contractor may not limit
the warranty period for defects arising from improper
installation of a preassembled product.
  (3) The warranties described in this section apply:
  (a) To workmanship performed and materials installed in the new
residential dwelling unit on or before the start of the warranty
period; and
  (b) For the remainder of the applicable warranty period, to any
workmanship performed and materials installed during the warranty
period as part of a defect repair authorized by the general
contractor.
  (4) Except as provided in subsection (5) of this section, a
warranty period described in this section shall start upon the
earlier of:
  (a) The date the residential dwelling unit is first occupied as
a residence;
  (b) The date title to the residential dwelling unit is
transferred to the original owner of the dwelling unit; or
  (c) One year after the general contractor substantially
completes construction.
  (5) If a residential dwelling unit is contained in a multiunit
building:
  (a) The warranty period for the general common elements of the
building starts on the first date on which any dwelling unit
contained in the building becomes covered by a warranty under
this section;
  (b) The warranty period for a limited common element of the
building starts on the first date on which any dwelling unit
having a right to use that element becomes covered by a warranty
under this section; and
  (c) The owner of any residential dwelling unit having a right
to use a common element that is under warranty may assert the
warranty to obtain the repair of defects in the common element.
  (6) Notwithstanding subsection (1) of this section, the
warranty period for the common elements of a multiunit building
expires if the building ceases to have at least one residential
dwelling unit. + }
  SECTION 4.  { + (1) The requirement to provide a warranty under
section 3 of this 2010 Act applies only to the general contractor
that substantially completed the construction of the new
residential dwelling unit. A general contractor that contracts
with a property owner to substantially complete the construction
of a new residential dwelling unit with knowledge that another
general contractor has previously provided workmanship or
materials for the dwelling unit is considered for purposes of
subsection (3) of this section to have provided that workmanship
or materials.
  (2) The general contractor providing the warranty for a
residential dwelling unit is directly responsible for ensuring
the provision of services under the warranty. However, if the
contractor providing the warranty ceases to be actively licensed
under this chapter, the Construction Contractors Board may assign
responsibility for ensuring the provision of services under the
remainder of the warranty to any actively licensed general
contractor that has the same owner as the contractor that
provided the warranty. As used in this subsection, 'owner' has
the meaning given that term in ORS 701.094.
  (3) The warranties described in section 3 of this 2010 Act
apply only to workmanship or materials provided by:
  (a) The general contractor or an officer, employee or agent of
the general contractor;
  (b) A subcontractor or an officer, employee or agent of a
subcontractor;
  (c) A person selected by the contractor to provide labor or
materials; or
  (d) A person for whom the contractor has a right to direct and
control the provision of services or materials at the dwelling
unit.
  (4) This section and section 3 of this 2010 Act do not prohibit
a contractor from offering a warranty that provides greater
coverage than the coverage required by this section and section 3
of this 2010 Act.
  (5) A warranty required under section 3 of this 2010 Act may
not be disclaimed, limited or waived. A purported disclaimer,
limitation or waiver of the required warranty is void.
  (6) A general contractor who warrants a residential dwelling
unit under section 3 of this 2010 Act shall record the warranties
for the dwelling unit in the deed records for the structure
property as warranty agreements under ORS 701.605. + }
  SECTION 5.  { + (1) A warranty claim under section 3 of this
2010 Act must be sent to the warrantor during the term of the
warranty.  The warranty claim sent to the warrantor must comply
with the requirements for giving a notice of defect to a
contractor under ORS 701.565. The sending of a notice of defect
to a subcontractor or supplier under ORS 701.560 to 701.595 does
not satisfy the requirement of sending a warranty claim to the
warrantor.
  (2) The warranty obligations of a general contractor under
sections 3 and 4 of this 2010 Act are in addition to any other
obligations or liabilities of the contractor or of a
subcontractor or supplier.
  (3) If a dispute regarding warranty coverage under section 3 of
this 2010 Act arises within the time limitations for filing a
claim under ORS 701.143, the purchaser of the structure may seek
resolution of the dispute by the Construction Contractors Board.
In any court action claiming a failure to provide services under
a warranty, the court shall award the prevailing party on the
warranty claim reasonable attorney fees and costs incurred in
regard to the warranty claim, whether at trial or on appeal. + }
  SECTION 6.  { + (1) ORS 701.320 is repealed.
  (2) Notwithstanding the amendments to ORS 701.335 by section 9
of this 2010 Act, the repeal of ORS 701.320 does not alter the
terms of any warranty agreement under a written contract entered
into before September 1, 2010. + }
  SECTION 7. ORS 701.305 is amended to read:
  701.305. (1) A contractor may not perform work to construct,
improve or repair a residential structure or zero-lot-line
dwelling for a property owner without a written contract if the
aggregate contract price exceeds $2,000. If the price of a
contract was initially less than $2,000, but during the course of
performance the contract exceeds that amount, the contractor
shall mail or otherwise deliver a written contract to the
property owner not later than five days after the contractor
knows or should reasonably know that the contract price will
exceed $2,000.  Failure to have a written contract will not void
the contract.
  (2) The Construction Contractors Board shall adopt rules that
require a contractor to use standard contractual terms in a
construction contract for which subsection (1) of this section
requires a written contract. The standard contractual terms shall
be clear, use words of common understanding and shall include but
need not be limited to:
  (a) A statement that the contractor is licensed by the board;
  (b) The name, license number, address and telephone number of
the contractor as shown on board records on the date the contract
is entered into;
    { - (c) An acknowledgment of a written offer of a warranty,
if an offer is required by ORS 701.320, and indication of the
acceptance or rejection of the offered warranty; - }
    { - (d) - }   { + (c) + } A list of the notices required
under ORS 87.093 or under rules adopted under ORS 701.330 and
701.335 (2) on the contractor's bid proposal; and
    { - (e) - }   { + (d) + } An explanation of the property
owner's rights under the contract, including, but not limited to,
the ability to file a claim with the board and the existence of
any mediation or arbitration provision in the contract, set forth
in a conspicuous manner as defined by the board by rule.
  SECTION 8. ORS 701.330 is amended to read:
  701.330. (1) The Construction Contractors Board shall adopt by
rule a consumer notice form designed to inform a property owner
or original purchaser of the actions the property owner or
original purchaser should take to protect the property owner in a
residential structure or zero-lot-line dwelling repair, remodel
or construction project or to protect the original purchaser in a
residential structure or zero-lot-line dwelling construction
project. The form shall briefly describe and identify additional
sources of information regarding:
  (a) Contractor licensing standards;
  (b) Contractor bond and insurance requirements;
  (c) The requirement   { - to offer - }  { +  that a general
contractor provide + } a warranty   { - under ORS 701.320 - }
 { +  for new residential construction that is subject to section
3 of this 2010 Act + }; and
  (d) Other information specified by the board.
  (2) The board shall adopt by rule a notice of procedure form
that briefly describes and identifies additional sources of
information regarding the procedure described under ORS 701.560
to 701.595 and other information specified by the board.
  (3) The consumer notice form and notice of procedure form
adopted by the board shall include signature lines for the
contractor and for the property owner or original purchaser.
  (4) The board shall adopt rules specifying the time and manner
for a contractor to deliver a consumer notice form and notice of
procedure form.
  (5) The board may adopt rules that require a contractor to
maintain evidence of delivery of the consumer notice form and
notice of procedure form and that specify the retention period
for and the form of that evidence.
  SECTION 9. ORS 701.335 is amended to read:
  701.335. (1) A contractor that enters into a contract to
construct a new residential structure or zero-lot-line dwelling
shall provide a recommended maintenance schedule to the property
owner or original purchaser of the proposed structure or dwelling
  { - at the time that the contractor makes a written offer of
warranty under ORS 701.320 - }  { +  no later than the date that

the term of the warranty for the structure or dwelling starts as
provided under section 3 of this 2010 Act + }.
  (2) The Construction Contractors Board shall adopt rules
describing the minimum information that a contractor shall
provide to a property owner or original purchaser under
subsection (1) of this section. The minimum information shall
include, but need not be limited to, the following:
  (a) Definitions and descriptions of moisture intrusion and
water damage.
  (b) An explanation of how moisture intrusion and water damage
can occur.
  (c) A description and recommended schedule for maintenance to
prevent moisture intrusion.
  (d) Advice on how to recognize the signs of water damage.
  (e) Appropriate steps to take when water damage is discovered.
  SECTION 10.  { + ORS 701.605 is added to and made a part of ORS
chapter 701. + }
  SECTION 11. ORS 701.560 is amended to read:
  701.560. As used in ORS 701.560 to 701.595   { - and
701.605 - } :
  (1) 'Contractor' means a person that performed services for the
construction, alteration or repair of a residence.
  (2) 'Defect' means a deficiency, an inadequacy or an
insufficiency arising out of or relating to the construction,
alteration or repair of a residence. 'Defect' includes a
deficiency, an inadequacy or an insufficiency in a system,
component or material incorporated into a residence.
  (3) 'Owner' means a person that possesses an interest in a
residence or in land that is a residential site or has entered
into a contract for the purchase of an interest in the residence
or land. 'Owner' includes:
  (a) A homeowners association as defined in ORS 94.550;
  (b) A managing entity as defined in ORS 94.803;
  (c) An owners' association as described in ORS 94.858;
  (d) An association of unit owners as defined in ORS 100.005;
and
  (e) Any other entity that possesses an interest in a residence
or represents owners of a residence.
  (4) 'Remediation' means the repair or replacement of some or
all of the defects described in an owner's notice of defect sent
under ORS 701.565.
  (5) 'Residence' means:
  (a) A residential structure as defined in ORS 701.005;
  (b) Common property as defined in ORS 94.550; and
  (c) A common element as defined in ORS 100.005.
  (6) 'Secondary notice' means a copy of an owner's notice of
defect that a contractor, subcontractor or supplier sends to
another contractor, subcontractor or supplier that may be
responsible for a defect.
  (7) 'Subcontractor' means any person that performed services
for the construction, alteration or repair of a residence at the
request or direction of a contractor.
  (8) 'Supplier' means any person that furnished or manufactured
the systems, components or materials incorporated into a
residence as part of the construction, alteration or repair of
the residence.
  SECTION 12. ORS 701.600 is amended to read:
  701.600. ORS 701.560 to 701.595   { - and 701.605 - }  do not
apply:
  (1) To personal injury or death claims.
  (2) To claims or complaints filed pursuant to ORS 671.695 or
701.139.
  (3) To claims against a person licensed under ORS 671.010 to
671.220.

  SECTION 13.  { + Sections 2 to 5 of this 2010 Act and the
amendments to ORS 701.305, 701.330 and 701.335 by sections 7, 8
and 9 of this 2010 Act apply to new residential dwelling units:
  (1) For which a general contractor enters into a written
construction contract on or after September 1, 2010; or
  (2) On which construction work commences on or after September
1, 2010, if no written construction contract exists. + }
  SECTION 14.  { + This 2010 Act being necessary for the
immediate preservation of the public peace, health and safety, an
emergency is declared to exist, and this 2010 Act takes effect on
its passage. + }
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