Effective July 1, 2008: New Requirements for Residential Construction

By John H. Baker and Katie E. Jeremiah

Two new requirements of builders and developers come into effect on July 1, 2008. Oregon's new residential warranty and maintenance requirements apply to builders and sellers of new residences, including single family homes, townhouses, and condominium units.

Offer a Warranty

Builders and sellers must offer a written warranty against defects in materials and workmanship to the first purchaser of a new residence. This new requirement applies to any written contract that is entered into on or after July 1. The contract must include a section where the customer acknowledges receipt of the written warranty and can accept or reject the warranty terms. The Construction Contractors Board offers the following language as an example:

Buyer acknowledgement that Contractor has offered warranty against defects in materials and workmanship to the purchaser. Purchaser has  accepted or  rejected the offer of a warranty (see Appendix B in the Contract).

If the owner rejects the warranty, the seller or builder can withdraw its offer to sell or build the residence.

Provide a Maintenance Schedule

Builders and sellers must give their customers information about moisture intrusion and water damage, including a recommended maintenance schedule. The maintenance information must be provided to customers on all new residences that will be complete on or after July 1. The contract must include the owner's acknowledgement of receiving the maintenance information. The board has developed sample maintenance information and a recommended maintenance schedule that are both available on the Construction Contractors Board website.

Failure to comply with the new requirements can have severe consequences. The CCB will enforce these new requirements at their discretion. They can revoke licenses and assess civil penalties.

Other new rules that are already in effect require all new residential construction projects over $2,000 to have a written contract that includes:

• A statement that the contractor is licensed by the Construction Contractors Board;
• Identifying information, including the contractor's name, address, phone number, and license number issued by the board, and the customer's name, address, the address of where the work is to be performed, a description of the work to be performed, and price and payment terms;
• An explanation of the property owner's rights under the contract including but not limited to the ability to file a complaint with the Construction Contractors Board and the existence of any mediation or arbitration provision in the contract; and
• A summary of required notices, including the Consumer Protection Notice, the Information Notice to Owner About Construction Liens, and the Notice of Procedure.

Contractors must keep proof of delivery of these required notices for two years after the contract was entered into. Even better than proof of delivery — keep either a signed copy of the notices, an acknowledgement of receipt in the contract that is initialed by the owner, or copies of the executed contract.

These new requirements add to the already complex regulations for Oregon contractors and developers. To avoid the harsh consequences of failing to comply, developers and contractors should pay close attention to their contracts — and consult legal counsel for assistance in meeting the new contract requirements.

View a summary of the 2007 changes to the contractor licensing and liability laws.

Published June 13, 2008

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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