NHWA as a Theory of Recovery

The Chinese Drywall situation is complex, and homeowners will seek recovery from builders, suppliers and manufacturers under a number of legal theories.

Like many other states, Louisiana has a “New Home Warranty Act” which mandates that a contractor warranty its work to the homeowner for a certain period of time.

In Louisiana, if the home is a new construction, the act is clear that owners with defective construction can only recover from the builder under the act:

…provides the exclusive remedies, warranties, and peremptive periods as between builder and owner relative to home construction and no other provisions of law relative to warranties and redhibitory vices and defects shall apply.

Ramifications if Act is Exclusive Remedy

The ramifications of the act applying to Chinese Drywall are many:

1.  The warranty period is “peremptive,” meaning that the warranty periods start at a certain time (delivery of the home) and end at a certain time, and is not suspended because the homeowner was without knowledge of the defect.

2.  The owner is required to give the builder written notice, by registered or certified mail, of the defect and give the builder a reasonable opportunity to comply with the provisions of the Act.

3.  The Act may completely exclude or significantly limit claims for health damages caused by the defects.

Issues in Determining whether NHWA applies

So, will the New Home Warranty Act apply to Chinese Drywall claims?  Only time will tell.

The Act does exclude certain types of damages or “defects” from applicablity under the act, and Chinese Drywall may be excluded if it is considered (§9:3144(B)):

a)  Dampness, condensation or other damage due to the failure of the owner to maintain adequate ventilation or drainage.  This exception may apply if results from lab testing of the Chinese Drywall confirm that dampness or poor ventilation exasperate the problem with the imported drywall.

b) Any defect in, or any defect caused by, materials or work supplied by anyone other than the builder, or any employee, agent, or subcontractor of the builder.   It will be interesting to see how this particular exclusion is interpreted as it applies to imported drywall.

c) Mold and mold damage.   Of course, the Chinese Drywall contamination is not “mold,” but owners may attempt to argue that its effects fall under this exclusion of the Act.

Applicable builders will [and probably should] argue that the Act applies, and use the Act to limit its exposure.   Louisiana judges will be called upon to determine whether any of the §9:3144(B) exclusions apply.