SB2340

SECTION 1. The legislature finds that ensuring the accountability of contractors results in quality work. The legislature further finds that the Contractor Repair Act, chapter 672E, Hawaii Revised Statutes, provides claimants and construction professionals with a mechanism to resolve construction disputes that reduces the need for litigation while preserving the claimants' rights. The legislature also finds that claimants may exploit this mechanism for their own benefit at the expense of contractors.

The purpose of this Act is to:

(1) Provide a timeframe for a claimant to accept a contractor's proposal to inspect an alleged construction defect;

(2) Provide a timeframe for a claimant and contractor to agree to the date of the inspection;

(3) Provide a timeframe for a claimant to accept a contractor's offer to repair or settle; and

(4) Limit the remedies for a claimant who unreasonably rejects a contractor's proposal to inspect or offer to repair or settle, or both.

SECTION 2. Section 672E-4, Hawaii Revised Statutes, is amended to read as follows:

"§672E-4 Rejection of claim; opportunity to repair construction defect. (a) The contractor rejects a claimant's claim of construction defects by:

(1) Serving the claimant with a written rejection of the claim; or

(2) Failing to respond pursuant to subsection (b)(1) or (b)(2), to the notice of claim within thirty days after service.

(b) The contractor, within thirty days after service of the notice of claim, shall serve the claimant and any other contractor that has received the notice of claim with a written response to the alleged construction defect that:

(1) Offers to settle without inspecting the construction defect by:

(A) Monetary payment;

(B) Making repairs; or

(2) Proposes to inspect the premises of the alleged construction defect that is the subject of the claim.

(c) [~~Within thirty days following any proposal for inspection under subsection (b)(2), the claimant shall provide access to:~~] The claimant shall accept a contractor's proposal to inspect under subsection (b)(2) and notify the contractor of that acceptance within fourteen days. After accepting the contractor's proposal to inspect, the claimant and contractor shall agree on a time and date for the inspection, which shall occur within thirty days of the claimant's acceptance of the contractor's proposal to inspect, unless the claimant and contractor agree to a later date. The claimant shall provide reasonable access to the dwelling or premises during normal working hours to:

(1) Inspect the premises;

(2) Document any alleged construction defects; and

(3) Perform any testing required to evaluate the nature, extent, and cause of the asserted construction defect, and the nature and extent of any repair or replacement that may be necessary to remedy the asserted construction defect;

provided that if the claimant is an association under chapter 514B, the claimant shall have forty-five days to provide such access. If access to [an] individual condominium [~~unit~~] units is necessary, and the association is unable to obtain [~~such~~] access, then the association shall have a reasonable time to provide access. If destructive testing is required, the contractor shall give advance notice of tests and return the premises to its pre-testing condition. If inspection or testing reveals a condition that requires additional testing to fully and completely evaluate the nature, cause, and extent of the construction defect, the contractor shall provide notice to the claimant of the need for additional testing. The claimant shall provide additional access to the dwelling, premises[.], or both. If a claim is asserted on behalf of owners of multiple dwellings, or multiple owners of units within a multi-family complex, the contractor shall be entitled to inspect each of the dwellings or units.

(d) Within fourteen days following the inspection and testing, the contractor shall serve on the claimant a written:

(1) Offer to fully or partially remedy the construction defect at no cost to the claimant. [~~Such~~] The offer shall include a description of construction necessary to remedy the construction defect and a timetable for the completion of the additional construction;

(2) Offer to settle the claim by monetary payment;

(3) Offer for a combination of repairs and monetary payment; or

(4) Statement that the contractor will not proceed further to remedy the construction defect.

(e) Upon receipt of the offer made under subsections (b)(1), (d)(1), (d)(2), or (d)(3), the claimant shall, within thirty or forty-five days, whichever applies pursuant to section 672E-5(a), accept the offer and authorize the contractor to proceed with any repairs offered under subsections (b)(1), (d)(1), or (d)(3).

(f) If a claimant unreasonably rejects the contractor's proposal to inspect made under subsection (b)(2), or unreasonably rejects an offer made under subsections (b)(1), (d)(1), (d)(2), or (d)(3), the claimant shall not recover any amount that exceeds the total value of the offer, calculated based on the reasonable value of the repair determined as of the date of the offer, the amount of the offered monetary payment, or both.

Any offer of settlement under this section shall reference this section and shall state that a claimant's failure to respond with a written notice of acceptance or rejection within thirty or forty-five days, whichever applies pursuant to section 672E-5(a), shall mean that the offer is rejected[.] and the claimant is subject to the limitations in subsection (f). Failure to serve a written offer or statement under this section shall be deemed a statement that the contractor will not proceed further."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2340
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII