Legislature weighs changes to Contractor Repair Act as homeowners and builders clash

The House Committee on Consumer Protection and Commerce advanced House Bill 420, House Draft 1—legislation amending post-purchase remedies for construction defects—after more than two hours of testimony from homeowner advocates, attorneys and builders. The committee voted to reinstate an exemption for fraudulent concealment tied to a requirement that such claims be pled with particularity, and to require plaintiffs to pay defendants’ fees and costs if a court dismisses a fraudulent-concealment claim for lack of particularity.

Why it matters: The bill would change how homeowners and builders resolve alleged construction defects under the state’s Contractor Repair Act, a statutory procedure that parties say was intended to encourage speedy repairs. Supporters argue the changes are needed to curb class-action litigation that delays housing and financing; opponents say the amendments would strip remedies from homeowners and slow or block repairs.

Opponents, including attorneys who represent homeowner plaintiffs, urged the committee to reject HB420 HD1. Phil Nerney, an attorney who said he chairs the Legislative Action Committee of the Community Associations Institute, called the bill “an anti consumer bill.” He and other plaintiff attorneys argued the measure would undercut class actions and leave homeowners bearing the cost of life-and-safety repairs.

Several homeowner advocates and attorneys described long delays and anxiety while litigation unfolded. Mitch Steinane of the Hawaii Regional Council of Carpenters described his experience in Ewa Beach, saying the community faced years of uncertainty about structural defects and repairs. Attorney representatives from Lipsmith LLP testified that, in their cases, class actions secured repairs for more than 4,000 homes and warned that HB420 HD1 would “extend rather than shorten litigation.”

Builders and trade groups urged reform. Lee Tokuhara, speaking for D.R. Horton Hawaii, said litigation has surged in the last decade and that broad class claims can halt projects, affect mortgage approvals and make lenders withdraw backing for developments. Tracy Tonake, division president of D.R. Horton Hawaii, said the company had sent engineers and crews to assess and repair homes before class certification but had to stop after litigation proceeded.

Committee action and next steps: The committee’s adopted language restores a limited fraudulent-concealment exception on the condition that such allegations be pleaded with particularity and adds a fee-shifting penalty if those allegations are dismissed for lack of specificity. The chair also said members should attempt a negotiated compromise between stakeholders before the bill proceeds to Judiciary. Representative Brett Martin registered a no vote during the floor discussion prior to the final committee adoption. The committee formally adopted the chair’s recommendation and moved the measure forward with the stated amendments.

Context and details cited in testimony: Supporters said the number of construction-defect lawsuits in Hawaii rose sharply after 2010; a D.R. Horton representative told the committee there were six before February 2010 and 65 after. Opponents warned the bill would curtail remedies tied to long-standing warranties and the Contractor Repair Act process, and urged sampling rather than mandatory inspection of every home in class claims to avoid protracted, expensive investigations.

The committee urged further negotiations between the parties and said the Judiciary Committee should consider any legal implications stemming from the adopted changes. No specific timetable for additional meetings or amendments was announced at the hearing’s close.