- Nevada Housing Now
Construction Defect Reform and the Impacts on Housing Affordability in Nevada
- Nevada Housing Now
Construction Defect Reform and the Impacts on Housing Affordability in Nevada
- Our MISSION
We Advocate for Policies that Keep Housing Costs Down.
Nevada’s housing market is facing a historic affordability crisis, and policymakers have a critical role to play in ensuring that state law supports, not undermines, housing access for working families.
The reforms enacted through Assembly Bill 125 (AB 125) in 2015 offer a clear example of legislation that successfully rebalanced the system, restored fairness for homeowners and builders and revitalized a segment of the housing market that had been nearly wiped out: for-sale attached housing.
Before AB 125, Nevada’s construction defect laws were among the most abused in the nation. Broad legal definitions, automatic attorney fee recovery and unchecked authority by HOAs to file lawsuits led to a 355 percent increase in defect claims from 2000 to 2012, while new home sales collapsed by 86 percent. The environment became so litigious that by 2003 no insurer was willing to offer construction liability coverage in the state. The hardest-hit sector was multi-family housing, with permits for condominiums and townhouses falling from 21 percent of new builds in 1995 to just 1.2 percent in 2012. These homes are often the most attainable path to ownership for first-time and moderate-income buyers.
- Pre-2015
The Problem
Before AB 125, Nevada’s construction defect laws were among the most abused in the nation. Broad legal definitions, automatic attorney fee recovery and unchecked authority by HOAs to file lawsuits led to a 355 percent increase in defect claims from 2000 to 2012, while new home sales collapsed by 86 percent.
The environment became so litigious that by 2003 no insurer was willing to offer construction liability coverage in the state.2 The hardest-hit sector was multi-family housing, with permits for condominiums and townhouses falling from 21 percent of new builds in 1995 to just 1.2 percent in 2012.3 These homes are often the most attainable path to ownership for firsttime and moderate-income buyers.
BETWEEN 2000 AND 2012
Construction Defect Claims
+
0
%
New Home Sales
-
0
%
Only 2% of People
PERSONALLY SOUGHT OUT AN ATTORNEY
67%
of homeowners involved in a construction defect lawsuit only learned about it after it was filed.
- Post 2015
The Solution
AB 125 reintroduced balance. It tightened the definition of a construction defect to focus on legitimate issues, required pre-litigation notice and the opportunity to repair and eliminated automatic attorney fees that incentivized excessive litigation. Critically, it restricted HOA litigation to common areas, protecting individual homeowners’ rights and reducing opportunities for abuse.
The results have been clear and measurable:
Attached Housing Has Rebounded
Now making up 16.5 percent of new home closings in Southern Nevada—over five times the share from 2015.
Homeowner Satisfaction Remains High
With 85 percent of new buyers in Nevada reporting they are generally or extremely satisfied with their homes. This exceeds the levels of satisfaction reported by buyers in the Denver and Phoenix markets.
Resolution Times for Construction Defect Claims have Reduced by Nearly 50%
From 35 months to 18 months on average.
Importantly, AB 125 did not eliminate legal protections for homeowners. On the contrary, homeowners still have access to litigation through Chapter 40 when warranted, as well as structured alternatives that resolve issues faster and without legal expense. These include builder warranty programs, now widely used and better understood by homeowners, and the Residential Recovery Fund, a state-backed program that has awarded over $15 million in relief to more than 1,600 homeowners since 1999.8 Together, these options offer a fair, flexible path to resolution while avoiding the costs and delays of unnecessary lawsuits.
- Post 2015
The Solution
Legislators should be proud of the success of AB 125, which has
helped restore integrity to the construction defect system,
protect consumers and increase housing supply. As housing affordability worsens, now is the time to build on these reforms not reverse them.
Average cost to settle per new home closing:
Pre-AB 125
$
0
Post-AB 125
$
0
Note: 2023 Inflation-Adjusted Values
1995
NRS Chapter 40 Enacted
- Included pre-litigation requirements affording builders/contractors an opportunity to correct alleged defects and resolve disputes early
- Allowed attorney fees to be recovered as part of damages in construction defect cases
1999
Senate Bill 32
- Included a key amendment that allowed for complex matters—involving HOAs of five or more separate residences—to bypass pre-litigation
2003
Senate Bill 241
- Restored pre-litigation requirements for complex matters, including stricter notice and documentation requirements for defect claims
- Established the State Contractors Board as a resource to assist in resolving disputes
- Automatic recovery of attorney fees remained intact, providing incentives to pursue litigation instead of repair
2015
Assembly Bill 125 (AB 125)
- Narrowed the definition of constructional defects to exclude cosmetic or minor issues
- Required specificity for claimed defects in notices and during the inspection process
- Restricted HOAs from bringing construction defect cases on behalf of individually owned homes
- Eliminated automatic attorney fee recovery
- Created a unified statute of repose of 6 years
2019
Assembly Bill 421
- Removed the requirement for specificity for claimed defects in notices and during the inspection process
- Eliminated the requirement for claimants to exhaust warranties
- Allowed claimants to recover incurred costs
- Extended the statute of repose to 10 years
