Other Utah Statutes Relevant to HOAs
Utah Code § 78B-4-513. Cause of action for defective construction
(1) Except as provided in Subsection (2), an action for defective design or construction is limited to breach of the contract, whether written or otherwise, including both express and implied warranties.fn1
(2) An action for defective design or construction may include damage to other property or physical personal injury if the damage or injury is caused by the defective design or construction.
(3) For purposes of Subsection (2), property damage does not include:
(a) the failure of construction to function as designed; or
(b) diminution of the value of the constructed property because of the defective design or construction.
(4) Except as provided in Subsections (2) and (6), an action for defective design or construction may be brought only by a person in privity of contract with the original contractor, architect, engineer, or the real estate developer.
(5) If a person in privity of contract sues for defective design or construction under this section, nothing in this section precludes the person from bringing, in the same suit, another cause of action to which the person is entitled based on an intentional or willful breach of a duty existing in law.
(6) Nothing in this section precludes a person from assigning a right under a contract to another person, including to a subsequent owner or a homeowners association.fn2
Enacted by Chapter 280, 2008 General Session
FN 1. See Davencourt v. Davencourt for treatment of express and implied warranties, as well as the economic loss doctrine generally.
FN 2. See Gables at Sterling v. Castlewood-Sterling where the court rejected an association's argument that the association was assigned the homeowners' rights under the CC&Rs, which established privity of contract allowing the association to sue the developer.
- This statute codifies the "economic loss rule" by requiring that a claim of defective construction can only be brought through a breach of contract claim (as opposed to a tort claim, such as negligence), and thus there must be a contract between the parties in order to be able to sue for a construction defect.
- Privity of contract is required, i.e., a plaintiff must be a party to the contract in order to sue, but this statute does not preclude assigning contract rights to an HOA.
- The "economic loss" rule marks the fundamental boundary between contract law, which protects expectancy interests created through agreement between the parties, and tort law, which protects individuals and their property from physical harm by imposing a duty of reasonable care. Unless there is physical property damage to other property, or bodily injury, this doctrine prohibits recovery of economic losses.