Revises provisions relating to constructional defects. (BDR 3-1144)

A.B. 505

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ASSEMBLY BILL NO. 505–COMMITTEE ON JUDICIARY

MARCH 24, 2025
____________

Referred to Committee on Commerce and Labor

SUMMARY—Revises provisions relating to constructional defects.
(BDR 3-1144)

FISCAL NOTE: Effect on Local Government: No.
Effect on the State: No.

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

AN ACT relating to constructional defects; requiring a written
response to a notice of a constructional defect to include
certain information; requiring a contractor, subcontractor
and certain related professionals to maintain a policy of
insurance which covers liability for constructional
defects; revising pr ovisions relating to certain settlement
offers concerning constructional defects; clarifying
certain provisions relating to the recovery of damages
proximately caused by a constructional defect; revising
provisions relating to certain required mediation; r evising
the definitions of certain terms related to actions resulting
from constructional defects; and providing other matters
properly relating thereto.
Legislative Counsel’s Digest:
Existing law authorizes an owner of a residence or appurtenance and cer tain 1
other persons to commence a civil action against a contractor, subcontractor, 2
supplier or design professional for certain constructional defects in the residence or 3
appurtenance. (NRS 40.610, 40.640, 40.645) Under existing law, before a claimant 4
commences an action or amends a complaint to add a cause of action for a 5
constructional defect, the claimant must give written notice to the contractor and 6
the matter must be submitted to mediation unless mediation is waived in writing. 7
(NRS 40.645) Existing la w also requires a contractor, subcontractor, supplier or 8
design professional who receives notice of a constructional defect to send a written 9
response to the claimant within 90 days after receiving the notice. (NRS 40.6472) 10
Section 3 of this bill: (1) requires the written response to state whether the 11
contractor, subcontractor, supplier or design professional has elected to enter into 12
mediation or waive mediat ion in writing; and (2) provides that failure to include 13
such a statement shall be deemed a written waiver of the requirement to submit the 14

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matter to mediation. Section 3 also requires the written response to include certain 15
additional information if the contractor, subcontractor, supplier or design 16
professional has elected to repair the constructional defect. Section 8 of this bill 17
revises provisions governing the mediation required by existing law by: (1) 18
providing that such mediation must be waived in writing on or befo re the deadline 19
for the submission of the written response required by section 3; and (2) removing 20
language prohibiting the total fees for each day of mediation from exceeding $750. 21
Existing law authorizes, but does not require, a contractor, subcontractor, 22
supplier or design professional who receives written notice of a constructional 23
defect to present the claim to an insurer. (NRS 40.649) Section 4 of this bill 24
requires a contractor, subcontractor, supplier and design professional to: (1) 25
maintain a policy of insurance which covers liability for constructiona l defects; and 26
(2) present the claim to the insurer that issued the policy. 27
Existing law establishes a procedure by which a claimant and a contractor, 28
subcontractor, supplier or design professional may agree to have a judgment 29
entered before the claimant commences a civil action for the constructional defect 30
or amends a complaint to add a cause of action for the constructional defect. (NRS 31
40.652) Sections 5 and 10 of this bill revise this procedure and eliminate certain 32
penalties for the rejection of a settlement offer for consistency with Rule 68 of the 33
Nevada Rules of Civil Procedure and certain other provisions of existing law 34
relating to settlement offers. Sections 6 and 7 of this bill make conforming changes 35
by removing references to the provision repealed by section 10 and certain related 36
language. Section 6 also clarifies that any interest recoverable as damages in a 37
cause of action for a constructional defect must be provided by statute for damages 38
otherwise recoverable by the claimant. (NRS 40.655) 39
Sections 1 and 2 of this bill revise the definitions of certain terms applicable to 40
actions resulting from constructional defects. 41

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN
SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

Section 1. NRS 40.615 is hereby amended to read as follows: 1
40.615 “Constructional defect” means a defect in the design, 2
construction, manufacture, repair , alteration or landscaping of a 3
[new] residence [, of] or appurtenance or a defect in an [alteration 4
of or] addition to [an existing] a residence [, or of an appurtena nce 5
and includes, without limitation, the design, construction, 6
manufacture, repair or landscaping of a new residence, of an 7
alteration of or addition to an existing residence, ] or [of] an 8
appurtenance: 9
1. Which presents an unreasonable risk of injury to a person or 10
property; or 11
2. Which is not completed in compliance with any applicable 12
building code and in a good and workmanlike manner in 13
accordance with the generally accepted standard of care in the 14
industry for that type of repair and [proximately] : 15
(a) Proximately causes physical damage to the residence, an 16
appurtenance or the real property to which the residence or 17
appurtenance is affixed [.] ; or 18

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(b) Creates a substantial risk of causing the damage described 1
in paragraph (a). 2
Sec. 2. NRS 40.630 is hereby amended to read as follows: 3
40.630 1. “Residence” means any dwelling in which title to 4
the [individual units] unit is transferred to the owners. 5
2. As used in this section, “dwelling” includes a single-family 6
house. 7
Sec. 3. NRS 40.6472 is hereby amended to read as follows: 8
40.6472 1. Except as otherwise provided in NRS 40.670 and 9
40.672, a written response must be sent by certified mail, return 10
receipt requested, to a claimant who gives notice of a constructional 11
defect pursuant to NRS 40.645: 12
(a) By the contractor not later than 90 days after the contractor 13
receives the notice; and 14
(b) If notice was sent to a subcontractor, supplier or design 15
professional, by the subcontractor, supplier or design professional 16
not later than 90 days after the date that the subcontractor, supplier 17
or design professional receives the notice. 18
2. The written response sent pursuant to subsection 1 must 19
respond to each constructional defect in the notice and: 20
(a) Must state whether the contractor, subcontractor, supplier or 21
design professional has elected to [repair] : 22
(1) Repair the defect or cause the defect to be repaired. [If an 23
election to repair is included in the response and the repair will 24
cause the claimant to move from the claimant’s home during the 25
repair, the election must also include monetary compensation in an 26
amount reasonably necessary for temporary housing or for storage 27
of household items, or for both, if necessary.] 28
(2) Enter into mediation or waive mediation in writing 29
pursuant to NRS 40.680. Failure to include the statement required 30
by this subparagraph in the written response shall be deemed a 31
written waiver of the requirement to submit the matter to 32
mediation pursuant to NRS 40.680. 33
(b) [May] Except as otherwise provided in paragraph (a) of 34
subsection 3, may include a proposal for monetary compensation, 35
which may include contribution from a subcontractor, supplier or 36
design professional. 37
(c) May disclaim liability for the constructional defect and state 38
the reasons for such a disclaimer. 39
3. In addition to the requirements prescribed by subsection 2, 40
if an election to repair is included in the written response sent 41
pursuant to subsection 1, the written response must: 42
(a) Include a proposal for monetary compensation in an 43
amount reasonably necessary for temporary housing or for 44

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storage of household items, or both, if the repair will cause the 1
claimant to move from the claimant’s home during the repair; 2
(b) Specify in reasonable detail the: 3
(1) Defect to be repaired; 4
(2) Method to be used to repair the defect; and 5
(3) Nature and extent of the repair; and 6
(c) Reasonably identify the proximate location of the defect to 7
be repaired. 8
4. If the claimant is a homeowners’ association, the association 9
shall send a copy of the response to each member of the association 10
not later than 30 days after receiving the response. 11
[4.] 5. If the contractor, subcontractor, supplier or design 12
professional has elec ted not to repair the constructional defect, the 13
claimant or contractor may bring a cause of action for the 14
constructional defect or amend a complaint to add a cause of action 15
for the constructional defect. 16
[5.] 6. If the contractor, subcontractor, supplier or design 17
professional has elected to repair the constructional defect, the 18
claimant must provide the contractor, subcontractor, supplier or 19
design professional with a reasonable opportunity to repair the 20
constructional defect. 21
Sec. 4. NRS 40.649 is hereby amended to read as follows: 22
40.649 1. [If a] A contractor, subcontractor, supplier or 23
design professional shall maintain a policy of insurance which 24
covers liability for acts or omissions actionable pursuant to NRS 25
40.600 to 40.695, inclusive. 26
2. A contractor, subcontractor, supplier or design 27
professional who receives written notice of a constructional defect 28
[, the contractor, subcontractor, supplier or design professional may] 29
shall present the claim to [an] the insurer which has issued [a] the 30
policy of insurance [that covers all or any portion of the business of 31
the contractor, subcontractor, supplier or design professional. 32
2. If the contractor, subcontractor, supplier or design 33
professional presents the] required by subsection 1. 34
3. An insurer that receives a claim [to the insurer] pursuant to 35
[this section, the insurer:] subsection 2 must: 36
(a) [Must treat ] Treat the claim as if a civil action has been 37
brought against the contractor, subcontractor, supplier or design 38
professional; and 39
(b) [Must provide ] Provide coverage to the extent available 40
under the policy of insurance as if a civil action has been brought 41
against the contractor, subcontractor, supplier or design 42
professional. 43
[3. A contractor, subcontractor, supplier or design professional 44
is not required to present a claim to the insurer pursuant to this 45

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section, and the failure to present such a claim to the insurer does 1
not relieve the insurer of any duty under the policy of insurance to 2
the contractor, subcontractor, supplier or design professional.] 3
Sec. 5. NRS 40.652 is hereby amended to read as follows: 4
40.652 1. At any time after a claimant has given notice 5
pursuant to NRS 40.645 and before the claimant commences an 6
action or amends a complaint to add a cause of action for a 7
constructional defect against a contractor, subcontractor, supplier or 8
design professional, the claimant or any contractor, subcontractor, 9
supplier or design professional who has received notice pursuant to 10
NRS 40.645 or 40.646 may serve upon one or more other parties a 11
written offer to allow judgment to be entered without action in 12
accordance with the terms and conditions of the offer of judgment. 13
Except as otherwise provided in subsection 7, any such written 14
offer must be unconditional and for a set amount. 15
2. Except as otherwise provided in subsection 7, if, within [10] 16
14 days after the date of service of an offer of judgment, the party to 17
whom the offer was made serves written notice that the offer is 18
accepted, the party who made the offer or the party who accepted 19
the offer may file the offer, the notice of acceptance and proof of 20
service with the clerk of the district court. Upon receipt by the clerk, 21
the clerk shall e nter a judgment according to the terms of the offer. 22
Any judgment entered pursuant to this section shall be deemed a 23
compromise settlement. The judgment, the offer, the notice of 24
acceptance and proof of service, with the judgment endorsed, 25
become the judgment roll. 26
3. If the offer of judgment is not accepted pursuant to 27
subsection 2 within [10] 14 days after the date of service, the offer 28
shall be deemed rejected by the party to whom it was made and 29
withdrawn by the party who made it. The rejection of an offer does 30
not preclude any party from making another offer pursuant to this 31
section. Evidence of a rejected offer is not admissible in any 32
proceeding other than a proceeding to determine costs and fees. 33
4. Except as otherwise provided in this section, i f a party who 34
rejects an offer of judgment fails to obtain a more favorable 35
judgment in an action for a constructional defect, the court: 36
(a) May not award to the party any costs or attorney’s fees; 37
(b) May not award to the party any interest on the judgment for 38
the period from the date of service of the offer to the date of entry of 39
the judgment; 40
(c) Shall order the party to pay the taxable costs incurred by the 41
party who made the offer; and 42
(d) May order the party to pay to the party who made the offer 43
any or all of the following: 44

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(1) A reasonable sum to cover any costs incurred by the party 1
who made the offer for each expert witness whose services were 2
reasonably necessary to prepare for and conduct the trial of the case. 3
(2) Any applicable in terest on the judgment for the period 4
from the date of service of the offer to the date of entry of the 5
judgment. 6
(3) Reasonable attorney’s fees incurred by the party who 7
made the offer for the period from the date of service of the offer to 8
the date of entry of the judgment. If the attorney of the party who 9
made the offer is collecting a contingent fee, the amount of any 10
attorney’s fees awarded to the party pursuant to this subparagraph 11
must be deducted from that contingent fee. 12
5. To determine whethe r a party who rejected an offer of 13
judgment failed to obtain a more favorable judgment: 14
(a) If the offer provided that the court would award costs, the 15
court must compare the amount of the offer with the principal 16
amount of the judgment, without inclusion of costs. 17
(b) If the offer precluded a separate award of costs, the court 18
must compare the amount of the offer with the sum of: 19
(1) The principal amount of the judgment; and 20
(2) The amount of taxable costs that the claimant who 21
obtained the judgment incurred before the date of service of the 22
offer. 23
6. Multiple parties may make a joint offer of judgment 24
pursuant to this section. 25
7. A party may make to two or more other parties pursuant to 26
this section an apportioned offer of judgment that is condit ioned 27
upon acceptance by all the parties to whom the apportioned offer is 28
made. Each party to whom such an offer is made may serve upon 29
the party who made the offer a separate written notice of acceptance 30
of the offer. If any party rejects the apportioned offer: 31
(a) The action must proceed as to all parties to whom the 32
apportioned offer was made, whether or not the other parties 33
accepted or rejected the offer; and 34
(b) The sanctions set forth in subsection 4: 35
(1) Apply to each party who rejected the apportioned offer. 36
(2) Do not apply to any party who accepted the apportioned 37
offer. 38
8. The sanctions set forth in subsection 4 do not apply to: 39
(a) An offer of judgment made to multiple parties who received 40
a notice pursuant to NRS 40.645 or 40.646 unless the same person is 41
authorized to decide whether to settle the claims against all the 42
parties to whom the offer is made and: 43
(1) There is a single common theory of liability against all 44
the parties to whom the offer is made; 45

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(2) The liability of one or more of the parties to whom the 1
offer is made is entirely derivative of the liability of the remaining 2
parties to whom the offer is made; or 3
(3) The liability of all the parties to whom the offer is made 4
is entirely derivative of a common act or o mission by another 5
person. 6
(b) An offer of judgment made to multiple claimants unless the 7
same person is authorized to decide whether to settle the claims of 8
all the claimants to whom the offer is made and: 9
(1) There is a single common theory of liabili ty claimed by 10
all the claimants to whom the offer is made; 11
(2) The damages claimed by one or more of the claimants to 12
whom the offer is made are entirely derivative of an injury to the 13
remaining claimants to whom the offer is made; or 14
(3) The damages c laimed by all the claimants to whom the 15
offer is made are entirely derivative of an injury to another person. 16
Sec. 6. NRS 40.655 is hereby amended to read as follows: 17
40.655 1. [Except as otherwise provided in NRS 40.650, in] 18
In a claim governed by NRS 40.600 to 40.695, inclusive, the 19
claimant may recover only the following damages to the extent 20
proximately caused by a constructional defect: 21
(a) The reasonable cost of any repairs already made that were 22
necessary an d of any repairs yet to be made that are necessary to 23
cure any constructional defect that the contractor failed to cure and 24
the reasonable expenses of temporary housing reasonably necessary 25
during the repair; 26
(b) The reduction in market value of the resid ence or accessory 27
structure, if any, to the extent the reduction is because of structural 28
failure; 29
(c) The loss of the use of all or any part of the residence; 30
(d) The reasonable value of any other property damaged by the 31
constructional defect; 32
(e) Any additional costs reasonably incurred by the claimant, 33
including, but not limited to, any costs and fees incurred for the 34
retention of experts to: 35
(1) Ascertain the nature and extent of the constructional 36
defects; 37
(2) Evaluate appropriate corrective mea sures to estimate the 38
value of loss of use; and 39
(3) Estimate the value of loss of use, the cost of temporary 40
housing and the reduction of market value of the residence; and 41
(f) Any interest provided by statute [.] for damages otherwise 42
recoverable by th e claimant pursuant to NRS 40.600 to 40.6 95, 43
inclusive. 44

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2. If a contractor complies with the provisions of NRS 40.600 1
to 40.695, inclusive, the claimant may not recover from the 2
contractor, as a result of the constructional defect, any damages 3
other than damages authorized pursuant to NRS 40.600 to 40.695, 4
inclusive. 5
3. This section must not be construed as impairing any 6
contractual rights between a contractor and a subcontractor, supplier 7
or design professional. 8
4. As used in this section, “struc tural failure” means physical 9
damage to the load -bearing portion of a residence or appurtenance 10
caused by a failure of the load -bearing portion of the residence or 11
appurtenance. 12
Sec. 7. NRS 40.665 is hereby amended to read as follows: 13
40.665 In addition to any other method provided for settling a 14
claim pursuant to NRS 40.600 to 40.695, inclusive, a contractor 15
may, pursuant to a written agreement entered into with a claimant, 16
settle a claim by repurchasing the claimant’s re sidence and the real 17
property upon which it is located. The agreement may include 18
provisions which reimburse the claimant for: 19
1. The market value of the residence as if no constructional 20
defect existed, except that if a residence is less than 2 years of age 21
and was purchased from the contractor against whom the claim is 22
brought, the market value is the price at which the residence was 23
sold to the claimant; 24
2. The value of any improvements made to the property by a 25
person other than the contractor; 26
3. Reasonable attorney’s fees and fees for experts; and 27
4. Any costs, including costs and expenses for moving and 28
costs, points and fees for loans. 29
[ Any offer of settlement made that includes the items listed in 30
this section shall be deemed reasonable for the purposes of 31
subsection 1 of NRS 40.650.] 32
Sec. 8. NRS 40.680 is hereby amended to read as follows: 33
40.680 1. Except as otherwise provided in this chapter, 34
before a claimant commences an action or amends a complaint to 35
add a cause of action for a constructional defect against a contractor, 36
subcontractor, supplier or design professional, the matter must be 37
submitted to mediation, unless mediation is waived in writing by the 38
contractor, subcontractor, supplier or design professional [and the 39
claimant.] on or before the date by which the contractor, 40
subcontractor, supplier or design professional must send the 41
written response required by NRS 40.6472. 42
2. The claimant and each party alleged to have caused the 43
constructional defect must select a mediator by agreement. If the 44
claimant and the other parties fail to agree upon a mediator within 45

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20 days after a mediator is first selected by the claimant, any party 1
may petition the American Arbitration Association, the Nevada 2
Arbitration Association, Nevada Dispute Resolution Services or any 3
other mediation service acceptable to the parties for the appointment 4
of a mediator. A mediator so appointed may discover only those 5
documents or records which are necessary to conduct the mediation. 6
The mediator shall convene the mediation within 30 days after the 7
matter is submitted to the mediator and shall complete the mediation 8
within 45 days after the matter is submitted to the mediator, unless 9
the parties agree to extend the time. 10
3. Before the mediation begins: 11
(a) The claimant shall deposit $50 with the mediation service; 12
and 13
(b) Each other party shall deposit with the mediati on service, in 14
equal shares, the remaining amount estimated by the mediation 15
service as necessary to pay the fees and expenses of the mediator for 16
the first session of mediation and shall deposit additional amounts 17
demanded by the mediation service as incurred for that purpose. 18
4. [Unless otherwise agreed, the total fees for each day of 19
mediation and the mediator must not exceed $750 per day. 20
5.] If the parties do not reach an agreement concerning the 21
matter during mediation or if any party who is alleged to have 22
caused the constructional defect fails to pay the required fees and 23
appear, the claimant may commence an action or amend a complaint 24
to add a cause of action for the constructional defect in court and: 25
(a) The reasonable costs and fees of the mediation are 26
recoverable by the prevailing party as costs of the action. 27
(b) Any party may petition the court in which the action is 28
commenced for the appointment of a special master. 29
[6.] 5. A special master appointed pursuant to subsection [5] 4 30
may: 31
(a) Review all pleadings, papers or documents filed with the 32
court concerning the action. 33
(b) Coordinate the discovery of any books, records, papers or 34
other documents by the parties, including the disclosure of witnesses 35
and the taking of the deposition of any party. 36
(c) Order any inspections on the site of the property by a party 37
and any consultants or experts of a party. 38
(d) Order settlement conferences and attendance at those 39
conferences by any representative of the insurer of a party. 40
(e) Require any attorney representing a party to provide 41
statements of legal and factual issues concerning the action. 42
(f) Refer to the judge who appointed the special master or to the 43
presiding judge of the court in which the action is commenced any 44
matter requiring assistance from the court. 45

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 The special master shall not, unless otherwise agreed by the 1
parties, personally conduct any settlement conferences or engage in 2
any ex parte meetings regarding the action. 3
[7.] 6. Upon application by a party to the cou rt in which the 4
action is commenced, any decision or other action taken by a special 5
master appointed pursuant to this section may be appealed to the 6
court for a decision. 7
[8.] 7. A report issued by a mediator or special master that 8
indicates that a part y has failed to appear before the mediator or 9
special master or to mediate in good faith is admissible in the action, 10
but a statement or admission made by a party in the course of 11
mediation is not admissible. 12
Sec. 9. The amendatory provisions of this act apply to any 13
claim that arises on or after October 1, 2025. 14
Sec. 10. NRS 40.650 is hereby repealed. 15

TEXT OF REPEALED SECTION

40.650 Effect of rejecting reasonable offer of settlement;
effect of failing to take certain actions concerning defect; effect
of coverage available under homeowner’s warranty.
1. If a claimant unreasonably rejects a reasonable written offer
of settlement made as part of a response pursuant to paragraph (b) of
subsection 2 of NRS 40.6472 and thereafter commences an action
governed by NRS 40.600 to 40.695, inclusive, the court in which
the action is commenced may:
(a) Deny the claimant’s attorney’s fees and costs; and
(b) Award attorney’s fees and costs to the contractor.
 Any sums paid under a builder’s warranty, other than sums paid
in satisfaction of claims that are collateral to any coverage issued to
or by the contractor, must be deducted from any recovery.
2. If a contractor, subcontractor, supplier or design professional
fails to:
(a) Comply with the provisions of NRS 40.6472;
(b) Make an offer of settlement;
(c) Make a good faith response to the claim asserting no
liability;
(d) Agree to a mediator or accept the appointment of a mediator
pursuant to NRS 40.680; or
(e) Participate in mediation,
 the limitations on damages and defenses to liability provided in
NRS 40.600 to 40.695, inclusive, do not apply and the claimant may

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commence an action or amend a complaint to add a cause of actio n
for a constructional defect without satisfying any other requirement
of NRS 40.600 to 40.695, inclusive.
3. If a residence or appurtenance that is the subject of the claim
is covered by a builder’s warranty, a claimant shall diligently pursue
a claim under the builder’s warranty.
4. Nothing in this section prohibits an offer of judgment
pursuant to Rule 68 of the Nevada Rules of Civil Procedure or NRS
17.117 or 40.652.

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