Construction Defects

NMHBA busily drafted a Bill to address the dramatic increase in construction defect litigation that has hit the Los Lunas-Albuquerque-Santa Fe areas in the past few years. These lawsuits were originally filed against a handful of production builders – including a couple of New Mexico’s own. But these lawsuits have blown up to include 50 subcontractors (represented by 64 individual attorneys) that also do work for our custom home builders and remodelers. The number of claims (most of which have yet to be proven) against these subs has resulted in a number of subcontractors being given a notice of non-renewal on their general liability (GL) insurance and left them scrambling for coverage. No general can build a house without their concrete and drywall subs, and if their GL costs go up, so do the cost of their services and ultimately, the affordability and quality of housing is impacted.

After reviewing what’s been enacted around the country, our leadership has opted to promote a requirement for a mandated one-year new home warranty, backed up by a third-party warranty such as is now offered by the 2-10 product. We have been told these warranties will cost custom builders just under .2% of the sales price and provide the builder and homeowner with the usual 1-yr. coverage for all claims; 2-yrs’ coverage for “distribution systems” (electrical, plumbing, mechanical); 10-yrs’ coverage for major structural defects. New builders with minimal experience or those who have had a poor claim history may be charged around .3% for the same coverage.

There are many contractors interested in this effort, and getting this right is a delicate process.


Tax Credits

HB221 Home Energy Efficiency Income Tax Credit (McQueen) modifies the Income Tax Act to create the Home Energy Efficiency Income Tax Credit (HEEC) for taxpayers who make energy efficiency improvements to their NM home. Improvements must be certified by a qualified assessor.

The HEEC tax credits are only for an owner-occupied single-family home that received its certificate of occupancy prior to January 1, 2010.

To qualify for the HEEC tax credit a home is measured by a qualified energy rater before improvements are made, and again after energy efficiency improvements have been completed.

The amount of tax credit depends on the energy efficiency improvement (as a percentage):

Credit of $2,000 if energy efficiency is improved at least 20% up to 30%;
$3,000 if 30% up to 40%; and
$4,000 if at least 40%.

The Energy, Minerals, and Natural Resources Department must adopt rules regarding certification, procedures and qualification of assessors, and procedures for measuring ventilation requirements and combustion safety.

There is an aggregate total of credits of $1 million for tax years 2019 through 2022. Tax years 2023 and 2024, the aggregate total is $2 million.

The provisions of HB221 apply to tax years beginning on or after January 1, 2019 and sunsets December 31, 2024.

To read the full text of HB221, Click HERE


Mechanics’ Liens

HB 343 Notice & Fees of Mechanics’ Liens (Powdrell-Culbert) is intended to address the issue of homeowners who are unaware that a lien has been placed on their home until it pops up when they try to refinance 5 years later. It is hoped that by finding out a subcontractor had not been paid before the project is complete, the homeowner can make sure the general pays the subs and no liens are filed against the home.  To read the full text of HB343, Click HERE


Construction Industry Licensing Act

SB105 Rename Construction Industries Licensing Act (Muñoz) has its number in red because this is a Bill NMHBA strongly opposes. The sponsor has suggested eliminating the license bonds altogether, and instead, having each licensed contractor contribute a one-time fee of $200 to create a $2 million fund that will be used to pay homeowners for remediation of improper work upon a contractor’s third strike. After this one-time funding, supposedly the fines and penalties charged to the “bad actor” contractors will be sufficient to refill the fund from then on. No details have been provided yet, and NMHBA will continue to oppose this Bill until we see this and the many other concerns Jack wrote about have been addressed.   To read the full text of SB105, Click HERE


HB 344 Failure to Pay Subcontractors as a Felony (Powdrell-Culbert) would take contract issues that are currently a civil issue and make them criminal. The prospect of having civil contracts litigated in the criminal justice side of our court system with public defenders and public prosecutors is too costly for our already over-loaded courts. These would simply clog up the system until it ground to a halt. Various public agencies are opposing this Bill so we have been monitoring it to see if it progresses. To read the full text of HB344, Click HERE


HB456 Notice & Fees of Mechanics’ Liens (Hochman-Vigil) looks to be a Bill that many of our members would be happy to see, as it increases the penalties for unlicensed contracting where the project is under $10,000 from $300 fine and/or 90 days in jail to a potential fine of $1,000 and/or up to 1-year incarceration. A project over $10,000 would carry a fine of 10% of the project’s value and/or up to 1-year incarceration.

This Bill also would also allow a select few employees of CID carry a gun and wield typical police powers when enforcing (arresting?) provisions of the CILA against unlicensed contractors. These employees must be currently certified by the State Law Enforcement Academy, and the current employees are already former cops.

Why this Bill is titled the same as HB343 is a mystery since this Bill contains nothing about “Notices”, and why it duplicates wording about unlicensed contractors being forbidden from filing a Mechanic’s Lien already in another section of the CILA is also unknown. This Bill also duplicates existing language in the CILA about penalizing contractors who report an employee as an independent contractor to a state agency. It may simply be a drafting error, and they left off the “repealers” to strike these concepts from their current locations in law.  To read the full text of HB456, Click HERE


Environmental Protection

HB 206 Environmental Review Act (Chasey/Stewart) has so many powerful industry groups lined up ready to kill this bill that it has a slim chance of progressing further. The Bill was substituted in House Energy and Natural Resources Committee (HENRC) earlier this week. The substitute made it clear individual home construction was exempted from the Act, but it appears new developments would still be subject to the Bill.

The “Do-Pass Without Recommendation” is about as lukewarm as a Bill can get and does not usually bode well for its passage. However, the Bill goes next to the House State Government, Elections & Indian Affairs Committee, where its sponsor is a member.  To read the full text of HB206, Click HERE


Economic Development

SB35/HB497 Market NM to Retirees (Padilla/Dow & Pratt) will hopefully generate more folks to move to NM so our members can sell them new homes or remodel existing homes for them. There is really no opposition to these twin Bills, and the “ask” for what is “small change” in the budget shouldn’t be a problem. It’s just taking time to get through the process — which is why twin Bills were introduced. John Garcia (E.O. of HBA CNM) is working diligently to keep these Bills going.  To read the full text of SB35, Click HERE