The following article deals with selected pieces of legislation passed by the Missouri Legislature at its session just ended in May, 2005 and signed into law as of July 14, 2005 by Governor Blunt. More information on these selected and other legislative topics may be obtained at www.gov.mo.gov.
Home Construction Defects; Racially Restrictive Covenants
Lien for Rental Equipment and Machinery
Tort Reform
Assessment of Business Personal Property
Successor Liability for Unpaid Unemployment Taxes
Non-Profit Corporation Reinstatements
For Profit Corporations Authorized to Issue Uncertified Shares
Home Construction Defects; Racially Restrictive Covenants
This legislation creates a process to resolve disputes arising out of alleged construction defects in residential property and permits contractors to repair construction defects prior to a homeowner commencing litigation.
Contractors must now provide notice to each homeowner upon entering into a contract for the sale, construction, or substantial remodeling of a residence of the contractor’s right to offer to cure construction defects before a homeowner may commence a civil action against the contractor. Substantial remodeling is defined as “a remodel of a residence, for which the total cost exceeds one-half of the assessed value of the residence for property tax purposes at the time the contract for the remodel work was made.”
This legislation also prohibits any racially restrictive covenant in any declaration or other governing document of a homeowner’s association. Governing bodies are authorized to delete the offending restrictive covenant without a vote of the members. If such a provision is not removed after notice, any person, the Missouri Commission on Human Rights, or any city or county may bring an action to remove such a provision. In such an event, attorney’s fees may be awarded to the prevailing party.
The notice must be conspicuous and may be included as part of the underlying contract signed by the homeowner. The notice must be in substantially the following form:
SECTIONS 431.300 TO 431.315 OF MISSOURI REVISED STATUTES PROVIDES YOU WITH CERTAIN RIGHTS IF YOU HAVE A DISPUTE WITH A CONTRACTOR REGARDING CONSTRUCTION DEFECTS. EXCEPT FOR CLAIMS FILED IN SMALL CLAIMS COURT, IF YOU HAVE A DISPUTE WITH A CONTRACTOR, YOU MUST DELIVER TO THE CONTRACTOR A WRITTEN CLAIM OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE AND PROVIDE YOUR CONTRACTOR THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY THE CONTRACTOR. READ THIS NOTICE CAREFULLY. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER SECTIONS 431.300 TO 431.315 WHICH MUST BE OBEYED IN ORDER TO PRESERVE YOUR ABILITY TO FILE A LAWSUIT. OTHER THAN REPAIRS TO WORK DONE BY THE CONTRACTOR THAT ARE NECESSARY TO PROTECT THE LIFE, HEALTH OR SAFETY OF PERSONS LIVING IN A RESIDENCE, OR TO AVOID ADDITIONAL SIGNIFICANT AND MATERIAL DAMAGE TO THE RESIDENCE PURSUANT TO SECTION 431.306.10, YOU MAY NOT INCLUDE IN CLAIMS AGAINST YOUR CONTRACTOR THE COSTS OF OTHER REPAIRS YOU PERFORM BEFORE YOU ARE ENTITLED TO FILE A LAWSUIT UNDER SECTIONS 431.300 TO 431.315.
If a contractor fails to provide the above written notice to a homeowner prior to the beginning of construction, then the homeowner is under no obligation to follow the statute. The amendments also do not apply if a lawsuit is filed by a contractor and the homeowner includes as a counterclaim or affirmative defense a claim based upon a construction defect.
The process is as follows. First the homeowner or a homeowner’s association (the “claimant”) must give written notice of a claim of a construction defect. The written notice shall describe the claim in reasonable detail sufficient to determine the general nature of the defect as well as any known damages or results of the defect. Within fourteen (14) days after service of the notice of claim, the contractor shall serve a written response to the claimant. The response can be (1) a proposal to inspect the residence; (2) an offer to remedy the defect without an inspection; (3) an offer to remedy part of the claim and compromise and settle the remainder of the claim by monetary payment without an inspection; (4) an offer to compromise and settle all of the claim without an inspection, which offer may include the express offer to purchase the residence that is the subject of the claim; or (5) a statement that the contractor disputes the claim and will neither remedy the defect nor compromise and settle the claim.
If the contractor disputes the claim or does not respond to the notice of claim within fourteen (14) days, the claimant may then bring an action against the contractor.
If the claimant elects to allow the contractor to inspect the residence, the claimant and contractor shall agree upon a date and time for the inspection to occur. This date must be within fourteen (14) days of the communication by the claimant of the election to allow the contractor to inspect the defect and damages, if any, unless the claimant and contractor agree to a later date. The contractor shall perform the inspection at its own cost and if destructive testing is required, the contractor shall repair all damage caused by the testing.
Within fourteen (14) days following the inspection, the contractor shall serve a report on the claimant and tender either (1) a written offer to remedy all of the claim at no cost to claimant; (2) a written offer to remedy part of the claim, and compromise and settle the remainder of the claim by monetary payment; (3) a written offer to compromise and settle all of the claim by monetary payment; or (4) a written statement that the contractor will not proceed further to remedy the defect.
If at anytime the claimant rejects any offers made by the contractor, the claimant and contractor may proceed to non-binding mediation. Any statements made during the mediation, or any written statements given during the above processes are inadmissible in any action related to the construction defect asserted. If the claim is not resolved through mediation, or if the parties elect not to mediate, then the claimant can proceed to file an action against the contractor.
If a claimant fails to give the written notice to the contractor, and proceeds directly against a contractor by filing a lawsuit, the lawsuit will be dismissed without prejudice and cannot be brought by a claimant until the claimant fulfills the requirements of 431.300 to 431.315.
SB 168: Signed by Governor Blunt on July 12, 2005 with an effective date of January 1, 2006.
Lien for Rental Equipment and Machinery
The Missouri Legislature passed and the Governor signed into law legislation which, in addition to other mechanic’s liens against real estate, creates a lien for nonpayment of rental equipment and machinery fees. The lien shall be for the reasonable rental value of the machinery or equipment during the period the equipment is on the property.
There will be no lien involving the rental of machinery or equipment unless:
1) The improvements are made on commercial property;
2) The amount of the claim exceeds five thousand dollars; and
3) The party claiming the lien provided written notice within five (5) business days of the commencement of the use of the equipment to the property owner that rental equipment or rental machinery is being used on their property. The notice must identify the name of the entity that rented the machinery or equipment, the machinery or equipment being rented, and the rental rate.
Every person seeking to obtain the benefit of a mechanic’s lien for rental equipment or machinery must, within sixty (60) days after the date of removal of the equipment or machinery from the property, file with the clerk of the court where the property is located an accounting of the amount due, which is to be a lien on the building or other improvements. The lien statement must also give a true description of the property, with the name of the owner or contractor, or both and be verified by oath of the person claiming the lien.
SB 320: Signed by Governor Blunt on July 14, 2005 with an effective date of August 28, 2005.
Tort Reform
This legislation seeks to address tort reform in the State of Missouri. The legislation changes the laws regarding claims for damages and their payment. In its main, the legislation addresses issues concerning personal injury and wrongful death by limiting compensatory and punitive damages.
This legislation also affected venue for actions based upon a tort, whether it is a personal or business tort. Section 508.010, RSMo, now provides that in all actions alleging a tort, and the injury occurred within Missouri, venue shall be in the county where the plaintiff was first injured by the wrongful acts or negligent conduct alleged in the action. For a corporate plaintiff, this would typically mean the county where plaintiff’s principal office or headquarters are located.
For those injuries which occurred outside the state of Missouri, venue is determined as follows:
(1) If the defendant is a corporation, then venue shall be in any county where defendant corporation’s registered agent is located or, if the plaintiff’s principal place of residence was in the state of Missouri on the date the plaintiff was first injured, then venue may be in the county of the plaintiff’s principal place of residence on the date the plaintiff was first injured; or
(2) If the defendant is an individual, then venue shall be in any county of the individual defendant’s principal place of residence in the state of Missouri or, if the plaintiff’s principal place of residence was in the state of Missouri on the date the plaintiff was first injured, then venue may be in the county containing the plaintiff’s principal place of residence on the date the plaintiff was first injured.
The above provisions shall apply whether the defendant is a for-profit or not-for profit corporation. All motions to dismiss or to transfer based upon a claim of improper venue shall be deemed granted, if not denied within ninety days of filing the motion.
HB393: Signed by Governor Blunt on March 29, 2005 with an effective date of August 28, 2005.
Assessment of Business Personal Property
This legislation amends the method for determination of personal property taxes for corporate or business equipment. However, this assessment procedure does not apply to business personal property placed in service prior to January 2, 2006. The practical effect is that businesses will not benefit from this provision until 2007, as the assessment year commences January 1 each year.
(1) “Business Personal Property” shall be any tangible personal property.
(2) “Original Cost” is the price paid for the item without freight, installation or sales or use tax. In the case of acquisition of items of personal property as part of an acquisition of an entity, the original cost shall be the historical cost of those assets remaining in place and in use and the placed in service date shall be the date of acquisition by the entity being acquired.
(3) “Recovery Period” shall be the same as the recovery period allowed for such property under the Internal Revenue Code.
(4) The estimate of value determined under this section shall be presumed to be correct for the purpose of determining the true value in money, but such estimation may be disproved by substantial and persuasive evidence of the true value in money under any method determined by the state tax commission to be correct, including, but not limited to, an appraisal of the tangible personal property specifically utilizing generally accepted appraisal techniques, by proof of economic or functional obsolescence, or evidence of excessive physical deterioration. The salvage or scrap value of depreciable tangible personal property may only be considered if the property is not in use as of the assessment date.
HB 461: Signed by Governor Blunt on July 6, 2005 with an effective date of August 28, 2005.
Successor Liability for Unpaid Unemployment Taxes
This legislation deals with employer accounts for unemployment taxes. Basically, this legislation gives the State of Missouri the ability to find successor liability on unemployment taxes. If one business, or employing unit, acquires substantially all of the assets of another business of an employer and the predecessor employer’s business is continued without interruption solely by the successor, the successor shall be deemed to stand in the position of such predecessor employer in all respects. This shall include the predecessor’s separate account, actual contribution and benefit experience, annual payrolls, and liability for current or delinquent contributions, interest and penalties. This provision will also apply if two or more individuals, organizations or employing units acquired at approximately the same time substantially all of the business of an employer. The liability assessed will be determined by the portion of the predecessor’s taxable payroll applicable to the portion of the business acquired.
If the successor employing unit was not an employer prior to the time it acquired the assets of the predecessor, the unemployment experience of the acquired business shall not be transferred if it is determined that the successor acquired the business solely for the purpose of obtaining a lower base rate of contribution. Instead the successor shall be assigned the applicable new employer rate under Missouri law.
If an individual, organization or employing unit knowingly violates, or attempts to violate these provisions, civil and criminal penalties can be assessed. Moreover, the employer’s base rate will be increased for three (3) years to the maximum base rate applicable for such type of employer, or the employer’s current base rate plus two percent, whichever is greater.
HB 500 & 533: Signed by Governor Blunt on July 6, 2005 with an effective date of January 1, 2006.
Non-Profit Corporation Reinstatements
The affect of this legislation is to allow not-for-profit corporations to apply for reinstatement if the not-for-profit corporation forfeited its charter after 1978 for failure to file an annual report. Once reinstated, the reinstatement relates back to and takes effect as of the effective date of the forfeiture and the not-for-profit corporation shall resume carrying on its activities as if the forfeiture never occurred.
HB 630: Signed by Governor Blunt on July 6, 2005 with an effective date of August 28, 2005.
For Profit Corporations Authorized to Issue Uncertified Shares
This legislation amends Section 351.295, RSMo, and allows a corporation, through its articles of incorporation, bylaws, or a resolution by the board of directors, to specify that classes or series of its stock will be uncertificated shares. Any such provision of the articles of incorporation or bylaws or resolution cannot apply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of uncertificated shares is entitled to receive a statement of holdings as evidence of share ownership. Corporations must, upon request, furnish to holders of uncertificated shares information regarding the voting powers, designation and preferences, as well as relative rights, participating, option, or other special rights of each class of stock.
HB 678: Signed by Governor Blunt on July 12, 2005 with an effective date of August 28, 2005.