TITLE 14 HOUSING AND CONSTRUCTION
CHAPTER 5 CONSTRUCTION INDUSTRIES GENERAL
PROVISIONS
PART 9 CODE
BOND DETERMINATIONS
14.5.9.1 ISSUING
AGENCY:
Construction Industries Division of the Regulation and Licensing Department.
[14.5.9.1
NMAC - N, 04/30/15]
14.5.9.2 SCOPE: This
rule applies to claims against a licensee’s code bond.
[14.5.9.2
NMAC - N, 04/30/15]
14.5.9.3 STATUTORY
AUTHORITY:
Pursuant Section 60-13-49 NMSA 1978.
[14.5.9.3
NMAC - N, 04/30/15]
14.5.9.4 DURATION:
Permanent.
[14.5.9.4
NMAC - N, 04/30/15]
14.5.9.5 EFFECTIVE
DATE:
April 30, 2015, unless a later date is cited at the end of a section.
[14.5.9.5
NMAC - N, 04/30/15]
14.5.9.6 OBJECTIVE: To
establish the process in which an indemnitee makes a claim against a licensee’s
code bond.
[14.5.9.6
NMAC - N, 04/30/15]
14.5.9.7 DEFINITIONS:
A. Authority having jurisdiction
(AHJ): The entity with permitting authority in the political subdivision
where the property is located. This may
be the division or a building department of a municipality or county.
B. Code: means the
statewide construction codes adopted by rule by the commission.
C. Code bond: means
the construction license bond required in Section 60-13-49 NMSA 1978, for
correction of code violations.
D. Certificate of uncorrected
violations (CUV): means a certificate prepared by a division employee confirming
that an uncorrected code violation(s) exists and that the code bond shall be
used to correct the code violation(s).
E. Code violation
determination report (CVD): means a report prepared by a division employee
that identifies code violations that must be brought into compliance.
F. Indemnitee:
means the purchaser of construction services, who is the owner or owner’s agent
of the improvement that is subject to the uncorrected code violation.
G. Responsible party:
means the contractor that performed the work that is alleged or determined to
be in violation of the code. In
situations where the division is unable to determine which contractor is
responsible for a code violation, the prime contractor or the contractor that
pulled the permit is the responsible party.
H. Surety: means
the insurance company that underwrites a contractor’s license code bond and is
authorized by the New Mexico department of insurance to transact business in
New Mexico.
[14.5.9.7
NMAC - N, 04/30/15]
14.5.9.8 REQUIREMENTS
FOR FILING A CLAIM:
A. Rights of indemnitee:
The filing of a claim with the division
serves to show an indemnitee established their potential right to payment on a
claim within the two-year time limitation set forth in Section 60-13-49, NMSA
1978. It further serves to establish
priority of claim should the licensee have more than one claim on the code bond
simultaneously. Acceptance by the division of a claim does not confirm if a
code violation has actually occurred, nor if the licensee was performing work
within the scope of the license issued by division, does not infer any right to
a payout on the claim, nor does it require a surety to hold any funds in
reserve to pay a potential claim. The
surety may close the claim file after a period of inactivity on the claim, but
any such closure shall not serve to eliminate the right of the indemnitee to
re-activate the claim upon receipt of a certificate of uncorrected code
violation from the construction industries division.
B. Eligibility requirements: a request for investigation of a potential
violation of a New Mexico code must meet the following minimum requirements for
acceptance.
(1) The
request from the indemnitee must be on a form provided by the division.
(2) The
request from the indemnitee must be received by the division within two years from
the date the final inspection occurred or certificate of occupancy was issued,
whichever is earlier.
(3) The
work performed must have been completed by a properly licensed contractor.
(4) The
indemnitee must agree to allow the responsible party the opportunity to correct
the alleged code violation. Failure to
agree to allow the licensee access for the purpose of performing corrective
work shall result in dismissal of indemnitee’s claim without further
investigation.
[14.5.9.8
NMAC - N, 04/30/15]
14.5.9.9 CODE VIOLATION DETERMINATIONS:
A. Determinations:
(1) CVDs
will be made by a division inspector and a chief inspector will review and
approve of the CVDs made by the division inspector. The division inspector’s determination may be
based on a municipality’s or county’s building department findings.
(2) If
the division issues a CVD, the licensee must be afforded the opportunity to
correct the code violations in the time allotted by the division before a
request for a CUV can be filed with the division.
(3) Damages
as a result of a code violation are not included in the corrective work for a
code violation except in cases of minor demolition to gain access to perform
the corrective work.
(4) Abandoned
or incomplete projects are not indemnified by the code bond as these are
contract issues not governed by the Construction Industries Licensing Act
(CILA).
B. Appeals: A licensee may appeal one or
all of the violations identified in the CVD by sending a written appeal that
specifies which violation(s) is being appealed to the director within 10
calendar days of receipt of the CVD. A licensee
may choose to appeal one or more violation determinations while also choosing
to correct other violation determinations that the licensee does not wish to
appeal. Upon the receipt of a timely
written appeal, the director shall uphold or overturn the CVD within 30
calendar days. If the director upholds a
CVD, the licensee may appeal the director’s decision to the commission by
sending a written request to the commission within 20 days of receipt of the
director’s decision. A timely written
appeal to the commission shall be heard at the commission’s next regularly
scheduled meeting. The commission’s
decision is final and not subject to judicial review.
C. Corrected code
violations: If at any time, a
licensee corrects violations identified in a CVD to the satisfaction of a
division inspector, the division shall administratively dismiss the code bond
determination request.
[14.5.9.9
NMAC - N, 04/30/15]
14.5.9.10 CERTIFICATES OF UNCORRECTED VIOLATIONS:
A. Cause for issuance
of a CUV: If a licensee refuses or fails to correct code violations listed
on a CVD, whether the refusal or failure to correct occurs at the time of the
initial issuance of the CVD, after multiple corrections have been attempted or
after a licensee exhausts all appeal rights provided under Subsection B of 14.5.9.9
NMAC, the division shall issue a CUV to the surety as well as the indemnitee
and the appropriate licensee(s).
B. Notice of CUV: The CUV shall include the following
information:
(1) name
and mailing address of the surety company holding the code compliance bond at
the time the licensee(s) refused to correct the code violation;
(2) name
and mailing address(es) of the licensee(s) that committed the uncorrected code
violation(s);
(3) name
and mailing address of the indemnitee;
(4) bond
number for the responsible party’s bond in effect at the time the licensee
refused to correct the code violation(s);
(5) all
license classifications held by the licensee(s);
(6) address
of the construction project where the uncorrected code violation(s) is located;
(7) date
the certificate of occupancy was issued or the final inspection was conducted
by the AHJ;
(8) a
description of each uncorrected code violation; and
(9) the
following statement: “this notice serves
to inform the surety company, the indemnitee and the licensee that the
specified licensee(s) has refused or failed to correct a code violation(s) and
therefore the construction industries division, under Section 60-13-49 NMSA
1978, is informing the surety that the code bond must be released for the sole
purpose of correcting the code violation(s) identified herein. The pay-out by the surety company is limited
to the amount of the code bond, which is set by statute at $10,000.00. If the actual costs to correct the code
violation(s) exceeds $10,000.00, the indemnitee is responsible for those
costs. The requirements of the surety
and indemnitee are listed under 14.5.9 NMAC.
The indemnitee is also notified that the claim may be denied if they
fail to meet the requirements listed in 14.5.9.10 NMAC.”
C. Responsibility of indemnitee: The
indemnitee is responsible for meeting the following requirements; failure to do
so may result in the surety denying the claim.
(1) The
indemnitee shall obtain three estimates from properly licensed
contractors. The estimates shall only be
based on the costs to correct the code violations listed in the CUV. If the indemnitee wishes to contract for
additional work, that work must be a separate agreement, the costs of which
will not be included in the estimate to repair the code violations listed in
the CUV. The surety company has the
option to release no more than the costs listed in the lowest of the three estimates. The indemnitee can choose any of the three
contractors, or a separate properly licensed contractor not included in the
three estimates, however, the indemnitee will be responsible for any costs
above the amount the surety company releases.
(2) The
indemnitee shall provide the three estimates to the surety company as well as
the division. The division will ensure
that the all three contractors are licensed and have the right license
classification(s) for the work required to correct the code violations listed
in the CUV. The division will notify the
surety company and the indemnitee if each of the three contractors is properly
licensed. If a contractor other than the
three used for the original estimates is selected by the indemnitee, the
indemnitee must submit that contractor’s estimate to the division for
verification that the contractor is licensed and possesses the necessary
licensing classifications before work begins.
The surety company shall release no more than the costs listed in the
lowest of the three estimates.
D. Responsibility of contractor retained by indemnitee: The contractor is responsible for pulling all
necessary permits and calling for inspections on the work performed.
E. Six-month time limitation to correct code violations: Once the CUV is issued, the indemnitee has a
period of six months to ensure that all code violations identified in the CUV are
corrected and pass inspection by the division or AHJ. Failure to meet the requirements listed in Subsection
C of 14.5.9.10 NMAC in a period of six months may result in the surety denying
the claim.
F. Release of the code bond: If all requirements of this section are met,
the surety company shall release the amount of the bond consistent with Paragraph
(1) of Subsection C of 14.5.9.10 NMAC to correct the code violations as listed
in the CUV by issuing a check to the contractor that performed the corrections
after the division or AHJ has confirmed that the corrections meet code. The surety company shall inform the division
when the code bond is released.
[14.5.9.10
NMAC - N, 04/30/15]
14.5.9.11 Disciplinary referral: Requests for release of the code bond shall
be processed before discipline when possible.
After the issuance of a CUV, or if additional violations are discovered,
the division will file an administrative disciplinary complaint under 14.5.8
NMAC based on the underlying code violation(s) and the matter with be submitted
to the commission for consideration of disciplinary action. Within 180 calendar days, the licensee will
receive a notice of investigation (NOI).
[14.5.9.11
NMAC - N, 04/30/15]
14.5.9.12 LIMITATIONS ON CODE BONDS:
A. It is possible
to have multiple violations on a single project. Only one code bond can be used to indemnify a
particular code violation listed in a CUV per trade bureau jurisdiction. If there are multiple violations by multiple
licensees, only the code bond belonging to the responsible party can be used to
indemnify the code violation.
B. Legal fees and
other related costs are not collectable from the code bond disbursements. Any disputes not covered by the code bond
must be resolved through civil litigation in a court of law or by means of
mediation, neither of which the division or the surety can be a party.
C. Priority on
claims against a code bond is established by the person that is first in time
to file a completed form provided by the division requesting a code bond
determination regardless of when the work occurred.
[14.5.9.12
NMAC - N, 04/30/15]
14.5.9.13 EFFECT OF PAYMENT OF A CLAIM: Upon receipt of notice from
surety of payment of a claim against a bond, the division shall notify the
licensee of the payment, and the licensee shall have 30 days to provide the
division with proof of financial responsibility as required by Section 60-13-49
NMSA 1978.
[14.5.9.13
NMAC - N, 04/30/15]
HISTORY OF
14.5.9 NMAC: [RESERVED]