Winter 2003

NEW LEGISLATION HAS IMPORTANT IMPLICATIONS FOR HOMEOWNERS AND BUILDERS IN CALIFORNIA

Governor Davis recently approved a measure impacting the rights of California homeowners and creating specific definitions of construction defects that will have far-reaching implications for building contractors.  Senate Bill 800 (which will become Civil Code sections 895 through 945.5) takes effect January 1, 2003, and applies only to residences originally sold on or after January 1, 2003.  The bill is extensive, and homeowners and builders should consult an attorney for in-depth analysis of the bill and its effect on their rights and obligations.

One of the most significant components of this new legislation is the process that must be followed by homeowners and builders alike before legal action may be filed.  Claims under the new legislation may be brought by “original purchasers” and their successors-in-interest.  For the purposes of this bill, condominium associations are considered “original purchasers.” [s. 945]

 The legislation contains a precise timetable for a builder’s reply to a homeowner’s notice of defects.  A homeowner must give notice of defects to the builder by certified mail, overnight mail, or personal delivery, and must describe the claimed defects in detail.  [s. 910(a)] The homeowner is required to follow this process before initiating legal action against the builder, however the builder’s failure to comply with any of the provisions of this new Civil Code section permits the homeowner to immediately file legal action against the builder and effectively waives the builder’s protections.

The homeowner’s notice to the builder initiates a chain of events with which the builder must comply in order to preserve its rights:

Within 14 Days After Homeowner’s Notice:  Builder to acknowledge receipt of claims — in writing — to homeowner.  Builder’s failure to provide written acknowledgment gives homeowner authority to proceed with civil action.  [s. 913]

14 Days After Builder’s Written Acknowledgment:  Builder must COMPLETE initial inspection and testing of residence, with all costs of such inspection and testing to be borne by the builder.  [s. 916]

48 Hours After Builder’s Initial Inspection/Testing:  Builder must restore property to pre-test condition.  [s. 916(a)]

Three Days After Builder’s Initial Inspection/Testing:  Builder must provide written explanation for any additional testing.  [s. 916(c)]

40 Days After Initial Inspection/Testing:  Second testing/inspection must be COMPLETE (property must be restored to pre-test condition within 48 hours of testing).  [s. 916(c)]

30 Days After Builder’s Final Inspection:  Builder must provide homeowner with written offer to repair defects.  Offer must include:

(a)        compensation to homeowner for reasonable value of repair and related damages (under new s. 944);

(b)        detailed step-by-step description of repairs with proposed completion date;

(c)        names, addresses, telephone numbers, license numbers of contractors who will perform repair work;

(d)        plans and specifications for repair work;

(e)        notice of homeowner’s right to request three other contractors to repair;

(f)         offer to mediate the dispute if homeowner so chooses (limited to four-hour mediation unless mutually agreed otherwise, and builder to choose and pay for mediator, or if homeowner wants to split cost, may choose mediator together).  [ss. 917-920]  Homeowner’s request to mediate must be in writing.

Builder may make a cash offer without repair.  Homeowner may accept offer, or reject and file an action against builder.  [s. 929(a)]

15 Days After Homeowner’s Written Request To Mediate:  Mediation must occur.  [s. 919]

30 Days After Offer [If No Mediation]:  Homeowner to authorize builder to repair, or may request three additional contractors who could perform repairs.  [s. 918]

35 Days After Homeowner Requests Additional Contractors:  Builder must provide alternate contractor names, addresses, telephone numbers, and license numbers who are not owned or financially controlled by the builder and who perform building services in the county where the residence is located.  [s. 918]

20 Days After Homeowner Receives Additional Contractors’ Names:  Homeowner must choose alternate contractor (or original builder) to do repair work.  [s. 918]

14 Days After Homeowner Accepts Builder’s Offer To Repair Or Chooses Alternate Contractor:  Repair work must commence (but shall commence on “mutually convenient date”).  [s. 921(a)]

7 Days After Failed Mediation: Repair work shall commence. 
[s. 921(a)]

120 Days After Repair Work Started: Repair work should be completed (“every effort shall be made to complete the repair within 120 days”).  If builder fails to complete repair within the time specified in the builder’s repair plan, the homeowner is released from requirements of the statute and may sue the builder.  [s. 921(b)]

If builder does repair, it may not get a release or waiver in exchange for the repair work, and after repairs have been made, homeowner may still file action for defects.  [s. 926]

Also important under the bill is the Legislature’s attempts to define “Actionable Defects” on a trade-by-trade basis.  Civil Code sections 896 and 897 set forth the standards with which each trade shall be implemented on a residence (an “individual dwelling unit”), with a “catch-all” provision that permits a homeowner’s recovery if any component of the residence “causes damage.” Furthermore, a homeowner need only show that the home does not meet the applicable standard in order to make a claim under this new legislation.  No further showing of causation or damage is required, so long as the alleged defect arises out of or is related to the original construction.  [s. 941(e)]

If the statute of limitations runs during this process, the period in which a homeowner may file a complaint is extended from the time of the original claim of the homeowner to 100 days after the repair is completed, whether or not the particular claim is the one being repaired.  [s. 927]

Finally, the newly enacted legislation contains a number of affirmative defenses available to the builder for comparative fault, among them unforeseen acts of nature, a homeowner’s unreasonable failure to mitigate (including failure to permit timely access for inspections and repairs under this Code), ordinary wear and tear, releases for alleged defects, and the builder’s successful repair of the alleged defect.  [s. 945.5]

It is important for you and your attorney to fully investigate the implications of this new legislation on your rights as a homeowner or as a building contractor.  There are a myriad of new requirements that must be followed in order to preserve the protections of this new law, too numerous to be summarized in this article.  Should you need any additional information about this new Senate Bill, please contact us.

PETER J. SENUTY

Mr. Senuty is a Director in the firm’s coverage group. 
Email:  pjs@kpclegal.com.

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