In February 2011, a new California Appellate decision was published effecting a homeowner’s rights after purchasing a newly constructed home. However, before delving into this legal development, this article will briefly review the statutory law behind the ruling.
Several years ago, some of California’s construction defect laws changed for newly constructed homes. The changes were codified as California Civil Code §§ 895 through 945.5, but will occasionally be referred to as Senate Bill 800 or SB800.
SB 800 governs actions for residential construction defects only in newly constructed homes originally sold on or after January 1, 2003. Examples of these construction defects include but are not limited to water intrusion, structural (cracks in foundation, etc.), and plumbing and sewer systems (shall not materially impair the use of the structure by its inhabitants). A verbatim list of actionable construction defects is located in California Civil Code §896.
If this area of law applies, the homeowner is provided with a number of significant building warranties and protections. An example of one of these warranties is that a seller-homebuilder shall provide a homeowner with a minimum “one year express warranty, limited warranty covering the fit and finish of [:]…cabinets, mirrors, flooring, interior and exterior walls, countertops, paint finishes, and trim, but shall not apply to damage to those components caused by defects in other components governed by the other provisions of this title.”
However, before the homeowner can file a lawsuit for the breach of any of these warranties or for constructing a building with actionable construction defects, the homeowner must adhere to an extensive pre-litigation process. These pre-litigation procedures are spelled out in Civil Code §§910-914, 917-928. These pre-litigation procedures include the builder-seller’s “right to repair” the claimed defects.
In a recently-decided case (Anders v. Superior Court), a California Court of Appeal dealt specifically with the pre-litigation process and a seller-homebuilder’s ability to avoid the process under California Civil Code §914. §914 permits the homebuilder-seller to draft its own alternative pre-litigation procedure and include the alternative in the homebuilder-seller’s sales contracts with buyer.
In Anders, the homebuilder-seller’s contract with buyers required that an alternative pre-litigation procedure be utilized, rather than the pre-litigation process set forth in SB800. The trial court found the alternative procedure unenforceable, but insisted that the buyers still comply with SB800. The Appellate Court disagreed.
The Anders Court ruled that if the alternative pre-litigation procedures are deemed unenforceable, the homeowner can immediately file a lawsuit against the homebuilder-seller. The Court essentially held that a homebuilder-seller forfeits its right to repair the construction defects under SB800 if its alternative pre-litigation procedures are deemed unenforceable.
As a result of the Anders case, a homebuilder-seller is left in a precarious situation when it sells the home or condominium if it wants to retain its statutory right to repair the construction defects and wants to stray from some of the other pre-litigation procedures. The homebuilder-seller must evaluate whether the risk of losing the statutory right to repair is worth attempting to craft enforceable alternative pre-litigation procedures. Until the California Supreme Court or the California Legislature approves of alternative procedures, the construction industry is blind as to what will be approved by the next judge that hears a builder-seller’s case.
If you are a homebuilder-seller and are contemplating seeking alternative pre-litigation procedures, we highly recommend that you consult an attorney at our firm to review your proposed procedures.
If you are a homeowner and are uncertain whether SB800 applies to you or whether the homebuilder-seller’s alternative procedures are unenforceable, you should contact our firm. Please also note that the statute of limitations for defects and length of warranties can vary. This is an additional reason to consult with an attorney as soon as you realize that your newly constructed home or condo was improperly constructed so that you are not precluded from seeking damages from the homebuilder-seller.