San Francisco Construction Litigation Lawyer Wolff Law Office HomeThe California Builders’ “Right To Repair Act” (SB800), and Homebuyers’ Rights Against Builders and Developers for Construction Defects in New Homes.
In 2002, after an adverse decision by the California Supreme Court denying homeowners the right to sue for construction defects that had not yet caused actual damage to other property or parts of a home, the California General Assembly adopted the “Right to Repair Act” (Civil Code §§ 895 - 945.5), often referred to as SB 800.
“The Right to Repair Act
“The Legislature enacted the Right to Repair Act to “‘specify the rights and requirements of a homeowner to bring an action for construction defects , including applicable standards for home construction, the statute of limitations, the burden of proof, the damages recoverable, a detailed prelitigation procedure, and the obligations of the homeowner.’ (Legis. Counsel's Dig., Sen. Bill No. 800 (2001–2002 Reg. Sess.).)” (Anders v. Superior Court (2011) 192 Cal.App.4th 579, 585 [121 Cal. Rptr. 3d 465] (Anders). . . .” (Emphasis added)
The McCaffrey Group, Inc. v. Superior Court (2014) 224 Cal. App. 4th 1330, 1342-1343.
The purpose of the Right to Act was abolish parts of the “Economic Loss Doctrine,” and to establish rights and procedures which allow a homeowner in a new development to recover for construction defects even where there is no actual property damage to other property yet, and where the only “defect” is the bad work or defective product itself, which bad work might not cause actual property damage to other property until years after the otherwise applicable Statutes of Limitation and Statute of Respose in Code Civil Proc. §* 337.1, 337.15 have expired.
“b. The economic loss rule
In Aas, supra, 24 Cal.4th at page 635, the Supreme Court considered whether a group of plaintiff homeowners could “recover in negligence from the entities that built their homes a money judgment representing the cost to repair, or the diminished value attributable to, construction defects that have not caused property damage.” In answering this question in the negative, the Aas court relied on the economic loss rule, which it described as “settled law limiting the recovery of economic losses in tort actions … .” (Id. at p. 632.) The Aas court noted that in the seminal case of Seely v. White Motor Co. (1965) 63 Cal.2d 9 [45 Cal. Rptr. 17, 403 P.2d 145] (Seely), the court explicated the rationale for the economic loss rule: “‘The distinction that the law has drawn between tort recovery for physical injuries and warranty recovery for economic loss,’ we wrote, ‘is not arbitrary and does not rest on the “luck” of one plaintiff in having an accident causing physical injury. The distinction rests, rather, on an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products.’ [Citation.] A manufacturer ‘can appropriately be held liable for physical injuries caused by defects by requiring his goods to match a standard of safety,’ but not ‘for the level of performance’ of its products unless the manufacturer ‘agrees that the product was designed to meet the consumer's demands.’ [Citation.] Similarly, ‘[a] consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market. He can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.’ [1210] [Citation.]” (Aas, supra, 24 Cal.4th at pp. 639–640, quoting Seely, supra, 63 Cal.2d at p. 18.)”
“The Aas court noted that under California tort law, courts had applied the economic loss rule in construction defect cases to preclude the recovery of purely economic losses, i.e., those not accompanied by either property damage or physical injuries: “Speaking very generally, tort law provides a remedy for construction defects that cause property damage or personal injury. Focusing on the conduct of persons involved in the construction process, courts in this state have found such a remedy in the law of negligence. [Fn. omitted.] Viewing the home as a product, courts have also found a tort remedy in strict products liability, [fn. omitted] even when the property damage consists of harm to a sound part of the home caused by another, defective part. [Fn. omitted.] For defective products and negligent services that have caused neither property damage nor personal injury, however, tort remedies have been uncertain. Any construction defect can diminish the value of a house. But the difference between price paid and value received, and deviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone. [Citation.] This general principle, the so-called economic loss rule, is the primary obstacle to plaintiffs' claim. ” (Aas, supra, 24 Cal.4th at pp. 635–636.)
SB 800 effectively reversed this Aas decision and the “economic loss rule” in part and in limited instances for home developments constructed in and after 2003 by a “Builder”, which the Act defines as meaning a regular developer of that home and other homes for sale to the public.
“The Right to Repair Act
“In response to the holding in Aas, the Legislature enacted the Right to Repair Act. The Act establishes a set of standards for residential construction, and provides tort liability for entities that fail to meet the standards. (§ 896. ) Section 896 provides in relevant part: “In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential construction, design, specifications, surveying, planning, supervision, testing, or observation of construction, a builder, and to the extent set forth in Chapter 4 (commencing with Section 910), a general contractor, subcontractor, material supplier, individual product manufacturer, or design professional, shall, except as specifically set forth in this title, be liable for, and the claimant's claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title. ” (Emphasis added)
Greystone Homes, Inc. v. Midtec, Inc . (2008) 168 Cal. App. 4th 1194, 1209-1211.
To minimize the costs, risks and time delays of regular construction defect litigation, the Act provides in Civil Code §§ 910-938 for a pre-litigation, non-adversarial, private procedure that is a precondition to litigation regarding alleged violations of the Standards for Residential Construction in Civil Code ྷ 896.
The Builder or Developer must give homebuyers notice of these procedures and rights in their sale and title documents, or the Builder waives the right to enforce these procedures or stay litigation pending the Right to Repair non-adversarial pre-litigation procedures.
However, even if the Builder fails to give homebuyers notice of the Right to Repair Act on the sale of the home, the Statues of Limitations and other limited exceptions to the Economic Loss Rule in SB 800 still apply to buyers.
The SB 800 procedure requires written notice to the Builder in a specific manner of the violation of the specific Standards for Residential Construction defined in Civil Code § 896, inspection procedures, and gives the Builder the right to offer to repair violations of the Standards, before the property owners may commence any suit for those same violations of the Standards.
“The chapter at issue here, division 2, part 2, title 7, chapter 4 of the Civil Code (Chapter 4), prescribes nonadversarial prelitigation procedures a homeowner must initiate before bringing a civil action against the builder for alleged construction defects. (§§ 910–938.) The homeowner is required to provide the builder with written notice of the claim that the construction of his or her residence violated any of the standards set forth in chapter 2 of the Act, and must “describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation. ” (§ 910, subd. (a).) Once the builder has received the claim, it has 14 days to provide written acknowledgment of the claim and another 14 days to inspect and test the claimed defects . (§§ 913, 916.) The builder has an additional 40 days to conduct a second inspection or testing. (§ 916.)”
“ Within 30 days of the last inspection or testing, the builder may offer to repair the violation, set a reasonable completion date, and compensate the homeowner for all recoverable damages. (§ 917.) The homeowner has 30 days to either authorize repairs as proposed or request repairs by a different contractor. (§ 918.) The repairs must be commenced within 14 days of acceptance, done “with the utmost diligence,” and “completed as soon as reasonably possible,” with every effort made to complete them within 120 days. (§ 921.)”
“The builder's offer to repair must be accompanied by an offer to mediate the dispute if the homeowner chooses; the mediation is limited to four hours, except as otherwise mutually agreed, before a nonaffiliated mediator selected and paid for by the builder, and must occur within 15 days after the request to mediate is received. (§ 919.) . . . .”
“[I]f the builder fails to acknowledge receipt of the claim, elects to not go through the process set forth in Chapter 4, fails to request an inspection within the time specified, fails to make an offer to repair, fails to complete the repair within the time specified, or fails to “strictly comply with this chapter within the times specified,” the homeowner is released from the requirements of Chapter 4 and may proceed with the filing of an action. (§§ 915, 920, 925, 930.) The standards set forth in the other chapters of the Act, however, continue to apply to the action. (§§ 915, 920, 925, 930.) . . . .”
The McCaffrey Group, Inc. v. Superior Court , supra, 224 Cal. App. 4th 1330, 1343-1344.
The Builder may establish alternate, but equivalent, pre-litigation procedures to those in SB 800.
“The builder has the option of contracting for an alternative nonadversarial prelitigation procedure in lieu of the statutory procedure. Section 914 provides: “(a) This chapter establishes a nonadversarial procedure, including the remedies available under this chapter which, if the procedure does not resolve the dispute between the parties, may result in a subsequent action to enforce the other chapters of this title. . . .” (All Emphasis added)
The McCaffrey Group, Inc. v. Superior Court ,supra, 224 Cal. App. 4th 1330, 1344.
“(a) This chapter establishes a nonadversarial procedure, including the remedies available under this chapter which, if the procedure does not resolve the dispute between the parties, may result in a subsequent action to enforce the other chapters of this title. A builder may attempt to commence nonadversarial contractual provisions other than the nonadversarial procedures and remedies set forth in this chapter, but may not, in addition to its own nonadversarial contractual provisions, require adherence to the nonadversarial procedures and remedies set forth in this chapter, regardless of whether the builder's own alternative nonadversarial contractual provisions are successful in resolving the dispute or ultimately deemed enforceable.
At the time the sales agreement is executed, the builder shall notify the homeowner whether the builder intends to engage in the nonadversarial procedure of this section or attempt to enforce alternative nonadversarial contractual provisions. If the builder elects to use alternative nonadversarial contractual provisions in lieu of this chapter, the election is binding, regardless of whether the builder's alternative nonadversarial contractual provisions are successful in resolving the ultimate dispute or are ultimately deemed enforceable.
(b) Nothing in this title is intended to affect existing statutory or decisional law pertaining to the applicability, viability, or enforceability of alternative dispute resolution methods, alternative remedies, or contractual arbitration, judicial reference, or similar procedures requiring a binding resolution to enforce the other chapters of this title or any other disputes between homeowners and builders. Nothing in this title is intended to affect the applicability, viability, or enforceability, if any, of contractual arbitration or judicial reference after a nonadversarial procedure or provision has been completed.” (All emphasis added)
Civil Code § 914
“Section 914, subdivision (a), permits the builder to elect to engage in its own nonadversarial contractual procedure in lieu of the statutory procedure. It requires the builder to notify the home buyer, at the time the sales agreement is executed, which set of procedures it elects to use. . . . .” (Emphasis added)
Anders v. Superior Court (2011) 192 Cal. App. 4th 579, 588.
And, in the absence of such other - “optional” - alternative, contractual pre-litigation procedures which a Builder is permitted to adopt prior to the sale of a property,
“(a) This chapter establishes a nonadversarial procedure, including the remedies available under this chapter which, if the procedure does not resolve the dispute between the parties, may result in a subsequent action to enforce the other chapters of this title . . . .” (Emphasis added)
Civil Code § 914(a).
“[T]he Right to Repair Act [itself] “‘specif[ies] the rights and requirements of a homeowner to bring an action for construction defects”, and “division 2, part 2, title 7, chapter 4 of the Civil Code (Chapter 4), prescribes nonadversarial prelitigation procedures a homeowner must initiate before bringing a civil action against the builder for alleged construction defects. (§§ 910–938.) ” (Emphasis added)
The McCaffrey Group, Inc. v. Superior Court , supra, 224 Cal. App. 4th 1330, 1342, 1343.
If the property owner does not comply with the mandatory, Non-adversarial, Pre-Litigation procedures in the statute, Civil Code §§ 910-938, the Builder may move to stay or dismiss any lawsuit the homeowners may have already filed.
“(b) If the claimant [homeowner] does not conform with the requirements of this chapter, the builder may bring a motion to stay any subsequent court action or other proceeding until the requirements of this chapter have been satisfied. The court, in its discretion, may award the prevailing party on such a motion, his or her attorney's fees and costs in bringing or opposing the motion.”
Civil Code § 930(b).
A homeowner/buyer who files suit has the burden of proof on such a motion to prove that he or she has complied with the non-adversarial prelitigation procedures in Civil Code §§ 910-938, or show it is subject to some exception thereto. Standard Pacific Corp. v. Superior Court (2009) 176 Cal. App. 4th 828, 834; Darling v. Superior Court (1st Dist. 2012) 211 Cal. App. 4th 69, 75; The McCaffrey Group, Inc. v. Superior Court ,supra, 224 Cal. App. 4th 1330, 1351.
The pre-litigation SB 800 procedures require the Builder and homeowner to take several specific steps by specified and very short deadlines:
“[O]nce the builder has received the claim, it has 14 days to provide written acknowledgment of the claim and another 14 days to inspect and test the claimed defects. (§§ 913, 916.) The builder has an additional 40 days to conduct a second inspection or testing. (§ 916.)”
”Within 30 days of the last inspection or testing, the builder may offer to repair the violation, set a reasonable completion date, and compensate the homeowner for all recoverable damages. (§ 917.) The homeowner has 30 days to either authorize repairs as proposed or request repairs by a different contractor. (§ 918.) The repairs must be commenced within 14 days of acceptance, done “with the utmost diligence,” and “completed as soon as reasonably possible,” with every effort made to complete them within 120 days. (§ 921.)”
“The builder's offer to repair must be accompanied by an offer to mediate the dispute if the homeowner chooses; the mediation is limited to four hours, except as otherwise mutually agreed, before a nonaffiliated mediator selected and paid for by the builder, and must occur within 15 days after the request to mediate is received. (§ 919.) . . . .”
“[I]f the builder fails to acknowledge receipt of the claim, elects to not go through the process set forth in Chapter 4, fails to request an inspection within the time specified, fails to make an offer to repair, fails to complete the repair within the time specified, or fails to “strictly comply with this chapter within the times specified,” the homeowner is released from the requirements of Chapter 4 and may proceed with the filing of an action. (§§ 915, 920, 925, 930.) The standards set forth in the other chapters of the Act, however, continue to apply to the action. (§§ 915, 920, 925, 930.) . . . .”
The McCaffrey Group, Inc. v. Superior Court , supra, 224 Cal. App. 4th 1330, 1343-1344.
The Right to Repair Act does have its own more specific Statutes of Limitations periods that apply where the alleged “defects” or violations of the Standards have not yet caused property damage to other property. See e.g., Civil Code §§ 900 (“fit and finish” of flooring, paint, trim, countertops, exterior walls etc, 1 year from Close of Escrow on the home); 896(e) (plumbing and sewers, 4 years), 896(f) (electrical systems, 4 years), (g)(1) (driveways, patios, sidewalks, 4 years), (2) (stucco, siding 4 years), (6) (violations of noise standards, 1 year), (7) (irrigation and drainage, 1 year), (8) (wood posts, 2 years), (9) (steel fences, 4 years), (10) (exterior paints and stains, 5 years), (12) (landscaping, 2 years), (14) (dryer ducts, 2 years from close of escrow). (Note, these statutory provisions and other SB 800 provisions elsewhere here have been greatly simplified for purposes of this Article, so please read the original statutory provisions for a complete and accurate description and understanding of the Act).
However, these SB 800 Statutes of Limitations - or outside limits or time periods within which a lawsuit must be filed - are stayed, suspended or “tolled” while the pre-litigation procedures under SB800 are being pursued in good faith. Civil Code § 941.
Once the non-adversarial pre-litigation procedure has commenced per Civil Code§ 910 et seq, the homeowner may only be released from this process so as to be able to file (or continue) suit in two limited circumstances.
First, the homeowner may only proceed with litigation after the start of the pre-litigation procedure “if the builder fails to make an offer to repair”, or “if the contractor performing the repair does not complete the repair in the time or manner specified”. Civil Code § 920.
Secondly,
“If the builder fails to complete the repair within the time specified in the repair plan, the claimant is released from the requirements of this chapter and may proceed with the filing of an action. If this occurs, the standards set forth in the other chapters of this title shall continue to apply to the action.” (Emphasis added)
Civil Code § 925.
And, if the Builder’s repairs do not correct the violations of the Standards of Residential Construction, the homeowners may still sue to recover for those violations of the Standards.
However, the other Provisions of SB 800 still apply to limit the time to file and the scope of any such lawsuit.
It is important for homeowners in a post-2002 residential development to understand that, even before or while the non-adversarial Right to Repair Act pre-litigation procedures are ongoing and still have not been completed or run their course as required by SB 800, homeowners can still sue the Builder and others responsible for construction defects, including Violations of the Standards for Residential Construction in Civil Code § 896 where those violations or other defects have caused actual damage to other parts of the home or other property.
Finally, even if the homeowner did not timely institute a claim or lawsuit for violations of the Standards for Residential Construction within the Statutes of Limitations in the Act periods discussed above, in Civil Code §§ 896, 900 et al, once those violations or conditions cause actual damages to other property or other parts of the home, a suit could still be brought against the Builder and others for negligence, strict liability and other claims for actual damages.
One example of such an defect for which suit maybe allowed without following the SB800 pre-litigation procedures might be a leak in the building shell which has caused water damage, or mold or rot to occur in some other part of the building, such as damage to plywood sheathing, drywall, interior finishes, furnishings, etc.
And, of course, claims for breach of contract, fraud, and non-disclosure etc also would not usually be subject to the mandatory Pre-litigation procedures, in or specific Statutes of Limitation of, the Right-to-Repair Act.
But those other claims or “causes of action” for damages would be subject to other statutes of limitation than those in SB 800, the Right to Repair Act.
N.B. The contents of this Article do not constitute legal advice or create an attorney-client relationship, and you may NOT rely on it without seeking legal advice regarding your particular, unique situation from a competent California Construction lawyer or Employment Law attorney.
Please also note that factual situations vary, and statutes, regulations and case law are frequently changing and evolving, and these materials thus also may be or become outdated or incorrect.
For further information on this topic and how the current law may apply to your particular contract, job and issues, Contact Us via email, phone (415)788-1881 or visit our website at www.wolfflaw.com for other contract information. © 2013, George W. Wolff , all rights reserved.
