Roseman & Antoni, LLP
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Roseman & Antoni, LLP
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Civil Code 895 Recently passed SB 800 will become effective on January 1, 2003. This legislation, embodied in Civil Code Sections 895 et seq. and entitled “Requirements for Actions for Construction Defects” (“RACD”), applies to all new residential units sold on or after January 1, 2003. The RACD is significant in several respects. Among other things, the RACD sets forth comprehensive construction standards that new homes must comply with. Additionally, by providing homeowners with a remedy for defects that have not caused actual property damage, the RACD supercedes the California Supreme Court’s decision in Aas v. Superior Court (2000) 24 Cal.4th 627. Most significantly, the RACD gives builders a right to attempt to repair any alleged defects, and to require homeowners to participate in mediation, prior to a construction defect lawsuit being filed. Below is a more detailed analysis of the RACD. A. Application The RACD applies to claims by “homeowners” relating to the construction standards discussed below. The RACD does not apply to “to any action . . . to enforce a contract or express contractual provision, or any action for fraud, personal injury, or violation of statute.” See Civil Code § 943(a). Homeowners are defined as “the individual owners of single-family homes, individual unit owners of attached dwellings and, in the case of a common interest development, any association as defined in” Civil Code Section 1351(a). See Civil Code § 895(f). The construction standards set forth in the RACD apply to claims against any party. However, the obligations and nonadversarial procedures discussed below apply only to “builders.” Builders are defined as: “any entity or individual, including, but not limited to a builder, developer, general contractor, contractor, or original seller, who, at the time of the sale, was also in the business of selling residential units to the public for the property that is the subject of the homeowner’s claim or was in the business of building, developing, or constructing residential units for public purchase for the property that is the subject of the homeowner’s claim..” See Civil Code Section 911(a). Individuals and entities such as general contractors or contractors are not considered “builders” unless they are a “partner, member of, subsidiary of, or [are] otherwise similarly affiliated with the builder.” See Civil Code § 911(b). B. Construction Standards Civil Code Section 896 sets forth comprehensive construction standards that residences subject to the RACD must comply with. For example, Section 896(a)(3) provides, in relevant part, that “[w]indows, patio doors, deck doors, and their systems shall not allow excessive condensation to enter the structure and cause damage to another component.” The construction standards in this section are “intended to address every function or component of a structure.” Civil Code § 897. “To the extent that a function or component of a structure is not addressed by these standards, it [is] actionable if it causes damage.” Id. A builder cannot limit the application of these construction standards through contract. Civil Code § 901. However, a builder can offer enhanced protection to the homeowner through contract, in which case the terms of the enhanced agreement, rather than the standards in the RACD, will govern the homeowner’s claims. See Civil Code §§ 901-906. C. Minimum One-Year Warranty For Fit and Finish Items The RACD obligates builders to provide a minimum one-year express written warranty covering the fit and finish of cabinets, mirrors, flooring, walls, countertops, paint finishes, and trim. If no such warranty is given, the warranty for these items shall be for a period of one year. This warranty does not apply to damage caused to such components by defects in other components governed by the RACD. Additionally, fit and finish matters governed by the warranty are not otherwise subject to the RACD. D. Obligation to Notify Builder of Claimed Unmet Standards Prior to filing a defect action, a homeowner must provide written notice to the builder, via certified mail, overnight mail, or personal delivery, of the homeowner’s claim that the construction of his or her residence violates one or more of the construction standards set forth in the RACD. The notice shall describe the claim in reasonable detail sufficient to determine the nature and location, the extent known, of the claimed violation. See Civil Code § 910. The builder must acknowledge receipt of such a demand, in writing, within fourteen (14) days of receipt of such a claim. If the demand was sent by the homeowner’s attorney, or the builder receives a written representation letter from the homeowner’s attorney, “the builder shall include the attorney in all subsequent substantive communications.” Civil Code § 913. If the builder does not respond to the demand within the time specified, or does not follow certain other procedures, discussed below, the RACD (with the exception of the construction standards set forth therein) does not apply and the homeowner is free to file suit. See Civil Code § 915. E. Obligation of Builder to Provide Documents Within thirty (30) days of a written request by a homeowner or his or her counsel, a builder must provide copies of: (a) all relevant plans, specifications, mass or rough grading plans, final soils reports, DRE public reports, and engineering calculations which concern the homeowner’s residence; (b) all maintenance and preventive maintenance recommendations that pertain to the homeowner’s residence; (c) all manufactured products maintenance, preventive maintenance, and limited warranty information, and; (d) all of the builder’s limited contractual warranties in effect at the time of the original sale of the residence. A builder must maintain the name and address of an agent for notice pursuant to the RACD, or may elect to use a third party to receive such notice, in which case the name and address for that third party shall be included with the original sales documentation and shall be initialed and acknowledged by the purchaser. The reasonable costs for copying the above documents shall beoffsite copy facility which is bonded and insured. See Civil Code § 912. F. Mandatory Nonadversarial Procedure Civil Code Sections 914 to 934 set forth the parameters of the nonadversarial procedure that a builder may elect to invoke upon the receipt of a homeowner’s claim. A builder may elect to commence nonadversarial contractual provisions, instead of the provisions of the RACD, but a builder cannot require a homeowner to participate in both a contractual nonadversarial process and the non-adversarial process set forth in the RACD. The time periods set forth in the nonadversarial process “are to be strictly construed.” If a builder does not comply with these timing requirements, absent consent of the homeowner, the homeowner may file suit arising out of the alleged defects. Below are the pertinent procedures and deadlines set forth in the RACD’s nonadversarial process. i. Builder’s right to inspect/test claimed unmet standards: A builder can inspect and test the claimed unmet standards provided it does so within fourteen (14) days after acknowledge of receipt of notice of the homeowner’s claim. Inspection and testing shall be at a mutually convenient date and time and shall be scheduled with the homeowner’s legal representative. All costs of the inspection and testing, including damage caused thereby, shall be borne by the builder. See Civil Code § 916(a). ii. Builder’s right to conduct second inspection/testing: A builder can conduct a second inspection/testing if it species the reasons therefor in writing within three (3) days following the initial testing. The second testing shall be completed within forty (40) days of the first testing. See Civil Code § 916(c). iii. Builder’s notification to third parties: A builder that intends to hold a subcontractor or other specified third party responsible for the unmet standards must provide notice to that third party sufficiently in advance to allow that third party to attend any inspection and testing. See Civil Code § 916(e). iv. Builder can offer to repair and compensate for damages: Within thirty (30) days of the completion of inspecting and testing the builder may offer in writing to repair the violation and compensate the homeowner for all damages recoverable under Section 944 (discussed below). The offer must detail, among other things, the particular violation being repaired, how it will be repaired, and who will be repairing it. See Civil Code § 917. If the builder does not make an offer to repair, or does not comply with the RACD’s deadlines, or the repairs are not completed within the time specified, the homeowner may file an action. See Civil Code § 920. If the builder elects to repair some, but not all, of the claimed unmet standards, the builder, at the same time it offers to repair, must set forth with particularity in writing the reasons, and the support for those reasons, for not repairing all of the claimed unmet standards. See Civil Code § 925. A builder can make a cash offer in lieu of an offer to repair. If a cash offer is made, the homeowner can reject it and proceed to file suit. See Civil Code § 929. v. Homeowner authorization to repair: A homeowner has thirty (30) days after receipt of the offer to repair to authorize the builder to proceed with repairs. The homeowner may request that the builder provide the names of three alternative contractors, not owned or controlled by the builder. In such a case, the builder is entitled to an additional noninvasive inspection to occur within twenty (20) days of the homeowner’s request, so that the alternate contractors can review the residence. Within thirty-five (35) days of the homeowner’s request for alternative contractors, the builder must present the homeowner with a choice of contractors. Within twenty (20) days of that presentations the homeowner must authorize one of the alternate contractors to perform the work. See Civil Code § 918. vi. Offer to repair must be accompanied by offer to mediate: A builder’s offer to repair must be accompanied by an offer to mediate the dispute, in the event the homeowner is not satisfied with the offer to repair. The mediation shall be limited to four hours, unless otherwise agreed, and the mediator shall be selected and paid for by the builder. The mediator may be selected jointly if the homeowner agrees to pay for one-half the cost of the mediator. The mediator must have sufficient availability to preside over the mediation within fifteen (15) days after the request to mediate is received. See Civil Code § 919. vii. Homeowner must allow repairs: If a builder makes an offer to repair, and mediation does not resolve the dispute, the homeowner must allow the repair to be made by the builder, its contractor, or an alternate contractor. See Civil Code § 920. viii. Timing of repairs: Repairs shall be commenced within fourteen (14) days of acceptance of the offer to repair, or within seven (7) days of the mediation, or within five (5) days after a permit is obtained, if one is required. The repairs must be completed as soon as reasonably possible, and every effort must be made to complete the repairs within one hundred and twenty (120) days. See Civil Code § 921. The builder must permit the homeowner to allow the repair to be observed and electronically recorded. See Civil Code § 922. ix. Homeowner can file suit upon the conclusion of repairs: At the conclusion of the repair, the homeowner may file an action for violation of the applicable standard or for a claim of inadequate repair, or both, including all damages available under Section 944. See Civil Code § 926. x. Mandatory request for mediation after repairs made, if no prior mediation: If a builder has made repairs, and there was no previous mediation between the parties, a homeowner must request mediation prior to filing an action. The mediation must occur within fifteen (15) days. See Civil Code § 928. x. Treatment of subsequently discovered claims: Subsequent discovered claims must be administered under the provisions of the RACD, unless otherwise agreed. However, if the dispute involves a detached single family residence, and a subsequently discovered claim is for a violation of the same standard alleged by the homeowner, the homeowner need not reinitiate the process as to the same standard. xii. Evidence of repairs/conduct during process admissible in action: The fact that a repair effort was made be introduced as evidence in an action filed by a homeowner. Evidence of both parties’ conduct, with the exception of mediation, may also be introduced in such an action. Civil Code §§ 933 and 934. G. Recoverable Damages Civil Code Section 943(a) provides that “[e]xcept as provided in this title, no other cause of action for a claim covered by this title, or for damages recoverable under Section 944 is allowed.” Section 943(b) provides that, for claims involving detached single family homes, “the homeowner’s right to the reasonable value of repairing any non-conformity is limited to the repair costs, or the diminution in current value of the home caused by the nonconformity, whichever is less, subject to the personal use exception as developed under common law.” Civil Code Section 944 sets forth the damages which are recoverable under the RACD. It provides, in relevant part: “[T]he homeowner is only entitled to damages for the reasonable value of repairing any violation of the standards set forth in this title, the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards, the reasonable cost of removing and replacing any improper repair by the builder, reasonable relocation and storage expenses, lost business if the home was used as a principal place of a business licensed to be operated from the home, reasonable investigative costs for each established violation, and all other costs or fees recoverable by contract or statute.” NOTES _____________________________________________________________________________________ _____________________________________________________________________________________ Roseman & Antoni, LLP, is a full service law firm representing homeowners and common interest developments. Our services include: ? Construction Defect Litigation ? Earthquake Claim Negotiation and Litigation ? Contract Negotiations, including Construction and Maintenance Agreements ? Lender/Developer Liability ? Alternative Dispute Resolution ? Creation and Amendment of Governing Documents, Interpretation of CC&Rs, By-laws, and Rules and Regulations Main Office 10940 Wilshire Boulevard Eighteenth Floor Los Angeles, California 90024 (310) 208-7400 tel (310) 208-7707 fax www.raattorneys.com or e-mail us at: info@raattorneys.com Other Contact Numbers: Orange County (949) 756-2700 tel (949) 756-2710 Las Vegas (702) 385-6800 tel (702) 385-6801 fax
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