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Cathy Croshaw is a little tired these days. Besides her regular caseload as a transactional attorney and duties as partner in charge of the San Francisco office of Luce, Forward, Hamilton & Scripps, for the past couple of months she’s traveled around California helping lawyers and others prepare for the implementation of Senate Bill 800. The product of negotiations between the plaintiffs bar and builders, the legislation by Senate President Pro Tem John Burton creates a new civil code statute intended to revolutionize construction defects litigation in California. It was a hard-fought battle, even by Sacramento standards. But if a lot of work went into the law’s drafting, just imagine what has to be done now. Among other provisions, the statute requires builders to inform homebuyers of their new rights and the procedures for dealing with claims. That means attorneys like Croshaw have to help their clients make what she calls the most “global change of residential documents” in years. Although many plaintiffs attorneys say the statute will strengthen their suits, some doubt that SB 800 will change defects litigation much and say more legislative reform is needed. For now, builders and their lawyers are learning their side of the equation because SB 800 puts the onus on them. If they don’t properly inform homebuyers of the new process for working out a defects claim, builders can lose the right to take advantage of provisions of the law designed to help them avoid being sued. To help spread the word to her peers and their clients, Croshaw sat on panels in a series of educational seminars put on by the California Building Industry Association. She’s done nine out of a dozen the association hosted up and down the state. They last about two hours, and most attracted close to 200 people, Croshaw said. Attendees include builders, subcontractors and defense lawyers. Construction defects defense attorneys and lawyers who helped draft the bill also sat on the panels. Plaintiffs attorneys are reaching out, too. They’ve participated in some seminars directed at the building industry and also hosted their own question-and-answer sessions. As she sipped a cup of coffee one recent afternoon, Croshaw ran through some of the documents being revised. The already-complicated papers are familiar to anyone who has bought a house: warranties and maintenance purchase agreements, disclosures. “All that information is changing,” she said. Construction defects litigation is a very specialized realm of product liability law that has, in recent years, boomed — or gotten out of hand, depending on which side you’re on. Plaintiffs attorneys say they’re only trying to force huge corporations to do the right thing, but the building industry believes the scales have tipped too far. Builders say the suits have scared insurers and made them raise premiums or flee the state altogether, putting affordable suburban subdivisions, especially condominiums, in jeopardy. They hope SB 800 eventually will reverse that trend, lowering the cost of housing. Besides the new disclosures required in transactional documents, the bill’s other provisions include: • Codifying areas previously determined by case law. For the most part, this gives power to plaintiffs, who were on the losing side of several high-profile cases, including Aas v. Superior Court, 00 C.D.O.S. 9607. • The absolute right by builders to fix defects before homeowners can file suit. • A definition, for the first time, of what constitutes a defect, a point fiercely argued in the courtroom. • A pre-litigation procedure that builders and homeowners must follow before heading to court. Timothy Coyle, California Building Industry Association senior vice president, said he hopes the “paradigm shift” will actually take lawyers out of the equation and enable builders and homeowners to work problems out themselves. He said a home is like other purchases — if you want a broken radio repaired, you usually don’t bring a lawyer to the electronics store. “It’s very clear to us that people don’t want to hire lawyers,” Coyle said. And he thinks it’s good the builders have brought the ball back to their court. “This bill requires a business decision be made about customer service,” Coyle said. That optimism isn’t echoed by everyone, including one of the plaintiffs lawyers who helped negotiate the statute on behalf of Consumer Attorneys of California. Scott Levine of Naumann & Levine in San Diego has chatted with trial lawyers at seminars. “I think that a lot of them, just like me, are skeptical that builders are going to take the repair route,” Levine said. “They’ve always had that option.” Just like the builders’ side, Levine said Consumer Attorneys has more seminars planned for this year, probably in San Francisco and Los Angeles. In the meantime, Levine recommends reading the bill as the best way for attorneys to learn. “People are going to need to spend some time with it,” he said. Already there’s one dust-up forming, a disagreement over when a house is considered “sold.” Plaintiffs attorneys believe the sale date is close of escrow. Builders, according to Croshaw, the transactional expert, believe a house is sold as soon as a purchase contract is signed, which can be months before escrow. Because the statute describes disclosures that have to be made at the time of sale, Levine said the new law applies to hundreds of houses statewide that were sold with contracts while still under construction in 2002. Escrow, however, is closing now, so Levine said any problems with the homes would have to be handled using SB 800 procedures. Croshaw disagreed. “It’s a due process issue because contracts were entered into before the bill passed. So basically, you’d have builders already in breach of the statute. There’s room for both arguments, but you have to go back to legislative intent,” she said. Clean-up legislation could solve the problem, but Croshaw said that’s not likely because it could open up the rest of the bill for debate. Even though both sides are wary of reopening the bill, it’s still possible the Legislature will revisit construction defects this session or later. Levine said consumer attorneys were exploring a plan that would change construction insurance, the relationship between general and subcontractors, and how defects cases are handled once in litigation. Coyle said the builders group was also looking at the issue. “The problem of insurance and the cost of it and its scarcity is affecting builders and subcontractors alike. Because of [their] relationship, there may be some excess coverage,” Coyle said. Coyle, like Levine, kept his comments vague, and said the CBIA hasn’t figured out whether reform would require legislation. But before they start worrying about where to go next with legislation, lawyers must still concentrate on learning the new statute. Plaintiffs attorneys seldom file suits within the first year of home ownership, Levine said, because many defects don’t come to light until the elements pound on the home for a couple of seasons. Croshaw said she’s enjoyed traveling around and talking to people. “I had a different perspective at the beginning. It’s been a huge education [for me] answering all those questions,” she said. “You don’t see competing firms working together all that often as a team — and that’s happening here.”

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