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As you are undoubtedly aware, on Sept. 20, 2002, Gov. Gray Davis approved Senate Bill 800, now codified in Civil Code �43.99 and 895 et seq., which implements major reforms in construction defect litigation. SB 800, a consensus bill, was the product of serious negotiations between the Consumer Attorneys of California, representatives of the California Building Industry Association and various insurers for more than a year. Major reform was overdue and prior attempts at reform, such as the Calderon Act (Civil Code �1375), only applied to “attached housing.” Then along came Aas v. Superior Court, 24 Cal.4th 627 (2000), which changed the landscape for construction defect litigation. As a result of Aas, plaintiffs had to show “actual damage” to recover for construction defects. This represented a victory for the building industry because homeowners had been requesting and receiving compensation for violations of the building code or construction industry practices even when those violations did not cause damage. Although Aas was a victory for the building industry, it did not rectify the enormous costs and inefficiencies associated with traditional construction defect litigation. SB 800 was designed to address these problems and change the way construction defect litigation will be handled for homes sold for the first time after Jan. 1, 2003. The cost and inefficiencies of construction defect litigation are frightening. In a typical example, a homeowner or association of homeowners files a construction defect suit against the builder, the builder cross-complains against the subcontractors, and the court will appoint a special master to preside over a litany of pretrial conferences. Unfortunately, even with the new law, the above example will probably always be part of the process unless other major reforms are instituted because: (1) the new procedures apply only to homes sold for the first time after Jan. 1, and (2) even under the new law, the pre-litigation procedures may be abandoned by the builder. However, the new law gives the builder the opportunity to avoid some of the cost and inefficiency by adhering to the pre-litigation procedures that follow. The builder can always decide to opt out of the procedures or decline to offer a repair, but the builder has the absolute right to attempt a repair prior to a homeowner filing an action. Only time will tell whether these new procedures will reduce or stunt the growth of litigation and insurance costs and foster the development of affordable housing. It may turn out that the procedures will be effective for some types of cases and not others, such as smaller cases involving a single homeowner rather than larger cases involving a group of homeowners or an association. Among the new provisions in the law are performance standards relating to the various functions of the building; a 10-year statute of limitations for construction defects, with certain lesser time periods of one, two or four years based on the particular claimed defect; and mandatory procedures prior to the filing of a construction defect suit in which the builder has the right to repair the alleged defects. The homeowner will be allowed to file a traditional lawsuit if the builder fails to follow the procedures. PERFORMANCE STANDARDS Section 896 establishes the performance standards of the component parts of the home. Counsel should carefully review the performance standards because they comprehensively address every major component of the structure, including but not limited to windows, doors, foundations, roofs, decks, exterior siding, landscaping, plumbing, retaining walls, electrical, tile, soils, irrigation systems, and heating and air conditioning. If a component does not perform in the specified manner, it is a per se actionable defect and the homeowner need not provide evidence of causation or damages. In other words, the new law essentially overrules Aas for most defects and imposes strict liability on the builder. However, to the extent �896 does not prescribe the performance criteria for a component of the structure, the Aas rule requiring damage remains intact. The statute for actionable defects is generally limited to 10 years after substantial completion but, for some components, may be as short as four years or even one or two years. Section 896 does not apply to actions seeking recovery solely for a defect in a manufactured product located within, or adjacent to, the home, such as a defective oven. PRE-LITIGATION PROCEDURES Section 910 establishes new pre-litigation procedures for actionable defects. The procedures do not apply to claims for personal injuries, class actions or fraud-based claims. In instances where claims for personal injuries are combined with claims for actionable defects, only the defect claims will be governed by the pre-litigation procedures. A typical situation in which pre-litigation procedures would apply to some, but not all, of a homeowner’s claims is where the suit alleges water intrusion from a leaking roof combined with a mold exposure bodily injury claim. The provisions of �910 give the builder the right to inspect and repair before the homeowner can sue, which is a major departure from existing law. It should be noted that the new pre-litigation procedures have extraordinarily short time parameters under which information and investigation must be conducted. While these time parameters may be suitable for smaller cases, they will be problematic for larger, complex cases unless extended. While SB 800 is not a panacea for the problems facing homeowners and builders, it is a truly meaningful reform because it affords the parties the opportunity to repair problems in a non-adversarial, timely and potentially cost-efficient manner. SB 800 emerged from a troubled industry; it’s hoped that a stronger industry will emerge from SB 800. Steven M. Cvitanovic is a partner in the San Francisco office of Haight, Brown & Bonesteel. His practice areas include construction law, professional liability, commercial litigation and insurance.

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