In Acqua Vista Homeowners Assn. v. MWI, Inc., (2017) 7 Cal.App.5th 1129, the California Court of Appeal, Fourth District, clarified the burden of proof that homeowners must satisfy to prove defects in new construction against materials suppliers. The Court held that under SB 800 (the Right to Repair Act, “RRA”, California Civil Code § 895 et seq.), a material supplier may be held liable for defects in new residential construction if the supplier “caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract.”
CASE UPDATES: Construction Defect Damages Under The Right To Repair Act (Civil Code §§ 896 et seq.; aka SB 800)
This month’s Update features two cases interpreting the Right to Repair Act (“RRA,” Civil Code §§ 896 et seq.) The RRA, also known as “SB 800”, comprises a comprehensive set of substantive and procedural rules for litigating residential construction defects cases for housing units first sold as new after January 1, 2003. The RRA’s provisions include the following:
- describes “functionality standards” for applicable residential construction, that is, it identifies certain types of construction problems as being actionable defects for which builders are liable;
- defines consumer burdens of proof in trials about construction defects
- defines “builder” as a builder, developer, general contractor, contractor, or original seller, with exceptions;
- imposes upon builders obligations to provide specified minimum warranties;
- provides builders with the conditional right to repair alleged defects before being sued with relatively short action deadlines;
- fosters mediation and other prelitigation conduct to avert lawsuits;
- allows builders selling new units to formally identify owner maintenance duties to assure that owners know of them;
- extends certain statutes of limitation, while shortening others; and
- lists the affirmative defenses available to builders in most lawsuits to which SB 800 applies
In Burch v. Superior Court (2nd Dist. 2014), 2014 WL 640707, the court held that the Right to Repair Act did not provide the exclusive remedies for plaintiff’s construction defect claims and did not limit other common law damages claims. Plaintiffs purchased a custom home in Pacific Palisades that had numerous construction defects, and they brought suit against the developer, the developer’s builder and the two individuals that co-owned both companies, alleging breach of contract, negligence, breach of implied warranty, unjust enrichment, third party beneficiary breach of contract, and violations of the RRA. The defendants argued that plaintiff’s damages were limited under the RRA to only the cost of remedying the construction defects pursuant to Civil Code section 896, which states as follows:
In any action seeking recovery of damages arising out of, or related to deficiencies in, the residential 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 toviolation of, the following standards, except as specifically set forth in this title.
Based on this language, defendants argued that plaintiff’s claims for other economic and consequential damages under negligence, breach of contract and other causes of action should be dismissed. However, the court disagreed. Analyzing other relevant limitations of damages provisions in the Civil Code (Civil Code sections 943(a), 944, and 897), the court held that the RRA provides a remedy for particular residential construction defects that cause no property damage or personal injury, and that it does not preclude other common law claims for damages arising from construction defects that have caused property damage.
KB Home Greater Los Angeles, Inc. v. Superior Court (2nd Dist. 2014), 2014 WL 667368, is another Right to Repair Act case, in which the court held that an owner’s damages claim was barred under the RRA because of the owner’s or the owner’s insurance company’s failure to give the builder timely notice and an opportunity to inspect and offer to repair the construction defects and related damages. In this case, a property manager discovered a water leak in a home while it was vacant. The property manager called the homeowner, who called its insurer, Allstate, which promptly hired an emergency mitigation company to remove the excess water and to remove the water-damaged dry wall and carpets. Two months later, Allstate hired a contractor to complete the repairs. However, it was not until after the repairs were completed that Allstate submitted its RRA construction defect/damages claim to the builder (under its subrogation rights). The builder then sought summary judgment to dismiss the RRA claim based on the owner’s and Allstate’s failure to follow the RRA’s notice/inspection/opportunity to repair provisions. The court agreed with the builder and dismissed Allstate’s RRA damages claim altogether. As the court explained: “the prelitigation procedure in chapter 4 [Civil Code sections 910-938] . . . begins with the homeowner’s notice of defect, gives the builder an opportunity to inspect, and leads to mediation or an offer of repair or cash. The sequential procedure fulfills the purpose of the Act ‘to give a builder the opportunity to resolve a homeowner’s construction defect claim in an expeditious and nonadversarial manner.’”
The court expressly rejected Allstate’s argument that the RRA’s notice procedures should not apply in cases of emergency, stating that the RRA does not prevent the homeowner from seeking immediate redress from the builder in a catastrophic damage case, that only reasonable notice may be required, and that builders have incentive to act quickly in such cases because of their liability for relocation costs, loss of income damages (for home-based businesses), and other consequential damages.
©2014 Miles J. Dolinger. This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship.