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Homeowners’ Claims Alleging Construction Defects Resulting In Property Damage Are Subject To The Right To Repair Act’s Prelitigation Procedures Regardless Of How The Claims Are Pleaded.

In McMillin Albany LLC v. Superior Court, (2018) 4 Cal.5th 241,  the California Supreme Court held that homeowners’ (collectively “the Van Tassels”) claims seeking recovery for construction defect damages are subject to the Right to Repair Act (“RRA” or “The Act”, California Civil Code section 895 et seq.), and thus the Van Tassels were required to comply with prelitigation procedures under the Act even if their operative complaint did not include expressly allege an RRA claim.

The Act sets forth numerous procedures and remedies regarding residential construction defect claims.  In particular, Chapter 4 creates a prelitigation dispute resolution process, whereby a homeowner must provide written notice to the builder of the allegations, and provide the builder with the opportunity to inspect, test, repair, or compensate the owner for any alleged defect (Civil code sections 910-938).

In this case, the Van Tassels purchased 37 new single-family homes from developer/contractor McMillin Albany LLC (“McMillin”).  The Van Tassels subsequently claimed their homes were defectively constructed, and sued McMillin alleging, breach of contract, negligence, strict liability, breach of warranty, and a claim for violation of construction standards set forth in Section 896 of the Act.  The Van Tassels claimed the defects caused property damage to the homes and economic loss due to the cost of repairs and reduction in property value.

McMillin sought a stipulation to stay the litigation in order to proceed through the prelitigation procedures under the Act, prompting the Van Tassels to dismiss their Section 896 claim.  When McMillin moved for a court-ordered stay, the Van Tassels argued that because they dismissed their Section 896 claim, the Act’s prelitigation process no longer applied.

The trial court denied McMillin’s motion for a stay, following Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, (2013) 219 Cal.App.4th 98, 101, which held that the Act was created to provide a remedy for construction defects causing only economic loss, and did not alter preexisting common law remedies where actual property damage or personal injuries resulted.

The Court of Appeal granted the petition and issued a writ, disagreeing with Liberty Mutual, and another case that had followed it, Burch v. Superior Court (2014) Cal.App.4th 1411, concluding that the Act was intended to at least partially supersede common law remedies in cases where property damage had occurred.  Consequently, the Court of Appeal held that the Act’s prelitigation resolution process applied to McMillin’s case despite the fact that the Van Tassels dismissed their statutory claim under the Act, and concluded that McMillin was entitled to a stay pending completion of the prelitigation process.

The Supreme Court granted review and affirmed the decision of the Court of Appeal, relying in part on Section 896 of the Act, which clarified that the provision applies to “any action” seeking damages for a construction defect of an individual dwelling unit, not just any claim brought under the RRA.  Additionally, the Court held that the Act’s provisions “supersede any other statutory or common law” except as otherwise provided.  The Court explained that, “the Legislature made the Act the virtually exclusive remedy not just for economic loss but for property damage arising from construction defects,” and those claims not involving personal injury will in effect be treated the same procedurally going forward regardless of whether the underlying defects gave rise to any property damage.

 

 

©2018 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.

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Miles J. Dolinger
Attorney at Law

314 Capitola Avenue Capitola, CA 95010
Phone: (831) 477-9193
FAX: (831) 477-9196
miles@dolingerlaw.com

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