When Does SB800 Apply?

Effective Jan. 1, 2003, SB800 establishes a mandatory process prior to the filing of certain types of construction defect law suits. The bill applies in California whenever there are defects alleged by a homeowner in new residential construction, but does not apply to condominium conversions or apartments of commercial buildings.

Who is Covered by the Law?

The law provides that any construction defect action against a developer, home builder, general contractor, subcontractor, product manufacturer or design professional will be governed by the standards set forth in SB800. Note that existing Certificate of Merit requirements for design professionals are not abrogated by SB800.

What is a "Defect" Under SB800?

The law attempts to specifically define what constitutes a "defect" for virtually all aspects of a residential building and its appurtenant systems. Most of the definitions for defective construction concentrate on water intrusion issues (requiring that building systems such as windows, doors, roofs and plumbing "shall not leak") and also provides that the defects "shall not materially impair the use of the structure by its inhabitants."

Requirements Before a Lawsuit is Filed?

The statutory process outlined in SB800 must be exhausted prior to the filing of a lawsuit. A homeowner or HOA initiates the process by first submitting a written claim to the developer's designated agent. If no offer to repair the alleged defects is made by the developer, or if the developer otherwise fails to adhere strictly to the process, the homeowner or HOA may proceed with the filing of a lawsuit.

What is the Timetable for the Claims Procedure?

The following hypothetical schedule assumes that an owner or HOA has notified the developer of alleged defects on January 3, 2025. It is also assumes (for purposes of simplicity and to illustrate the maximum duration of the statutory pre-litigation process), that each event takes place on the last day of the period allowed under the law.

• Owner or HOA submits a claim to the developer on January 3, 2025.

• The developer must "acknowledge" the claim by January 17, 2025.

• If the developer sends owner or the HOA a written acknowledgment on January 17; it then has until January 31, 2025 to complete its preliminary inspection.

• Developer has until February 3, 2025 to request a second inspection. This second inspection must be completed within 40 days, i.e., by March 15, 2025.

• Developer then has until April 14, 2025 to make its offer to repair some, all, or none of the alleged defects and to suggest a contractor to perform the work.

Interplay Between SB800 and the Calderon Process?

Civil Code Section 1375 (commonly referred to as the "Calderon" bill) sets up an analogous prelitigation process for common interest development projects such as condominiums. The pre-trial process prescribed by Section 1375 is mandatory and involves a minimum 6-month period of information exchange and alternative dispute resolution ("ADR") sessions between the prospective litigants. SB800 creates another, entirely separate, pre-litigation process that lasts for at least 101 days. 8ecause it is entirely foreseeable that certain residential projects will fall within the both 58800 and Calderon, SB800 contains an express provision excusing compliance with Section 1375's provisions where the requirements of the two statutes are "substantially similar."

How Does SB800 Affect the Aas Case?

Liability would arise in spite of the Supreme Court's decision in Aas v. Superior Court (2000) 24 Cal.4th 627 (which held that only those construction defects causing property damage are actionable under negligence and strict liability theories). Under SB800, it is not required that the "construction defects" enumerated in the legislation cause property damage, thereby amounting to a legislative veto of the Aas decision.

Does SB800 Change Existing Statutes of Limitation?

Existing law provides that an action based on defects not apparent from a reasonable inspection ("latent" defects) must be brought no later than 10 years after "substantial completion" of the development or improvement. Although SB800 maintains the 10-year statute of limitations for actions falling within the ambit of the bill, there are shorter time frames prescribed for certain types of defects (Le., 1 year for noise transmission and irrigation system claims, 2 years for defective wood posts, 4 years for defective steel fences, 5 years for painting claims, etc.). Further, if the 10-year statute of limitations expires during the 58800 process, it will be extended for 100 days following completion of the repairs. The 10-year statute of limitations is also extended in the event a mediation occurs after completion of the repairs.

What Immunity for 3rd-Party Inspectors Does SB800 Provide?

58800 provides immunity from liability to third-party inspectors including cities and counties. This immunity would extend to any potential claimant except the person who retains the inspector, meaning only a person paying the inspector for his/her services could sue for negligence. A third-party inspector will be required to meet certain minimum experience requirements to qualify for the immunity, and will also be required to maintain a minimum of $2 million in liability insurance coverage.

Is A Developer Released after Completing Repairs?

A developer is not released after completing repairs. The law presumes that a developer warrants implicitly, in addition to any express warranties on the original construction, that the repairs will be reasonably adequate to restore the structure to the condition intended by its designers, and that the units will be reasonably habitable by its occupants. Specifically, a developer may not obtain a release or waiver of any kind in exchange for the repair work mandated by the bill. If the repairs fail before the statute of limitations runs, an HOA or owner may still bring a lawsuit against the developer. However, nothing in the law prohibits a developer from obtaining an enforceable release in exchange for a cash payment.

• The Homeowner or developer may consider developer's offer until May 14, 2025.

• Should the owner or HOA object to the repair designated by the developer, the developer has until June 18, 2025 to provide the HOA or owner with a list of three alternative contractors. The developer may also make a final, "non-invasive" inspection, ostensibly to facilitate the involvement of the repair contractor, by June 3, 2025

• Assuming the HOA or owner or agrees to a repair contractor on June 18, 2025 repairs must commence by July 2, 2025.

• "Every effort" must be made to complete repairs by October 30, 2025.

• Total duration of the illustrated process: 300 days.

What Happens If the HOA or owner Does Not Follow SB800?

If an HOA or owner does not file a written claim with the developer in advance of filing suit, SB800 provides for a statutory bar to the action and a court would have no authority to hear the case. The case would be dismissed without prejudice, meaning it could be re-initiated at a later time, after proper exhaustion of the SB800 process.

What Defenses are Available?

The law sets forth certain statutory affirmative defenses available to the developer for: (a) unforeseen acts of nature in excess of the design criteria expressed by the applicable building codes; (b) HOA's or owner's unreasonable failure to minimize or prevent damages; (c) HOA's or owner's failure to follow recommended or commonly accepted maintenance obligations; (d) defects caused by alterations, ordinary wear and tear,  misuse, abuse, or neglect; (e) defects barred by the statute of limitations; (f) defects subject to a valid release; and (g) the extent that developer's repair was successful in correcting the defects.

What Happens After the Process is Completed?

If the developer has not strictly adhered to the process, the Homeowner or HOA need not follow the process for matters not covered by the legislation (i.e., alleged defects in products, such as washers/dryers, etc., which have been manufactured' completely offsite).

How Are Subsequently Discovered Defects Handled?

All defects discovered after the process is completed .would require the initiation of a new SB800 procedure and the developer is not responsible for repairs of defects which it had no notice of or opportunity to repair. If the statute of limitations has already run when the defect is discovered, the process cannot be initiated and no lawsuit may be brought. If the process is initiated prior to the running of the statute, the statute will be extended to allow the HOA or owner and the developer to complete the process.

Admissibility of SB800 Proceedings.

If an action to enforce the law's standards is initiated in court by an HOA, the fact that a repair effort was made may be introduced to the trier of fact, and evidence of the parties' conduct during the repair process may be introduced during a subsequent enforcement action. Repair efforts by a developer are not considered confidential and privileged settlement communications and may not be withheld from evidence on this basis.

What Effect Does SB800 Have Upon Warranty Obligations?

It requires developer to provide minimum one-year express warranty covering the "fit and finish" of cabinets, mirrors, flooring, interior and exterior walls, countertops, paint finishes and trim. The law also permits developers to exceed the warranty standards of the bill and provide HOAs with other more extensive warranties.

What Mediation Procedures are Contained in SB800?

If a developer has complied with the laws requirements and has completed repairs prior to the filing of an action by an HOA (and if there has been no previous mediation between the parties), the then required to request mediation in writing. In the event that a mediation is undertaken at this point, any applicable statutes of limitation will be tolled. SB800 also allows a developer to pursue ADR as an alternative to its provisions. However, a developer may not pursue ADR as an alternative to SB800 and then also insist on compliance with the SB800 process after completion of ADR.

Who May Participate in the 5B800 Process Besides Developers?

SB800 provides that if the developer intends to hold a subcontractor, design professional, or material  supplier, including an insurance carrier, warranty company, or service company, responsible for its contribution for any construction defects, the developer shall provide notice to that person or entity sufficiently in advance to allow them to inspect the alleged defects and to participate in the repair process.

For more information regarding S8800 and its implications on construction defect litigation, please contact us.

 

 

 

Construction Defect Prelitigation Procedures

Developer's Breach of Fiduciary Duty

Non-Payment of Assessments by Developer

Signs of Common Construction Defects

Construction Defect Statutes of Limitations