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California Construction Defects Litigation Update

By: Guy W. Bluff (08-Feb-2011)

Anders v. Meritage Homes of California, F059492 (5th App Dist, CA)

California Civil Code sections 895-945.5 (SB 800) was enacted in 2002 to specify the rights and requirements of a homeowner to bring an action for construction defects, including applicable standards for home construction, the statute of limitations, the burden of proof, the damages recoverable, a detailed pre-litigation procedure, and the obligations of the homeowner.

 Similar to Arizona’s statutory scheme, the pre-litigation procedures requires among other things that the homeowner give the builder notice of the alleged defects and an opportunity to investigate and repair them prior to initiating a court action seeking remedies.

 Chapter 4 of SB 800 sets out a non-adversarial pre-litigation procedure a homeowner is required to follow prior to filing suit to recover on claims of construction defects. (§§ 910, 914.) The homeowner must give written notice to the builder of the claim, describing the nature and location of the claimed violations. (§ 910.) The builder must acknowledge receipt of the notice within 14 days; if the builder elects to inspect and test the claimed defects, it must make its initial inspection within 14 days after acknowledgement of receipt of the notice, at a mutually convenient time. (§ 916.) Within 30 days after inspection and testing, the builder may make a written offer to repair the defects, explaining which defects are to be repaired and the method of repair, identifying any contractors to be used to make the repairs, and setting a reasonable completion date. (§ 917.) Within 30 days, the homeowner may authorize the repairs as proposed, or request that the builder identify other contractors that may be used to implement the repairs; after the builder identifies other contractors, the homeowner “shall authorize the builder or one of the alternative contractors to perform the repair.” (§ 918.) The repair must be commenced within specified time periods, done “with the utmost diligence,” and “completed as soon as reasonably possible.” (§ 921.)  The builder’s offer to repair the defects must be accompanied by an offer to mediate the dispute if the homeowner chooses. (§ 919.) As an alternative to an offer of repair, the builder may make the homeowner a cash offer. (§ 929.) If the builder fails to acknowledge receipt of the claim, fails to make an offer to repair, fails to complete the repair within the time specified in the repair plan, or fails to “strictly comply with this chapter within the times specified, the claimant is released from the requirements of this chapter and may proceed with the filing of an action.” (§§ 915, 920, 925, 930.) A claimant may also file an action for a violation standards alleging an inadequate repair. (§ 927.)

 Under the statutory scheme, the home builder has an option to include and contract for an alternative non-adversarial pre-litigation procedure at the time of the initial sale of the home.

 In Anders v. Meritage Homes of California, Meritage sought to enforce their “alternative” contractual requirements set forth in the purchase agreements with the homeowners, which among other things included a mandatory Arbitration Clause and various other limitation of liability agreements and limited warranty provisions.   Those alternative contractual requirements were determined to be unenforceable and unconscionable, after which Meritage attempted to compel the Plaintiffs to begin again with the statutory scheme.  Meritage’s request was rejected by the Court.

 The Court of Appeals held that builders who elect to create contractual pre-litigation remedies cannot thereafter compel homeowners to comply with the statutory procedures Civil Code sections 895-945.5 when the contractual remedies are deemed unenforceable.

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