by John McGill
The courts are supposed to determine how the facts fit the law and then apply the law, and they do that with great efficiency. But the fact that they decide if the facts fit the law also means that the courts get to determine what the law means, and therein lies the problem. If a judge does not like the way an outcome might be determined under one interpretation of a statute they can re-interpret the law to get the decision that is more in line with the outcome they might think is better suited to the case. Sometime this is OK, but sometimes it monkey wrenches the whole scheme and where there is a monkey wrench thrown into the law, you can bet there will be attorneys fighting over whose monkey wrench it is and whether it should stay or go.
That’s what happened and is happening with the Right to Repair Act (SB 800) that the Legislature implemented in 2003. The point of the legislative scheme was to clarify how homeowners with construction defects could have those issues addressed by the builder or general contractor in an efficient and fair way. Prior to 2003, construction defect litigation was a free for all and the law was unclear and sometimes contradictory in the way that construction defect claims could be adjudicated. One particular case Aas v Superior Court precipitated a lot of debate because the California Supreme Court ruled that if a deficiency had not caused any damage, even if it was likely that it would, the homeowner could not sue the contractors for repair costs. The Aas court ruled this type of issue was a breach of warranty claim (an economic loss because you didn’t get what you paid for) and not a defect that entitled the plaintiff to damages. Warranty was still actionable, just not as a defect claim.
Aas was great for contractors, but not so good for homeowners, and so the Legislature got together with attorneys and representatives of the insurance and building industry and worked out the SB 800 framework. The statutory scheme addressed what kinds of defects would be covered (water intrusion, structural issues, soil issues etc), what standards would apply, and what time limits would attach for bringing any claim. It didn’t matter whether the defect was causing damage or not, if there was a problem because the work did not meet the statutory requirements, the homeowner could make a claim.
Once the homeowner knew of the problem though they had to let the builder/general contractor know. The builder would then have an opportunity to inspect the problem in a certain time frame and then to make an effort to repair the problem; hence the name Right To Repair Act. The parties would work together to correct the problem. If they could not, then a lawsuit could be filed, but before then there was a procedure in place to address the issues. And of course the builder and homeowner could always settle their dispute.
This worked well enough until 2013 when it was all thrown up in the air by the decisions in two cases: Liberty Mutual v Brookfield and Burch v Superior Court. In both cases, the Courts of Appeal ruled that the SB 800 Right to Repair statutes are not the exclusive remedy for homeowners with construction defect claims. Instead, according to these cases, the Right to Repair Act is only intended to allow homeowners to make claims for defects that have not resulted in damage. SB 800 therefore does not preclude the homeowner from asserting other defect claims under common law and because the common law claims have a different statute of limitations, any SB 800 timeframes and functionality standards that determine whether there is a defect do not apply.
So much for SB 800 and cutting down on construction defect litigation!
According to these two decisions, the SB 800 scheme is limited and does not really address the full scope of construction defects. The fact that the first part of SB 800 states that “In any action seeking recovery of damages arising out of, or related to deficiencies in residential construction …. the claimant’s claims or causes of action shall be limited to violation of the following standards, except as specifically set forth in this title” apparently does not mean what it says. The SB 800 statutes also provide that “The standards set forth …are intended to address every function or component of a structure…” , so again, it is not clear how the courts arrived at the conclusion that SB 800 is not all inclusive.
Likewise, courts dealing with the notice provisions of SB 800 have decided that until and unless a homeowner complies with the statute, they cannot bring an action for defects, assuming the builder included the SB 800 provisions in the purchase agreement. (The McCaffrey Group Inc v Superior Court) If the Burch and Liberty Mutual decisions are correct, then a homeowner can ignore all of the purchase agreement SB 800 requirements and immediately sue the builder under common law causes of action.
The Burch and Liberty Mutual courts also based their decisions on the fact that the Legislature did not change the patent defect and latent defect statute of limitations so therefore the Legislature must not have intended to change the common law claims that were traditionally raised in defect litigation. The argument ignores the fact that the SB 800 scheme changed the limitations periods for residential defects only and there are other patent and latent construction defects in, for example, commercial or industrial construction projects that would not be covered by SB 800.
If you are working on residential projects, be aware that the provisions in SB 800 can no longer be taken for granted. What the Legislature gave, the courts have (somewhat)taken away and what was once a fairly clear statute (SB 800) is now not so clear; in fact, it’s pretty muddied up.
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Bio: John P. McGill is an attorney and represents contractors and suppliers throughout the Bay Area and Northern California in both private and public work disputes and in employment, transactional, and administrative matters. He is the author of California Contractor’s DESKTOP GENERAL COUNSEL What You Need To Know About California Construction Law. Contact: Work - 925-952 5403 or Cell- 707 337 1932. Or email at johnmcgill310@gmail.com