Under Right to Repair Act, Builder Must Timely Respond to Homeowner’s Notice of Claim Despite Inadequate Specificity of Alleged Defects

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In California, the Right to Repair Act, codified at Civil Code sections 895 et seq., was established with the goal of resolving construction defect claims in an expeditious and non-adversarial manner. The Act requires that, prior to filing a lawsuit, a homeowner must provide the builder with a notice of claim. The notice must contain the claimant’s name, address, and preferred method of contact. The notice must also state that claimant is alleging a violation pursuant to section 910 of the Act, and describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the alleged defects.

Once such a claim is delivered via overnight mail, certified mail, or personal delivery to the builder, the statutory timelines go into effect. The builder must acknowledge receipt of the claim within 14 days, may elect to conduct an initial inspection of the property within the following 14 days, and may offer to repair the violation and compensate the owner within 30 days of the initial or second inspection. The owner then has 30 days to authorize the builder to proceed with the repair or request alternative contractors. If the builder fails to strictly comply with any of the requirements or timelines, the owner is released from the requirements of the Act and may proceed with filing a lawsuit.

In a recent case, Blanchette, the owner of one of 28 homes constructed by GHA Enterprises, served GHA with a notice of claim under the Act. GHA did not respond to the notice until 21 days later. GHA’s response asserted that Blanchette had not alleged the defects with sufficient detail as required by the Act. Because the response took 21 days, Blanchette took the position that it was untimely and filed a construction defect class action against GHA. GHA moved to stay the lawsuit, and the trial court granted the motion, agreeing that Blanchette’s notice of claim lacked sufficient detail to trigger GHA’s obligations under the Act.

The Court of Appeal reversed the trial court decision, finding that the timelines under the Act are to be strictly construed. Although the Court agreed that Blanchette’s notice of claim lacked sufficient detail of the alleged defects, the Act nonetheless requires that the builder respond and acknowledge the claim within 14 days. Here, the builder should have raised any objection to the sufficiency of the notice within the 14 day time period rather than relying on that defect as a basis to delay the response. Because GHA did not timely acknowledge receipt of the claim and set forth its objections, Blanchette was released from the requirements of the Act and could proceed with the lawsuit.

This case serves as a reminder to builders in California to make sure and strictly comply with all provisions of the Right to Repair Act, or risk becoming embroiled in what may become much more lengthy and expensive civil litigation.

Blanchette v. Superior Court (GHA Enterprises) (Feb. 10, 2017) 17 C.D.O.S. 1302

(2/17)

Broker Denied Commission Is Allowed to Proceed With Case Against Non-Signing Owners

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Jacobs, a licensed real estate broker, signed a vacant land listing agreement granting her the exclusive right to sell a parcel of property in Marin County. The listing agreement was signed by one of the property owners, Locatelli, as trustee for the Locatelli trust. There were signature lines on the listing agreement for five additional owners, but they did not sign. However, the term “owner” was defined in the agreement as the Locatelli trust “et al.”, which means “and others”. Locatelli told Jacobs he was authorized to act on behalf of all owners.

Jacobs marketed the property and found a potential buyer, The Trust For Public Land (TPL). When Jacobs informed Locatelli, he claimed that he had already been speaking with TPL for 3 years and would deal with them directly. He instructed Jacobs to cease all communications with TPL. The owners later sold the property to TPL, and refused to pay Jacobs a commission.

Jacobs filed a complaint against the owners and TPL to recover the commission. The owners who had not signed the listing agreement moved to dismiss the case against them, and the trial court granted their demurrer. The court of appeal reversed the decision, thus keeping all the owners in the case.

The non-signing owners argued that Jacobs’ complaint was barred by the statute of frauds, which provides that a broker’s commission agreement is invalid unless some form of it is in writing and signed by the party to be charged or the party’s agent. The court, however, found the statute inapplicable because Jacobs alleged there was a written agency agreement between Locatelli and the owners allowing him to act on their behalf, and he signed the listing agreement. In addition, Jacobs alleged that at least two of the other owners had acknowledged her as the listing broker during the marketing of the property. As such, the court of appeal held that the trial court should have allowed extrinsic evidence on these claims rather than dismissing the complaint.

The owners also argued that the parol evidence rule barred introduction of extrinsic evidence to dispute the listing agreement because it was a fully integrated and thus a final agreement. The court of appeal also found this rule inapplicable, because there was no apparent contradiction between the terms of the listing agreement and Jacobs’ allegations, i.e., that all owners had retained her through their agent, Locatelli.

This case was decided correctly under the facts and circumstances involved. It is nonetheless an important warning and reminder to brokers and agents to ensure that all necessary parties sign listing agreements and other transaction documents, so as to avoid unnecessary litigation and problems down the line.

Jacobs v. Locatelli (Feb. 9, 2017) 17 C.D.O.S. 1232

(2/17)

Where Broker Acts as Dual Agent, Listing Agent Owes Equivalent Fiduciary Duty to Buyer

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It is settled law in California that a real estate broker representing both seller and buyer has fiduciary duties to both parties. In a recent decision, the California Supreme Court has now confirmed that, when there is such dual agency by the broker, the associate licensee acting solely as the listing agent under the broker’s license also has a fiduciary duty to the buyer.

In this case, seller retained Coldwell Banker to list a luxury residence for sale. The listing agent marketed the home as having approximately 15,000 square feet, which was more than reflected in public records. Buyer was also represented by Coldwell Banker, but by a different salesperson in a separate office. As required by law, buyer had knowledge of and consented to the dual agency. The listing agent provided copies of public records and the marketing flyer, but did not advise buyer to verify the square footage. After the purchase, buyer discovered the discrepancy and sued for breach of fiduciary duty.

Initially, the trial court decided that listing agent had no fiduciary duty to buyer. After the Court of Appeal reversed that decision in 2014, the California Supreme Court agreed to hear the case. The court first examined the history of dual agency in California, noting many developments since the early 1980s. At issue was interpretation of the final two sentences of Civil Code section 2079.13(b), in which the term “agent” refers to the broker and contemplates a real property transaction: “The agent…bears responsibility for his or her associate licensees who perform as agents of the agent. When an associate licensee owes a duty to any prinicipal, or to any buyer or seller who is not a principal,…that duty is equivalent to the duty owed to that party by the broker for whom the associate licensee functions.”

The listing agent argued that, taken in context, the “equivalent” language merely clarifies that the broker assumes duties owed by its agents, not the other way around. The court, however, agreed with buyer’s contrary position that because the agent’s authority derives solely from that of the employing broker, the second sentence imposes on the agent the same responsibility as held by the broker. This reading of the statute is supported by its full legislative history.

As such, the court affirmed that listing agents, when their brokers act as dual agents, owe buyers a duty to learn and disclose all information materially affecting the value or desirability of the property being purchased. In this instance, that included a duty by the listing agent to the buyer to investigate and disclose everything he could learn about the square footage. Here, the duty to investigate arose because there was a known discrepancy regarding square footage.  This decision further clarifies and strengthens protection afforded to real estate buyers in California.

Horiike v. Coldwell Banker Residential Brokerage Company (Nov. 21, 2016) 16 C.D.O.S. 12228

(12/16)

“Buyer/Tenant” Beware: Purchase Contract May Include Lease Agreement

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The case of Taylor v. Nu Digital Marketing, Inc. involved an unusual purchase contract for residential property.  The contract set forth payment of the “purchase price,” and also included a provision that Buyer would pay monthly “probationary installments” for 60 months, which would not count toward the purchase price.  Only payments in excess of the monthly probationary amount went toward the purchase price.  The contract also provided that the probationary payments would increase by any increase in the mortgage payments.  Finally, the contract gave Buyer the right to possession only while making the monthly probationary payments, and gave Seller the right to evict Buyer for failure to do so if not cured.

 

The monthly mortgage increased but Buyer failed to pay the corresponding increase in the monthly probationary amount.  Seller served a five-day Notice to Quit, and Buyer failed to cure.  Seller filed an unlawful detainer action, and the court ruled in favor of Seller, finding that the “purchase contract” also included a lease agreement, with the “probationary installments” as rent.  Seller appealed, arguing that the contract was for purchase and sale, and thus Buyer could not state a claim for unlawful detainer.

 

The appellate court affirmed.  While unlawful detainer actions are typically not available to a seller to regain possession of property when the buyer defaults on an installment payment on the purchase price, they are available to a landlord when a tenant fails to pay rent or otherwise breaches a lease.  The court recognized that an agreement can be for both a purchase/sale and lease, where possession is achieved through a landlord-tenant relationship.   In determining whether the contract at issue is for purchase and sale, a lease, or a combination thereof, the court looked to the rights and obligations of the parties.

 

In this case, the contract did not require a down payment and subsequent installment payments to pay off the purchase price.  Rather, it required a down payment plus monthly probationary installment payments for 60 months.  Possession was conditioned on the continued payment of the probationary amounts.  Importantly, only payments in excess of the probationary payments went toward the purchase price.  The court therefore concluded that the probationary installment payment provisions created a 60-month lease, with the monthly payments constituting rent.  This was bolstered by the fact that both parties routinely referred to such payments as “rent.”  As such, an unlawful detainer action for non-payment of rent was appropriate.

 

Buyers, sellers and brokers should pay careful attention to purchase contract language that may raise lease issues.

Taylor v. Nu Marketing, Inc. (2016) 16 C.D.O.S. 2284

(03/16)

Interfere With Your Neighbor’s Trees, Be Prepared to Restore Them And Pay Money Damages Times Three

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The Salazar family (“plaintiffs”) lived in San Francisco but owned, since 1982, a 10-acre parcel of rural property in Mendocino County that they visited frequently over the years.  The property, which included many large trees and a spring, was completely undeveloped except for a small cabin, and the family enjoyed it as a respite from city life.  Plaintiffs valued the property and the trees in their undisturbed natural state for aesthetics, recreation and privacy.

 

Defendant Matejcek purchased the adjacent 20-acre parcel in 2007.  Without first conducting a survey, defendant cleared numerous trees on plaintiffs’ property, and added a road, fence, gate, plastic water tanks and a pool, all of which encroached on plaintiffs’ property.  He also apparently moved markers placed by plaintiffs’ surveyor.

 

The court awarded money damages for encroachment, treble damages for removal of timber, and an injunction requiring defendant to restore plaintiffs’ land.  Defendant appealed.

 

The measure of damages for wrongdoing that injures property, including trees, is the amount that will compensate for all the detriment proximately caused thereby.  (Civ. Code § 3333.)  Typically, this is measured by the monetary value of the property before and after the damage.  However, this measure may be insufficient where the aesthetic and personal value of the trees to the owner exceeds their monetary value.  In that case, the court may devise an alternative measure based on a more appropriate formula, such as the cost of restoring the property to its former condition even if the cost exceeds diminution in value.  Plaintiffs here relied on this “personal reason” exception to the standard measure of damages, and their expert estimated a cost of $67,500 to remediate the trees.  The court thus found that a damage award of $67,500 was reasonable even if the entire 10-acre parcel was worth only $75,000.

 

The court then trebled the restoration damages to $202,500 based on a finding of willful and malicious conduct.  (Civ. Code § 3346; CCP § 733.)  The evidence showed that defendant had pulled records and harassed plaintiffs to sell him their property for years before he purchased the neighboring parcel, did not obtain a survey prior to the work, may have moved or ignored survey markers, and failed to advise plaintiffs of his construction plans.

 

Defendant also argued that plaintiffs elected to recover money damages and could not also obtain equitable relief.  An injunction provides an equitable remedy as opposed to money damages.  In order to obtain such equitable relief, where the court orders that defendant take or refrain from some action, plaintiff must prove that there is no other adequate remedy.  The court can then fashion the remedy that is most appropriate under the circumstances.

 

Here, plaintiffs alleged irreparable injury to their property rights because continuance of the encroachments could ripen into a prescriptive easement and give defendant legal rights to use it.  This could not be compensated by an ordinary damage award.  The court thus ordered a permanent injunction compelling defendant to remove the encroachments, return the roadway to its original grade, and to otherwise restore the property, after which plaintiffs could replant the trees for their use and enjoyment.  Had the encroachment been innocently made and not caused irreparable injury, and if cost of removal outweighed inconvenience to plaintiff, the court could have denied the injunction and awarded only money damages, but here both the legal and the monetary remedy were fully warranted.

 

Salazar v. Matejcek (2016) 16 C.D.O.S 2682

 

(03/16)

Appellate Court Slams Scofflaw Tenant for Bogus Anti-SLAPP Motion

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This case pitted the competing goals of two very important statutory schemes.  On the one hand, an unlawful detainer action provides landlords a means to evict a tenant in a short, simplified proceeding where the only issue to be tried is whether the tenant is in lawful possession of the premises.  The availability of such an expedited procedure is hugely important to landlords, especially given that landlords are prohibited from using “self-help” to remove a tenant.

 

This case pitted the competing goals of two very important statutory schemes.  On the one hand, an unlawful detainer action provides landlords a means to evict a tenant in a short, simplified proceeding where the only issue to be tried is whether the tenant is in lawful possession of the premises.  The availability of such an expedited procedure is hugely important to landlords, especially given that landlords are prohibited from using “self-help” to remove a tenant.

 

On the other hand, the anti-SLAPP statutory scheme is designed to deter the filing of non-meritorious lawsuits which are aimed at thwarting a party’s valid exercise of protected activity, such as the exercise of free speech or the filing of a lawsuit to remedy a wrong.  When invoked by a defendant in a proper case, a plaintiff must present evidence at the very beginning of a case to establish the probable validity of their case or face dismissal.  Moreover, discovery is stayed pending resolution of the motion.

 

In what may have seemed like clever legal maneuvering at the time, the tenant in this case (who was behind in rent and presumably knew that eviction was inevitable) filed an action claiming its landlord was liable for allowing another tenant to monopolize parking spaces in a shopping center.  After the landlord filed a separate unlawful detainer (eviction) action, the tenant responded by filing an anti-SLAPP motion to strike which argued that the landlord’s unlawful detainer action was filed to thwart tenant’s exercise of its free speech rights.

 

The trial court denied the motion to strike and sanctioned the tenant almost $3,500 for filing a frivolous motion, finding that the purpose of the landlord’s unlawful detainer action was to address the tenant’s failure to pay rent and common area charges rather than to thwart the tenant’s public participation in a protected activity.  The Court of Appeal agreed that while the tenant beat the landlord to the courthouse by filing its action first, the mere timing of the two lawsuits was not dispositive.  The court looked to the California Supreme Court’s opinion in Navellier v. Sletten, (2002) 29 Cal. 4th 82, which provides that the mere fact that an action was filed after, or even triggered by, protected activity does not establish that the action arose from that activity as required by the anti-SLAPP statute.

 

Applying the holding of Navellier, the Court of Appeal concluded that “the unlawful detainer complaint arose from Tenant’s unprotected activity in allegedly failing to pay rent and CAM charges, rather than from its protected petitioning activity in filing the prior lawsuit.”  According to both the trial court and appellate court, this was not even a close call.

 

This decision is yet another reminder that, as powerful as an anti-SLAPP motion to strike can be, discretion must be used in bringing such motions because they are only proper in cases which truly arise from protected activity.

Olive Properties v. Coolwaters Enterprises, Inc. (2015) 241 Cal.App.4t 1169

(03/16)

Ninth Circuit Confirms Old Adage in Home Buyer’s Rescission Action: “He Who Hesitates Is Lost”

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First Tennessee National Bank Association (“FTB”) initiated a nonjudicial foreclosure on residential real property and sold the property at a foreclosure sale to DM Residential Fund II, LLC (“DM”).  The property lacked a utilities easement needed to provide electrical service to the new home on the property.  DM discovered the easement issue shortly after buying the property but waited two years to file suit against FTB seeking to rescind the transaction based on FTB’s failure to disclose this defect.

 

The district court granted FTB’s motion for summary judgment on the grounds that DM was not entitled to the equitable remedy of rescission.  Even though a jury could have reasonably concluded that DM could not have discovered the utility easement issue prior to the foreclosure sale, and therefore a genuine issue of material fact existed, a party seeking the equitable remedy of rescission must do so “promptly upon discovering the facts which entitle him [or her] to rescind.”  (Civ. Code § 1691.)

 

It was undisputed that shortly after the sale DM discovered it did not have electricity and could not obtain any absent the purchase of an additional easement.  Nevertheless, the Ninth Circuit, relying on a 1920 California Supreme Court case, ruled that “a reasonable person would be put on inquiry notice as to whether there had been some wrongdoing in the sale of the residence, at which point a duty to investigate the wrongdoing arises.”

 

DM presented no evidence that would allow a trier of fact to conclude it would not have been able to discover the facts supporting its right to rescind at the time it discovered the defect.  The Court further noted that DM took actions inconsistent with “unwinding the contract” including encumbering the property, building improvements and attempting to sell it.  By taking those actions and waiting two years to sue FTB, DM affirmed the transaction and its right to rescind was gone.  As such, the Ninth Circuit concluded that there was no genuine question of material fact on this issue and affirmed the trial court’s granting FTB’s motion for summary judgment.

 

The moral of the story is he who sits on his rights, with knowledge that his rights may have been violated, is lost and may be stuck with a defective property with no path for recourse.  Therefore, a party who may be entitled to rescind a contract must act “promptly upon discovering the facts which entitle him to rescind” or else he may find himself stuck with the object of the contract.  And this is true even if any applicable statute of limitations has yet to expire such as the three-year statute of limitations for fraud; an argument made in the dissenting opinion.

DM Residential Fund II, LLC v. First Tennessee Bank Nat’l Assoc. (December 30, 2015) 2015 U.S. App. LEXIS 22816.

(03/16)

Homeowners Were Not Liable, This Time, for Injury Sustained by Employee of Their Unlicensed, Uninsured Contractor

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Vebr v. Culp serves as a cautionary tale for any homeowner considering hiring a contractor to perform work on their home.

 

The Culps contracted with OC Wide Painting to paint the interior of their home. The contract specified that OC Wide had workers’ compensation insurance, or would acquire it. Culp confirmed online that OC Wide had a valid license and also checked OC Wide Painting’s references. Before signing the contract, Culp reviewed the California Contractors State License Board’s detail for OC Wide which stated: “This License is exempt from workers compensation insurance; they certified that they have no employees at this time.”

 

An hour into working in the Culps’ home, OC Wide’s employee, Plaintiff Tomas Vebr, fell from an extension ladder provided by OC Wide resulting in serious injury. The ladder was supported by two helpers employed by OC Wide. OC Wide never did acquire workers’ compensation insurance as promised in the contract and the Culps did not halt the project despite the fact that other individuals were working in their home.

 

California Business and Professions Code § 7125.2(a)(2) provides that a contractor’s license is automatically suspended by operation of law as of the date the contractor is required to obtain workers’ compensation insurance but fails to do so. Labor Code § 2750.5 provides that a worker who performs services for which a license is required but lacks such a license is rebuttably presumed to be an employee, not an independent contractor.

 

Vebr sought to hold the Culps liable in tort under the theory of respondeat superior as Vebr’s statutory employer in light of OC Wide’s unlicensed and uninsured status. The Culps moved for summary judgment on the grounds there were no facts to show that they were liable for Vebr’s injuries, that they breached any duty owed to Vebr, that the premises were dangerous or defective, or that the Culps’ actions were the legal or proximate cause of Vebr’s injuries. The trial court agreed and granted the motion for summary judgment. Vebr appealed, and the Court of Appeal, Fourth Appellate District, affirmed the decision of the Orange County Superior Court.

 

Ordinarily, when an employee sustains a worksite injury, the exclusive remedy is provided by the workers’ compensation law, and the employer is immune from a lawsuit. (Lab. C. §§ 3600, 3601, 3602.) But if the employer has not secured workers’ compensation coverage, an injured employee may bring a civil suit against his employer. (Lab. C. § 3706.) If the employee establishes that he was injured in the course and scope of his employment, a rebuttable presumption is created that an uninsured employer was negligent and the employer is precluded from claiming comparative fault or assumption of risk as a defense. (Lab. C. § 3708; Huang v. L.A. Haute (2003) 106 Cal.App.4th 284, 289–291.)

 

When an employee of a contractor is injured, and the contractor is unlicensed and uninsured at the time of injury, the injured employee’s recourse may be against not only the contractor, but also against the landowner who hired the contractor, as an additional employer. (Heiman v. Workers’ Comp. Appeals Bd. (2007) 149 Cal.App.4th 724, 734.) The injured employee may have the landowner deemed a “statutory” employer and seek workers’ compensation benefits through the landowner’s general liability or homeowners’ insurance policy. In this case, the Culps were insured under a homeowners’ policy but Vebr did not qualify as a “residence employee” under that coverage. This meant that if the Culps were found liable, they would have to pay out of pocket for Vebr’s injuries.

 

The potential scope of a homeowner’s tort liability to an injured employee of an unlicensed contractor whom the homeowner hired has not yet been resolved by the California Supreme Court. (See Cortez v. Abich (2011) 51 Cal.4th 285, 291 [“Whether unlicensed contractors or their workers may or must be deemed the homeowners’ employees under section 2750.5 … are difficult and unsettled questions.]; Ramirez v. Nelson (2008) 44 Cal.4th 908, 916 [same].

 

The Court ruled that it did not need to decide whether the Culps were the statutory employer of Vebr because no triable issue of material fact existed regarding such liability. The court concluded: “Here, the undisputed facts show the cause of Vebr’s fall is a mystery. There is no evidence showing what had occurred or that Vebr was free from negligence himself. There is no evidence, for example, that at the time of the fall, he was holding on the ladder with two hands and did not cause the fall himself by losing his balance. On this record, there is no reasonable and logical inference that…anyone…present in the residence at the time of the accident, was negligent. Someone might have been negligent, but we do not and likely never will know whether that was the case.”

 

Don’t count on being as lucky as the Culps. If you are considering hiring a contractor to perform work in your home, review their license and insurance status. If the license deems the contractor exempt from carrying workers’ compensation insurance because there are no employees, make sure no one other than the contractor himself performs work at the property. Otherwise, immediately halt the work and demand written proof of workers’ compensation insurance. Doing so will reduce the possibility of being deemed a statutory employer and possibly held liable for injuries sustained by workers on your property.

 

Vebr v. Culp (2015) 14 C.D.O.S. 11845

(12/15)

Physical Division of Property Does Not Necessarily Equate to Division Under the Subdivision Map Act

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Save Mount Diablo v. Contra Costa County involved the question of whether an imminent domain taking which physically splits an existing parcel into several non-adjacent pieces constitutes a subdivision of the original parcel under the Subdivision Map Act, thus allowing a would-be developer to forego the often onerous requirements of the Subdivision Map Act.

 

The property in question consisted of a large undeveloped tract off Vasco Road in Eastern Contra Costa County. Historically, the tract had been recorded as a single parcel and used for agricultural purposes, but in the mid-1990s the Contra Costa Water District (“District”) acquired two narrow intersecting strips of land by eminent domain for an underground pipeline and to relocate Vasco Road, respectively. The District’s acquisition of the strips in fee left a remaining property consisting of four irregularly shaped parts, each physically separated from the other parts by one of the strips owned by the District.

 

Nunn, the property owner who had purchased the property after the District’s acquisition of the strips, first attempted to subdivide the land using the parcel map process outlined in the Subdivision Map Act. After those efforts proved unsuccessful, Nunn changed course and instead sought a certificate of compliance from the County. While the County initially denied the request at the planning staff level, the matter was brought before the Planning Commission, which reversed the staff’s decision. The County Board of Supervisors eventually agreed with the Planning Commission and issued four certificates of compliance (i.e., one for each physically separated portion of the property) certifying that the four newly created parcels complied with the Subdivision Map Act.

 

Save Mount Diablo (“SMD”) filed suit, petitioning the Court for a Writ of Mandate requiring the County to set aside the four certificates of compliance. The trial court granted SMD’s petition and the Court of Appeal, First Appellate District, affirmed. The Court first examined the purpose of, and procedures mandated under, the Subdivision Map Act’s requirements for creation of a new legal parcel. Next, the Court considered Nunn’s main argument, that the District’s physical division of the Property by acquiring the strips traversing the Property constituted a “division” under the act. While Nunn contended that the District had effectively divided the Property because the result was four non-contiguous “parcels,” the Court disagreed.

 

While the Court agreed that the District’s acquisition of the strips physically divided the Property, such that a person would need to traverse the District’s property in order to travel from one portion of the Property to another, the physical division of the property by imminent domain did not constitute a division of the Property under the Subdivision Map Act. On this issue, the Court found that a physical division of property was not determinative, but that the key issue was whether the newly created parcels complied with the Subdivision Map Act. The Court noted that a division within the meaning of the Subdivision Map Act is not established merely because parts of a property do not touch. In reaching its holding, the Court looked a California Attorney General opinion which advanced the notion that the term “contiguous” could be used to not only denote two things which are in physical contact, but could also be used in this context describe two things which are “nearby.” The Court ultimately held that despite being separated by strips running across the Property, the portions of the Property were still contiguous and, therefore, no division had taken place.

 

The takeaway from this case: The Court was likely influenced by equitable considerations, as evidenced by the reference to Nunn’s predecessor’s receipt of almost $1 million from the District to compensate for the taking of the two strips of land and the fact that the remaining pieces of the Property were still easily accessible.

 

Save Mount Diablo v. Contra Costa County (Nunn) (2015) 14 C.D.O.S. 11084

(12/15)

SB800 Right to Repair Act Determined to Be Exclusive Remedy for Residential Construction Defect Cases

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The Fifth Appellate District of the California Court of Appeal recently held that SB800 (otherwise known as the “Right to Repair Act” and codified at Civil Code sections 895 through 945.5) is the only remedy available to homeowners for residential construction defect claims against builders. (McMillin Albany LLC v. Superior Court)

 

In so holding, the court rejected the reasoning and outcome of the 2013 decision by the Fourth Appellate District in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, which allowed for common law remedies outside SB800 when the defective conditions caused actual damage to property. (The Fifth Appellate District covers nine counties in central California:  Fresno, Kern, Kings, Madera, Mariposa, Merced, Stanislaus, Tulare and Tuolumne. The Fourth Appellate District covers six southern California counties: San Diego, Imperial, Orange, San Bernardino, Riverside and Inyo.) Given the split of authority, the issue may now be ripe for review by the California Supreme Court.

 

Both cases examined the legislative history of the Right to Repair Act. Enacted in 2002, the Act established a mandatory process to manage residential construction defects prior to litigation. The Act set forth building standards, the violation of which constitute construction defects. Prior to litigation, homeowners must follow certain notification procedures and builders must be permitted to inspect, test, and offer to repair the defects. The Act also prescribes statutes of limitations, affirmative defenses, and recoverable damages.

 

The Act sought to abrogate the 2000 decision in Aas v. Superior Court, in which the California Supreme Court held that construction defects in residential properties must cause actual property damage or injury prior to being actionable. The Act, by contrast, was intended in part to grant statutory rights where construction defects caused economic damage alone. The Act made major changes to the law governing construction defects, and sought to respond to builders and insurers concerned about litigation costs as well as giving homeowners the ability to have defects identified and corrected before they caused actual harm.

 

The Liberty Mutual case had interpreted the Act to not eliminate the property owner’s common law rights and remedies where actual damage occurred as a result of the defect. The more recent McMillin decision however undertook a more comprehensive analysis of the Act and concluded that the “groundbreaking reform” and “major changes” intended by the Legislature did not allow for the Act to be optional. The implications of the recent case for home builders are that claimants will have to comply with the Act before filing suit and will arguably have shorter time periods in which to do so.

 

McMillin Albany LLC v. Superior Court (2015) 14 C.D.O.S. 9696

(12/15)