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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