SB 800 – New Rules for Builders – Part 1

If you purchased a new house after January 1, 2003, or are planning to buy one, Senate Bill 800 affects your rights as a homeowner, and the rights of a builder to correct deficiencies discovered in new construction. Senate Bill 800 was passed on August 31, 2002, and signed into law by Governor Davis on September 21, 2002. SB 800 applies to all condos, town homes, and single-family residences that close escrow after the first of this year.

This bill is significant because it makes major changes to the laws governing construction defects. Among other things, the bill eliminates the four and ten year statutes of limitations for patent and latent defects that homeowners now have to bring suit against builders. It attempts to define defects by establishing specific standards that components of a house must meet to be considered serviceable, and it creates a detailed process that both the builder and home owner must follow before litigation for defects can occur.

Up until December of 2000, a homeowner could sue a builder for construction defects as long as they were discovered within the four and ten year statute of limitations. However, in December of that year, the California Supreme Court handed down a decision in a case known as Aas v. Superior Court (2000, 24 Cal. 4th 627), that stated a builder was not responsible for construction defects unless the defect caused personal or property damage. This was a major setback for consumers and gave builders a legal defense to avoid being responsible for defective construction.

Senate Bill 800 attempts to change the effects of the Aas decision, and in the process creates an uncertain legal landscape for both builders and consumers. While the bill was drafted to provide more protection for both builders and homeowners, builders, insurance companies, and attorneys have clearly influenced its final form.

To understand the legal implications of SB 800, let’s look at what the bill entails. First, this bill states that any action seeking damages for construction defects against a builder, subcontractor, product manufacturer, or design professional, will have to comply with the requirements and time frames of this bill. The bill also says that a homeowner cannot file for a claim of defect(s) until the builder has had a chance to inspect and repair the alleged deficiency. These two requirements benefit both the builder and the homeowner.

In order to establish a claim, a homeowner must submit a written notice to the builder stating the defect(s). Then, the builder has 14 days to schedule and complete the initial inspection of the defect(s). If destructive testing is necessary, repairs must be done within 48 hours, and the costs borne by the builder. If a second inspection is required, it must be performed within 40 days of the initial inspection. After the defects have been substantiated, the builder, subcontractor, or manufacturer has 30 days to make an offer to repair the problem. These specific time periods are so restrictive that they could actually end up delaying the process and be argued by the builder or owner in court.

If the homeowner does not want the builder or subcontractor to actually make the repair, they can request up to three additional contractors to bid the repair of the defects, and then select one to perform the work. The builder would then pay the other contractor for the repairs. The builder is also allowed to offer a cash settlement in lieu of a repair. The bill also states that every effort shall be made to complete the repair within 120 days.

Under the provisions of this bill, the builder is not be responsible for defects or damages resulting from an act of God or nature, an alteration or wear and tear, a homeowner’s failure to maintain their home, or their failure to minimize or prevent damage from occurring. SB 800 puts specific responsibilities on homeowners to perform detailed maintenance (as provided by builders and manufacturers), and exercise care whenever modifying or repairing their homes. If an owner fails to properly maintain a component and damage occurs, the builder may not be responsible. Yet there is no language in the bill stating what normal maintenance is, or what specific duties an owner has to keep his or her home in good repair.

So what actually constitutes a defect? There are over 45 standards stating how certain components of a building shall function. The descriptions of the standards are very generic, somewhat vague, and essentially state the obvious. For example, the standards for components preventing water intrusion (exterior siding, windows, doors, roofs, foundations) state that the component shall not allow unintended water to pass beyond, around or through its designed or actual moisture barrier. What constitutes unintended water?

Another example of vague language in the bill is the standard for foundations, retaining walls, and other concrete surfaces, which states that there shall not be substantial cracking or vertical displacement. How much is substantial cracking or vertical displacement, one half inch, or two inches? Right now, there are no clear answers, and each situation would have to be judged separately. Without defined and measurable standards, builders and owners may not come to agreement on what really needs to be done to correct a defect.

While the standards attempt to define construction defects, they are not the panacea that the legislature had hoped for. To make matters worse, SB 800 has dramatically changed the statute of limitations within which various components are to operate properly, potentially compromising the quality of new construction. In my next column I will discuss the changes in these limitations, and what affect they will have on buyers of new homes.