Construction defects., the official text

An act to amend Sections 910, 930, 942, and 944 of, to add Sections 942.2, 945.1, and 945.2 to, to add Chapter 4.5 (commencing with Section 939) to Title 7 of Part 2 of Division 2 of, and to repeal and add Section 926 of, the Civil Code, relating to construction defects.

LEGISLATIVE COUNSEL'S DIGEST

Existing law specifies 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, and detailed prelitigation procedures.
This bill would establish an alternative process for certified buildings, as established by the bill, and would provide that the bill’s provisions only apply to condominium projects and townhouse developments constructed on or after January 1, 2027. The bill would authorize a builder to obtain a certified building status for a building by undergoing private inspection, repairs, and reinspection during construction, as provided. The bill would prohibit future challenges to the status of the building as a certified building once certified. The bill would authorize the builder of a certified building to establish its own process for handling postconstruction claims. The bill would specify that a builder has a complete and unrestricted right to inspect and repair a certified building at times mutually agreed upon by the builder and claimant and within timeframes established by the builder. If a claimant refuses the offer of repair or prevents, restricts, delays, or frustrates access for more than 7 days from the mutually agreed upon day, the bill would deem the builder to have received a release. The bill would require an inspector to meet specified criteria, including, among others, that they are a private licensed architect, engineer, or general contractor, and to certify to the Department of Real Estate that they meet the criteria. On or before July 1, 2028, the bill would require the Department of Real Estate to post on its internet website a list of eligible inspectors.
Existing law requires a person claiming that the construction of their residence violates standards of construction, as specified, to provide a written notice of the claim to the builder that, among other things, describes the claimed violation in reasonable detail sufficient to determine the nature and location of the claimed violation. Existing law, in the case of a group of homeowners or an association, authorizes the notice to identify the claimants solely by address or other description sufficient to apprise the builder of the locations of the subject residences. Existing law authorizes that written notice to be provided by the claimant’s legal representative.
This bill would require evidence of the violation, including copies of any reasonably available photographs, estimates or reports relating to the damage, and the specific location of the evidence to be included in the notice. The bill would remove the above-described authorization for notices in the case of a group of homeowners or an association.
Existing law prohibits a builder from obtaining a release or waiver in exchange for repair work mandated by law, as specified, and authorizes a claimant, at the conclusion of the repair, to file an action for violation of the applicable standard or for a claim of inadequate repair.
This bill would repeal that provision and would, instead, authorize a builder to obtain a release or waiver in exchange for the repair work one year after the repair.
Existing law specifies that the prelitigation procedures are to be strictly construed, and that, if the claimant does not conform with the requirements, the builder may bring a motion to stay any subsequent court action or other proceeding until the requirements are met.
This bill would, instead, authorize the builder to bring a motion to dismiss without prejudice any court action or other proceeding if the claimant does not substantially conform with the requirements and would require the court to grant the motion.
Existing law specifies that to make a claim for violation of construction standards applicable to construction defect claims, a homeowner need only demonstrate that the home does not meet the applicable standard, and that no further showing of causation or damages is required to meet the burden of proof, provided that the violation arises out of, pertains to, or is related to, the original construction.
This bill would, instead, require a claimant to affirmatively demonstrate that there is a violation of the applicable standard, that the violation caused appreciable, nonspeculative, present physical damage to another component part of the building, and that the violation is caused by the original construction. The bill would prohibit an insurer from asserting repairs as a voluntary payment or as a payment made without the insurer’s consent, or deny counting the costs associated with those repairs.
Existing law authorizes a homeowner to recover reasonable investigative costs for each established violation.
This bill would delete that provision, and would prohibit the recovery of investigative costs. The bill would prohibit an action from being filed unless the conditions for filing an action have been met for each claimed violation. The bill would prohibit a claim for damages based on extrapolation of claims, and would limit testing of the components of the structure, as specified.

The people of the State of California do enact as follows:

SECTION 1.
Section 910 of the Civil Code is amended to read:
910.
Prior to filing an action against any party alleged to have contributed to a violation of the standards set forth in Chapter 2 (commencing with Section 896), the claimant shall initiate the following prelitigation procedures:
(a) (1) The claimant or their legal representative shall provide a written notice via certified mail, overnight mail, or personal delivery to the builder, in the manner prescribed in this section, of the claimant’s claim that the construction of their residence violates any of the standards set forth in Chapter 2 (commencing with Section 896).
(2) The notice shall state that the claimant alleges a violation pursuant to this title against the builder.
(3) The notice shall be signed by the claimant.
(4) The notice shall include all of the following:
(A) The claimant’s name, address, and preferred method of contact.
(B) A description of the claimed violation in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation.
(C) Evidence of the claimed violation, including copies of any reasonably available photographs, estimates, or reports relating to any damage to the extent they exist at the time the notice is provided, and the specific location of the evidence.
(5) The notice shall have the same force and effect as a notice of commencement of a legal proceeding.
(b) The notice requirements of this section do not preclude a homeowner from seeking redress through any applicable normal customer service procedure as set forth in any contractual, warranty, or other builder-generated document; and, if a homeowner seeks to do so, that request shall not satisfy the notice requirements of this section.

SEC. 2.
Section 926 of the Civil Code is repealed.

SEC. 3.
Section 926 is added to the Civil Code, to read:
926.
The builder may obtain a release or waiver of any kind in exchange for the repair work pursuant to this chapter one year after the conclusion of the repair.

SEC. 4.
Section 930 of the Civil Code is amended to read:
930.
(a) The time periods and all other requirements in this chapter are to be strictly construed, and, unless extended by the mutual agreement of the parties in accordance with this chapter, shall govern the rights and obligations under this title. If a builder fails to act in accordance with this section within the timeframes mandated, unless extended by the mutual agreement of the parties as evidenced by a postclaim written confirmation by the affected homeowner demonstrating that they have knowingly and voluntarily extended the statutory timeframe, the claimant may proceed with filing an action. If this occurs, the standards of the other chapters of this title shall continue to apply to the action.
(b) If the claimant does not substantially conform with the requirements of this chapter, the builder may bring a motion to dismiss without prejudice any court action or other proceeding and the motion shall be granted. The court, in its discretion, may award the prevailing party on the motion, their reasonable attorney’s fees and costs incurred in bringing or opposing the motion.

SEC. 5.
Chapter 4.5 (commencing with Section 939) is added to Title 7 of Part 2 of Division 2 of the Civil Code, to read:
4.5.
Certified Buildings939.
Compliance with this chapter is optional in the sole discretion of the builder. This chapter may be used in connection with Chapter 4 (commencing with Section 910), on its own, or with alternative nonadversarial contractual provisions pursuant to Section 914.

939.1.
A building may obtain a certified building status by undergoing private inspection, repairs, and reinspection during construction in addition to any inspections conducted by the local public agency. The inspections shall take place at least once relating to all of the following:
(a) Grading
(b) Foundations.
(c) Framing, flashing, windows, and drywall.
(d) Plumbing.
(e) Exterior applications such as stucco, siding, and roofs.
(f) Mandatory health and safety features, including, but not limited to, seismic safety and fire suppression features.

939.2.
Once inspections and repairs, if appropriate, during construction are conducted and approved by the inspector, the inspector shall certify that the building is a certified building. Once certified, there shall not be future challenges to the status of the building as a certified building.

939.3.
(a) The builder of a certified building may establish its own process for handling postconstruction claims made pursuant to this title that includes a notice provided by the claimant, inspections, and repairs by the builder. The builder may include some, none, or all of the provisions in Chapter 4 (commencing with Section 910) in the builder’s process pursuant to this chapter.
(b) The builder shall pay for its own costs to determine necessary repairs. A builder shall have the complete and unrestricted right to inspect and repair a certified building at times mutually agreed upon by the claimant and the builder within timeframes established by the builder’s process. If the claimant refuses the offer of repair or prevents, restricts, delays, or frustrates access for more than seven days from the mutually agreed upon day, then the repairs are deemed completed and the builder shall be deemed to have received the release described in subdivision (c).
(c) If the claimant makes a claim relating to a certified building and the builder responds by performing repairs that are inspected and approved by the inspector, the claimant shall be deemed to have granted a full and general release, including a waiver of Section 1542, related to the claims asserted in the written notice pursuant to Section 910 or as otherwise required by the builder’s process established under subdivision (a). The release applies to the builder and all other parties identified in Section 936 relating to the certified building.
(d) No action may be filed unless all of the following are satisfied:
(1) A notice of claim is presented before the filing of the action.
(2) Observable evidence of the alleged violation and damage has been provided to the builder.
(3) The repair does not receive an approval by the inspector pursuant to subdivision (c) after full compliance with this chapter has been achieved.
(e) The builder may elect to use this chapter with or without a warranty. If the builder elects to provide a warranty, the warranty shall be provided to the homeowner no later than the close of escrow.

939.4.
(a) For purposes of this chapter, the inspector shall meet all of the following criteria:
(1) The inspector shall be a private licensed architect, engineer, or general contractor.
(2) The inspector shall not have a direct or indirect financial interest in the builder, the developer, or any entity affiliated with the builder or developer.
(3) The inspector shall not have received, in the aggregate, more than 10 percent of the inspector’s gross professional revenue from the builder, the builder’s affiliates, or the builder’s subcontractors during the two calendar years preceding the first inspection performed under this chapter.
(4) The inspector shall not be, and shall not have been within the preceding five years, an employee, an agent of the builder, the developer, or any subcontractor that performed work on the project and shall not have been an officer or director of the builder, the developer, or any subcontractor that performed work on the project.
(b) The inspector shall certify in writing, to the Department of Real Estate, that the inspector meets the criteria of subdivision (a).
(c) On or before July 1, 2028, the Department of Real Estate shall post on its internet website a list of inspectors eligible to perform inspection under this chapter.

939.5.
This chapter shall only apply to condominium projects, as defined in Section 4125, or a townhouse development constructed on or after January 1, 2027.

SEC. 6.
Section 942 of the Civil Code is amended to read:
942.
(a) In order to make a claim for violation of the standards set forth in Chapter 2 (commencing with Section 896), a claimant shall affirmatively demonstrate all of the following, in accordance with the applicable evidentiary standards:
(1) There is a violation of the applicable standard.
(2) The violation caused appreciable, nonspeculative, present physical damage to another component part of the building, consistent with Aas v. Superior Court (2000), 24 Cal.4th 627.
(3) The violation is caused by the original construction.
(b) All claims are subject to the affirmative defenses set forth in Section 945.5.

SEC. 7.
Section 942.2 is added to the Civil Code, to read:
942.2.
An insurer may not assert repairs as a voluntary payment or as a payment made without the insurer’s consent, or deny counting the costs associated with those repairs, whether pursuant to a warranty or not, against a deductible or self-insured retention.

SEC. 8.
Section 944 of the Civil Code is amended to read:
944.
If a claim for damages is made under this title, the homeowner is only entitled to damages for the reasonable value of repairing any violation of the standards set forth in this title, the reasonable cost of repairing any damages caused by the repair efforts, the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards, the reasonable cost of removing and replacing any improper repair by the builder, reasonable relocation and storage expenses, lost business income if the home was used as a principal place of a business licensed to be operated from the home, and all other costs or fees recoverable by contract or statute.

SEC. 9.
Section 945.1 is added to the Civil Code, to read:
945.1.
Notwithstanding any other law, an action may not be filed pursuant to this title unless the conditions for filing an action pursuant to this title have been met for each claimed violation.

SEC. 10.
Section 945.2 is added to the Civil Code, to read:
945.2.
No investigative costs are recoverable. Stearman v. Centex Homes (2000) 78 Cal.App.4th 611 is abrogated. No claim for damages based on extrapolation of claims may be made. Testing of any components of the structure are limited to conditions that would realistically be expected in the location of the component part of the building.