BILL NUMBER: AB 600 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Dutra
FEBRUARY 22, 2001
An act to amend Sections 7019, 7030, 7085, 7090, 7091, and 7111
of, to add Sections 7019.1, 7026.15, and 7086 to, and to add Chapter
4 (commencing with Section 17800) to Part 3 of Division 7 of, the
Business and Professions Code, to amend Sections 1351, 1354, 1355.5,
1356, 1357, 1364, 1365, 1365.7, 1368, 1368.4, 1375, and 1375.1 of the
Civil Code, to amend Sections 1298 and 1298.7 of the Code of Civil
Procedure, and to amend Section 120 of the Insurance Code, relating
to new home warranties.
LEGISLATIVE COUNSEL'S DIGEST
AB 600, as introduced, Dutra. Home warranty program.
Existing law permits the registrar of contractors to investigate
and discipline a contractor who has violated provisions of the
Contractors' State License Law, which discipline can include
requiring the contractor to correct construction defects that are the
result of the contractor being found to have violated provisions of
the Contractors' State License Law.
This bill would express the Legislature's findings and
declarations relating to a lack of construction of affordable
housing, and that there is a substantial need for a highly effective
state-sanctioned 10-year new home warranty program to provide both a
process for resolving claims and a mechanism to ensure quality design
and construction.
This bill would establish the California Homebuyer Protection and
Quality Construction Act of 2002. The bill would permit a licensed
contractor to apply to the Contractors' State License Board to be
certified as a participating home builder, which would authorize the
contractor to issue a California Home Construction Warranty, as
defined. The bill would require the Contractors' State License Board
to promulgate regulations and to review annually the certification.
The bill would require a California Home Construction Warranty to
meet specified minimum standards and procedures. The bill would
authorize a participating home builder to issue a California Home
Construction Warranty on new residential housing, including a home
that is part of a common interest development, where the purchaser
secured title on or after January 1, 2002. The bill would provide
that a California Home Construction Warranty applies for a minimum of
10 years and is binding on subsequent purchasers during the term of
the warranty.
The bill would define "construction defects." The bill would
define "correction of any construction defect" to include repair,
replacement, or payment of reasonable cost to repair or replace,
pursuant to existing construction codes and standards of construction
practice in effect at the time of the original construction, or at
the builder's option, subject to the dispute resolution provisions of
the warranty, either rebuilding the structure in accordance with the
original plans and specifications and certain modifications or
paying the reasonable value of the property plus relocation costs.
The bill would permit a California Home Construction Warranty to
provide for alternative dispute resolution for claims covered under
the warranty. The bill would provide that if a homeowner elects by
contract to purchase a home subject to a California Home Construction
Warranty, the contractual provisions of that warranty shall be
deemed to be the exclusive election of recourse by the homeowner and
the participating homebuilder for the claims covered by the warranty.
The bill would provide that the parties to a California Home
Construction Warranty are deemed to have waived any tort remedies,
including negligence, strict liability, implied warranties, or any
other common law remedy other than for breach of warranty contract
and the provisions therein. The bill would provide that the waiver
does not preclude or limit any right of action for bodily injury,
wrongful death, or fraud and intentional misrepresentation. The bill
would also provide that to the extent that a California Home
Construction Warranty does not contain coverage for alleged defects,
there would be no election of recourse, and that the homeowner, if
the warranty provides, waives any noncontractual claims against any
design, professional, or trade contractors covered by the warranty
who performed professional services or works of improvement on the
subject property.
The bill would require a participating home builder to have a
program of quality assurance.
This bill would provide that a homeowner's rejection of a builder'
s reasonable offer during the dispute resolution process would limit
recovery. The bill would further provide that limitations on damages
would not apply if a builder fails to make a reasonable offer during
the dispute resolution process or fails to complete repairs. The
bill would also provide that if a builder does not take reasonable
steps in a reasonable time to correct a defect creating an imminent
threat to the inhabitants of a house the homeowner may correct the
defect and recover from the builder.
Existing law provides specified procedures relating to binding
arbitration provisions in any contract to convey real property.
Existing law also provides in the event of an arbitration provision
in a contract to convey real property, it shall not preclude or limit
any right of action for bodily injury or wrongful death or for any
right of action as specified or actions for damages relating to
design specifications, surveying, planning supervision or observation
of construction or construction improvement to real property, or
latent deficiencies, in the construction or construction improvement
of real property.
This bill would provide that the procedures regarding binding
arbitration provisions in contracts to convey real property may apply
to a dispute that arises under a California Home Construction
Warranty that may apply to the real property in question. This bill
would also provide instead that an arbitration provision shall not
preclude or limit any right of action to actions for bodily injury or
wrongful death.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7019 of the Business and Professions Code is
amended to read:
7019. (a) If funding is made available for that purpose, the
board may contract with licensed professionals, as appropriate, for
the site investigation of consumer complaints , including
complaints arising under a California Home Construction Warranty
issued pursuant to the California Homebuyer Protection and Quality
Construction Act of 2002 . The registrar shall determine the
rate of reimbursement for licensed professionals performing
inspections on behalf of the board. All reports shall be completed
on a form prescribed by the registrar.
(b) As used in this section, "licensed professionals" means, but
is not limited to, engineers, architects, landscape architects, and
geologists licensed, certificated, or registered pursuant to this
division.
SEC. 2. Section 7019.1 is added to the Business and Professions
Code, to read:
7019.1. (a) The board shall furnish a copy of any opinion
prepared by the licensed professional, including any contractor,
retained pursuant to Section 7019, to the complainant, to the
licensee against whom the complaint has been made, and, upon request,
to the successors, receivers, trustees, executors, administrators,
assignees, or guarantors of either party, if directly or collaterally
interested under this chapter or otherwise as provided by law, and
to a warranty administrator under contract with a participating
homebuilder pursuant to Chapter 4 (commencing with Section 17800) of
Part 3 of Division 7.
(b) The opinion specified in subdivision (a) shall include all of
the following:
(1) An identification of the nature of the condition that produced
the complaint and the cause or basis or contributing cause of that
condition.
(2) Whether the cause or basis of the condition complained of
constituted a departure from plans, codes, or accepted trade
standards.
(3) What the code provisions or trade standards specified in
paragraph (2) are.
(4) The cost to correct each item identified under paragraph (2)
as being the result of a departure from plans, specifications, codes,
or accepted trade standards.
(5) The cost to correct the damages specified in paragraph (4) was
established on the following basis:
_
|_| Time and Materials
_
|_| Unit Cost
_
|_| Other (identify) ___________________________________
and was calculated from standards provided by
_
|_| Means Data Systems
_
|_| Dodge Data Systems
_
|_| National Construction Estimator
_
|_| Marshall-Swift
_
|_| Software Program (identify) ____________________
_
|_| Other (identify) _______________________________
(c) The opinion shall also provide the name, identification,
address, license number, and license classification or
classifications of the professional who prepared the opinion, and a
statement of any other qualifications that the professional asserts
he or she relied upon as stated in the industry expert report
submitted to the board. The license and other information required
to be furnished under this subdivision may be provided on a form
prescribed by the registrar.
The opinion shall also state the date or dates of any inspection
of the site or other investigation and the date of the report. If
the complaint arises under a California Home Construction Warranty
issued pursuant to Chapter 4 (commencing with Section 17800) of Part
3 of Division 7, the report of the investigator shall provide the
name and address of the warranty administrator under contract with a
participating homebuilder and the actions taken by the warranty
administrator or the participating homebuilder under the warranty to
resolve the complaint with the complainant. The board shall endeavor
to assure that all items in subdivision (b) that are subject to the
pertinent cause of action are completed on the report.
(d) The board shall make the opinion available on, or promptly
following, the earliest date upon which the opinion or the
information from it is available for the purpose of mediation or the
purpose of preparing a citation pursuant to Section 7099, or to any
arbitrator or arbitration panel, or the date of service of any
accusation pursuant to Section 11505 of the Government Code on any
matter upon which the opinion relates, and to a warranty
administrator under contract with a participating homebuilder
pursuant to Chapter 4 (commencing with Section 17800) of Part 3 of
Division 7.
(e) The board may impose a charge for furnishing a copy of an
opinion pursuant to this section to any person except the complainant
or the licensee against whom the complaint has been made. The
charge shall be reasonably related to the cost of preparing and
transmitting that copy and of processing the request.
(f) Nothing in this section shall be construed to supercede,
amend, or otherwise modify the terms and conditions, the complaint
and claims processing procedures, or the dispute resolution
procedures, agreed to by the parties to a California Home
Construction Warranty issued pursuant to the California Homebuyer
Protection and Quality Construction Act of 2002. Upon receipt of the
report referred to in this section, the board shall defer action on
the complaint until the complaint, claims, and dispute resolution
procedures provided for in the warranty have been exhausted by the
parties, unless the report includes a finding that the participating
homebuilder or warranty administrator under contract with the
homebuilder has not complied with the terms and conditions of the
warranty, nor the complaint, claims, and dispute resolution
procedures provided therein.
SEC. 3. Section 7026.15 is added to the Business and Professions
Code, to read:
7026.15. For purposes of this chapter, "contractor" does not
include a warranty administrator under contract with a participating
homebuilder to provide services under a California Home Construction
Warranty issued pursuant to Chapter 4 (commencing with Section 17800)
of Part 3 of Division 7.
SEC. 4. Section 7030 of the Business and Professions Code is
amended to read:
7030. (a) Every person licensed pursuant to this chapter shall
include the following statement in at least 10-point type on all
written contracts , including in California Home Construction
Warranties issued pursuant to Chapter 4 (commencing with Section
17800) of Part 3 of Division 7, with respect to which the
person is a prime contractor:
"Contractors are required by law to be licensed and regulated by
the Contractors' State License Board which has jurisdiction to
investigate complaints against contractors if a complaint regarding a
patent act or omission is filed within four years of the date of the
alleged violation. A complaint regarding a latent act or omission
pertaining to structural defects must be filed within 10 years of the
date of the alleged violation. Any questions concerning a
contractor may be referred to the Registrar, Contractors' State
License Board, P.O. Box 26000, Sacramento, California 95826."
(b) At the time of making a bid or prior to entering into a
contract to perform work on residential property with four or fewer
units, whichever occurs first, a contractor shall provide the
following notice in capital letters in at least 10-point roman
boldface type or in contrasting red print in at least 8-point roman
boldface type:
"STATE LAW REQUIRES ANYONE WHO CONTRACTS TO DO CONSTRUCTION WORK TO
BE LICENSED BY THE CONTRACTORS' STATE LICENSE BOARD IN THE LICENSE
CATEGORY IN WHICH THE CONTRACTOR IS GOING TO BE WORKING--IF THE TOTAL
PRICE OF THE JOB IS $500 OR MORE (INCLUDING LABOR AND MATERIALS).
LICENSED CONTRACTORS ARE REGULATED BY LAWS DESIGNED TO PROTECT THE
PUBLIC. IF YOU CONTRACT WITH SOMEONE WHO DOES NOT HAVE A LICENSE,
THE CONTRACTORS' STATE LICENSE BOARD MAY BE UNABLE TO ASSIST YOU WITH
A COMPLAINT. YOUR ONLY REMEDY AGAINST AN UNLICENSED CONTRACTOR MAY
BE IN CIVIL COURT, AND YOU MAY BE LIABLE FOR DAMAGES ARISING OUT OF
ANY INJURIES TO THE CONTRACTOR OR HIS OR HER EMPLOYEES.
YOU MAY CONTACT THE CONTRACTORS' STATE LICENSE BOARD TO FIND OUT IF
THIS CONTRACTOR HAS A VALID LICENSE. THE BOARD HAS COMPLETE
INFORMATION ON THE HISTORY OF LICENSED CONTRACTORS, INCLUDING ANY
POSSIBLE SUSPENSIONS, REVOCATIONS, JUDGMENTS, AND CITATIONS. THE
BOARD HAS OFFICES THROUGHOUT CALIFORNIA. PLEASE CHECK THE GOVERNMENT
PAGES OF THE WHITE PAGES FOR THE OFFICE NEAREST YOU OR CALL
1-800-321-CSLB FOR MORE INFORMATION."
(c) Failure to comply with the notice requirements set forth in
subdivision (a) or (b) of this section is cause for disciplinary
action.
SEC. 5. Section 7085 of the Business and Professions Code is
amended to read:
7085. (a) After investigating any verified complaint alleging a
violation of Section 7107, 7109, 7110, 7113, 7119, or 7120, and any
complaint arising from a contract involving works of improvement as
defined in Section 7151 and finding a possible violation, the
registrar may, with the concurrence of both the licensee and the
complainant, refer the alleged violation, and any dispute between the
licensee and the complainant arising thereunder, to arbitration
pursuant to this article, provided the registrar finds that:
(1) There is evidence that the complainant has suffered or is
likely to suffer material damages as a result of a violation of
Section 7107, 7109, 7110, 7113, 7119, or 7120, and any complaint
arising from a contract involving works of improvement as defined in
Section 7151.
(2) There are reasonable grounds for the registrar to believe that
the public interest would be better served by arbitration than by
disciplinary action.
(3) The licensee does not have a history of repeated or similar
violations.
(4) The licensee was in good standing at the time of the alleged
violation, and is in good standing at the time of referral to
arbitration.
(5) The licensee does not have any outstanding disciplinary
actions filed against him or her.
(6) The parties have not previously agreed to private arbitration
of the dispute pursuant to contract , in a California Home
Construction Warranty issued pursuant to Chapter 4 (commencing with
Section 17800) of Part 3 of Division 7, or otherwise.
(7) The parties have been advised of the provisions of Section
2855 of the Civil Code.
For the purposes of paragraph (1), "material damages" means
damages greater than five thousand dollars ($5,000) and less than
fifty thousand dollars ($50,000).
(b) In all cases in which a possible violation of the sections set
forth in paragraph (1) of subdivision (a) exists and the contract
price is equal to or less than five thousand dollars ($5,000), or the
demand for damages is equal to or less than five thousand dollars
($5,000) regardless of the contract price, the complaint shall be
referred to arbitration, utilizing the criteria set forth in
paragraphs (2) to (6), inclusive, of subdivision (a).
SEC. 6. Section 7086 is added to the Business and Professions
Code, to read:
7086. Nothing in this article shall be construed to supersede,
amend, or otherwise modify the terms and conditions, and the
complaint, claims, and dispute resolution procedures agreed to by
parties to a California Home Construction Warranty.
SEC. 7. Section 7090 of the Business and Professions Code is
amended to read:
7090. The registrar may upon his or her own motion and shall upon
the verified complaint in writing of any person, investigate the
actions of any applicant, contractor, participating homebuilder
certified to offer home construction warranties pursuant to Chapter 4
(commencing with Section 17800) of Part 3 of Division 7, or
home improvement salesperson within the state and may deny the
licensure certification or the renewal of licensure
or certification of, or cite, temporarily suspend, or
permanently revoke any license , certification, or
registration if the applicant, licensee, participating
homebuilder certified to offer home construction warranties pursuant
to Chapter 4 (commencing with Section 17800) of Part 3 of Division 7,
or registrant, is guilty of or commits any one or more of the
acts or omissions constituting causes for disciplinary action.
The registrar may proceed to take disciplinary action as in this
article provided against an applicant or a person licensed or
registered under the provisions of this chapter , or certified
pursuant to Section 17815, even though the grounds or cause for
such disciplinary action arose upon projects or while the applicant,
licensee, or registrant was acting in a capacity or under
circumstances or facts which, under the provisions of Sections 7044,
7045, 7046, and 7048, would otherwise exempt the person or his or her
operations from the provisions of this chapter.
Notwithstanding any provision of this chapter, if the registrar
finds that any contractor licensed or registered under the provisions
of this chapter has willfully and deliberately violated any state or
local law relating to the issuance of building permits, other than
failure to obtain a county or city permit for repair, maintenance,
and adjustment of equipment where such repair, maintenance, or
adjustment is valued at less than five hundred dollars ($500) for
labor or materials, or where the repair of a part or component part
of mechanical equipment consists of replacing such part or component
part of mechanical equipment in need of repair with the identical
part or component part, the registrar shall take disciplinary action
against the contractor's license in accordance with this chapter.
For the purpose of this section, there shall be a rebuttable
presumption affecting the burden of proof that construction performed
without a permit is a willful and deliberate violation.
SEC. 8. Section 7091 of the Business and Professions Code is
amended to read:
7091. (a) A complaint against a licensee alleging commission of
any patent acts or omissions that may be grounds for legal action
shall be filed in writing with the registrar within four years after
the act or omission alleged as the ground for the disciplinary
action. An accusation or citation against a licensee shall be filed
within four years after the patent act or omission alleged as the
ground for disciplinary action or within 18 months from the date of
the filing of the complaint with the registrar, whichever is later,
except that with respect to an accusation alleging a violation of
Section 7112, the accusation may be filed within two years after the
discovery by the registrar or by the board of the alleged facts
constituting the fraud or misrepresentation prohibited by the
section.
(b) A complaint against a licensee alleging commission of any
latent acts or omissions that may be grounds for legal action
pursuant to subdivision (a) of Section 7109 regarding structural
defects, as defined by regulation, shall be filed in writing with the
registrar within 10 years after the act or omission alleged as the
ground for the disciplinary action. An accusation and citation
against a licensee shall be filed within 10 years after the latent
act or omission alleged as the ground for disciplinary action or
within 18 months from the date of the filing of the complaint with
the registrar, whichever is later, except that with respect to an
accusation alleging a violation of Section 7112, the accusation may
be filed within two years after the discovery by the registrar or by
the board of the alleged facts constituting the fraud or
misrepresentation prohibited by Section 7112. As used in this
section "latent act or omission" means an act or omission that is not
apparent by reasonable inspection.
(c) An accusation regarding an alleged breach of an express,
written warranty for a period in excess of the time periods specified
in subdivisions (a) and (b) issued by the contractor shall be filed
within the duration of that warranty.
(d) The proceedings under this article shall be conducted in
accordance with the provisions of Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code, and
the registrar shall have all the powers granted therein.
(e) Nothing in this section shall be construed to affect the
liability of a surety or the period of limitations prescribed by law
for the commencement of actions against a surety or cash deposit.
(f) The board shall adopt regulations to define the term
"structural defect" for purposes of this section by December 31,
1995.
(g) Nothing in this section shall be construed to supersede,
amend, or otherwise modify the terms and conditions of a California
Home Construction Warranty issued pursuant to Chapter 4 (commencing
with Section 17800) of Part 3 or Division 7 or the complaint, claims,
and dispute resolution procedures provided for therein.
SEC. 9. Section 7111 of the Business and Professions Code is
amended to read:
7111. (a) Failure to make and keep records showing all contracts,
documents, records, receipts, and disbursements by a licensee of all
of his or her transactions as a contractor, including records
relating to home construction warranties issued by the contractor,
and failure to have those records available for inspection by
the registrar or his or her duly authorized representative for a
period of not less than five years after completion of any
construction project or operation to which the records refer, or
refusal by a licensee to comply with a written request of the
registrar to make the records available for inspection constitutes a
cause for disciplinary action.
(b) Failure of a licensee, applicant, or registrant subject to the
provisions of this chapter, who without lawful excuse, delays,
obstructs, or refuses to comply with a written request of the
registrar or designee for information or records, to provide that
information or make available those records, when the information or
records are required in the attempt to discharge any duty of the
registrar, constitutes a cause for disciplinary action.
SEC. 10. Chapter 4 (commencing with Section 17800) is added to
Part 3 of Division 7 of the Business and Professions Code, to read:
CHAPTER 4. CALIFORNIA HOMEBUYER PROTECTION AND QUALITY
CONSTRUCTION ACT OF 2002
Article 1. General Provisions
17800. This chapter shall be known and may be cited as the
California Homebuyer Protection and Quality Construction Act of 2002.
17801. (a) The Legislature finds and declares all of the
following:
(1) California has a statewide home building crisis.
(2) Nationally, most of the least affordable housing markets are
in California.
(3) The median price of homes in some California counties exceeds
three hundred thousand dollars ($300,000).
(4) By 2003 only 20 percent of the households in Los Angeles
County will be able to afford a median priced home in that county.
(5) Multifamily housing, including condominiums and townhouses,
has traditionally been the entry level type of housing designed for
single people, young families, and senior citizens.
(6) Californians need affordable homes that incorporate high
quality construction, and they want to buy from homebuilders who are
able to stand behind their workmanship.
(b) The Legislature further finds and declares that there is a
substantial need for a highly effective state-sanctioned 10-year new
home warranty program to provide both a process for resolving claims
and a mechanism to ensure quality design and construction.
17802. The purpose of this chapter is to do all of the following:
(a) Promote the construction of high quality, affordable,
residential housing units by California homebuilders.
(b) Induce California homebuilders to improve the training of
homebuilding craftsmen to better assure the construction of high
quality, affordable, residential housing throughout California.
(c) Inspire consumer confidence by establishing state standards
for residential home warranties offered by homebuilders throughout
California that promise high quality workmanship free from
construction defects.
(d) Focus consumer awareness on home warranty terms by requiring,
prior to purchase, adequate disclosure of the rights and obligations
of both the builder and owners of homes warranted under this chapter,
including information about the claim resolution process if a
construction defect occurs.
(e) Ensure that participating homebuilders provide sufficient
financial resources to back their warranty, or obtain adequate
insurance from a licensed insurance company to guaranty that home
warranties will be honored.
(f) Encourage prompt and fair resolution of construction defect
claims by homeowners through the use of consumer friendly claims
processing procedures.
(g) Enhance consumer confidence in purchasing existing homes, by
enabling warranties to run with the title of the land throughout the
warranty, for a period of not less than 10 years.
(h) Protect subsequent purchasers of homes warranted pursuant to
this chapter, by requiring a seller to adequately disclose the terms
of home warranty coverage.
(i) Build consumer trust in the value of the home warranties
issued under this chapter by providing effective and consistent state
oversight of home warranty administration for the protection of
homeowners.
(j) Educate homeowners and potential buyers about home warranties
issued under this chapter by creating clear and concise informational
materials.
17803. This chapter applies to homebuyer warranties which meet
the requirements of this chapter, and which are offered by
participating homebuilders to purchasers of new residential homes.
17804. Nothing in this act shall be construed to require a
licensed contractor to offer homebuyer warranties as a requirement of
his or her licensure.
17805. The requirements and standards set forth in this chapter
are applicable only to homebuyer warranties issued by participating
homebuilders pursuant to this chapter.
17806. As used in this chapter, the following definitions apply:
(a) "Board" means the Contractors' State License Board.
(b) "California Home Construction Warranty," "home construction
warranty," and "warranty," unless otherwise specified, mean a
warranty offered by a participating homebuilder pursuant to this
chapter.
(c) "Construction defect" means a defect in design, materials, or
workmanship that meets all of the following:
(1) Results from an act or omission of the builder, or of an
architect, engineer, subcontractor, or some other agent, who is
responsible for design, specifications, surveying, planning,
supervision, or observation of construction or construction of the
residential improvements, and who is working for the builder as an
employee or pursuant to contract.
(2) Occurs during the original construction of the improvement or
in connection with the warranty repair work, and which, in the case
of a common interest development, includes construction or repair
work in all common areas.
(3) Renders the improvement or some part of it not reasonably fit
for its intended purpose.
(4) Materially affects one or more of the following:
(A) Building site work, including, but not limited to, subsurface
investigation, earthwork, protective drainage systems for slopes, and
landscape irrigation systems.
(B) Substructure, including, but not limited to, concrete slabs,
retaining walls, foundations, and basements, including waterproofing
and drainage.
(C) Building shell, including, but not limited to, floors and
floor coverings, walls and wall coverings, including stucco and
siding, windows, doors, roof and roof coverings, including eaves, and
building interior elements, including, but not limited to, interior
partitions, framing, interior doors, stairs and stair cases, drywall
and drywall finish, fire resistive assemblies and smoke barriers, and
sound control systems.
(D) Building services and exterior components, including, but not
limited to, chimneys and flues, decks and patios, plumbing systems
and plumbing fixtures, sanitary waste systems, rain water gutters,
downspouts and drain systems, heating ventilation and air
conditioning systems, electrical systems, fire protection and fire
suppression systems, telephone, television and computer wiring
systems and security systems installed by the builder.
(d) "Homeowner" means a "purchaser of a new residential home,"
"subsequent purchaser," or other holder of title of a home that is
the subject of a home construction warranty issued pursuant to this
chapter.
(e) "Licensed insurance company" means an insurance company
authorized by the California Department of Insurance to transact
miscellaneous insurance, as defined in Section 120 of the California
Insurance Code with a rating of at least "AA" or the equivalent from
a standard rating agency recognized by the Contractors' State License
Board, or a nonadmitted insurer declared eligible for placement and
included on the export list established and maintained by the
Insurance Commissioner pursuant to Section 1763.1 of the Insurance
Code with a rating of at least "AA" or the equivalent from a standard
rating agency recognized by the Contractors' State License Board.
(f) "Participating homebuilder" means a contractor, partnership,
corporation, limited liability company, or other entity who has been
certified by the Contractors' State License Board pursuant to Section
17815 to issue California Home Construction Warranties.
(g) "Purchaser of a new residential home" means the holder of the
original title to a newly constructed residential home, including a
home that is part of a common interest development, where the
purchaser secured title on or after January 1, 2002.
(h) "Subsequent purchaser" means a subsequent holder of title to a
residential home that is subject to a home construction warranty
issued pursuant to this chapter.
(i) "Warranty administrator" means a licensed insurance company or
a qualified third party claims administrator that has contracted
with a participating homebuilder to administer and process complaints
and claims under a home construction warranty, or an employee of the
participating homebuilder whose responsibilities include the
administration and processing of complaints and claims under the
warranty.
Article 2. Warranty Administration and Qualification
17810. The board shall administer and enforce this chapter as it
applies to licensed contractors who apply to be certified as
participating homebuilders under this chapter and who offer home
construction warranties pursuant to this chapter.
17811. The board shall establish and administer a certification
process for licensed contractors who make application to be certified
as participating homebuilders pursuant to this chapter.
17812. The board shall promulgate regulations establishing the
amount and nature of financial security to be required under this
chapter.
17815. For a licensed contractor to be a participating
homebuilder, the contractor has to be certified by the board to issue
a California Home Construction Warranty. To be certified, the
contractor shall meet all of the following requirements and provide
proof of compliance therewith on a form prescribed by the board:
(a) Hold and maintain a valid license as a general building
contractor, issued by the board.
(b) Provide proof of an insurance policy providing coverage for
the warranty obligations assumed by the contractor, issued by a
licensed insurance company.
(c) Develop and implement a quality assurance program that meets
the requirements of Section 17840.
(d) File a sample copy of the home construction warranty that the
contractor intends on offering. The home construction warranty shall
meet the requirements of Article 3 (commencing with Section 17825).
(e) Demonstrate proof of administrative capacity to administer and
process complaints and claims during the effective dates of all
warranties issued pursuant to this chapter.
(1) A contractor may contract with a warranty administrator or
licensed insurance company to administer and process complaints and
claims under warranties issued pursuant to this chapter.
(2) Complaint and claims-handling procedures adopted by the
warranty administrator, licensed insurance company, or qualified
employee of the contractor shall meet the requirements of Article 3
(commencing with Section 17825).
(f) Provide a summary of the alternative dispute resolution
process to be used under the warranty.
17816. Proof of compliance with all of the requirements of this
section shall be filed with the board before a contractor may be
certified to offer and issue warranties under this chapter. A
contractor is deemed to have met the requirements of this chapter if
the board has not certified or refused certification of the
contractor's application within 30 days of the date all required
documents have been filed with the board.
17817. A contractor, upon being issued a certificate to issue
California Home Construction Warranties by the board pursuant to this
section, shall file annually with the board, on a form prescribed by
the board, information indicating any modifications to the
contractor's original application for certification as approved by
the board. The board shall renew the contractor's certification
unless it finds, upon review of the contractor's annual renewal
filing, that the contractor no longer meets the requirements of this
section. Upon a finding by the board that the contractor no longer
meets the requirements of this section, the contractor shall have 30
days within which to provide proof that all of the requirements of
this section have been met. If the contractor is not able to provide
the required proof to the board, the board shall suspend or revoke
the contractor's certification to issue California Home Construction
Warranties until the contractor provides proof of meeting the
requirements of this section. Any action taken by the board to
suspend or revoke the certification of a contractor to issue
California Home Construction Warranties under this section shall not
affect the obligations of the contractor under home construction
warranties issued by the contractor, as a participating homebuilder
prior to the date of the suspension or revocation.
17820. The following fair marketing standards apply to
participating homebuilders who offer home construction warranties
pursuant to this chapter:
(a) Only a warranty that meets the minimum standards of Article 3
(commencing with Section 17825) may be advertised and marketed as a
California Home Construction Warranty.
(1) A warranty offered in connection with the sale of residential
housing that does not meet the requirements of this chapter and
purports to warrant the construction of the house shall not be
represented as meeting the requirements of this chapter to
prospective homebuyers, nor shall the warranty, the warranty
administrator, a licensed contractor or other person misrepresent or
falsely advertise the warranty as meeting the requirements of the
California Homebuyer Protection and Quality Construction Act of 2002.
(2) Nothing in this section shall be construed to prohibit a home
protection company, licensed pursuant to Chapter 1 (commencing with
Section 12740) of Part 7 of Division 2 of the California Insurance
Code, from offering a home protection contract in connection with the
sale of residential housing, as long as the home protection contract
clearly discloses that the contract is not being offered pursuant to
the California Homebuyer Protection and Quality Construction Act of
2002.
(b) A participating homebuilder shall disclose to purchasers of
new residential homes, at the time of acceptance of the real estate
purchase contract, that a California Home Construction Warranty
applies to the property.
(1) The participating homebuilder shall reference the existence of
a California Home Construction Warranty in the deed of sale for the
property at issue, at the time of the filing and registration of the
deed with the county.
(2) A copy of the warranty shall be provided to the purchaser at
the time of acceptance of the real estate purchase contract.
(3) The warranty shall clearly state the effective date that
coverage begins and ceases under the warranty. The warranty shall be
in effect a minimum of 10 years, and shall begin on the date of
substantial completion of the residential home to which it applies.
(4) If a home construction warranty provides for alternative
dispute resolution to resolve disputes under the warranty, this shall
be clearly disclosed to the purchaser no later than at the time of
acceptance of the real estate purchase contract.
(5) During the term of the warranty, if the purchaser of a new
home subject to a California Home Construction Warranty transfers
title to the property to a subsequent purchaser, the original
purchaser of the home shall provide the disclosure required by this
section to the subsequent purchaser at the time of acceptance of the
real estate purchase contract.
(6) For new residential homes to which this chapter applies that
are included within a subdivision subject to the California
Subdivided Lands Act, and for which a public report is required to be
filed pursuant to that act, the developer of the subdivision shall
include a statement in the public report indicating whether or not
the new residential homes within the division are subject to a home
construction warranty issued pursuant to this chapter.
(c) A participating homebuilder, a warranty administrator, or a
sales, marketing, or other representative of the homebuilder shall
not knowingly misrepresent the terms and conditions of a warranty
offered pursuant to this chapter.
Article 3. California Home Construction Warranty
17825. A California Home Construction Warranty issued, sold, or
offered for sale by a participating homebuilder pursuant to this
chapter shall be written in clear, understandable language and the
entire contract shall be printed or typed in easy to read 10-point or
larger type.
17826. A California Home Construction Warranty issued, sold, or
offered for sale by a participating homebuilder pursuant to this
chapter shall include the following:
(a) The coverage provided under the warranty and any exclusions or
restrictions to that coverage.
(b) The rights and obligations of the participating homebuilder
and the homeowner under the warranty.
(c) The process for filing of a complaint or a claim under the
warranty, including an emergency complaint, and any filing fees or
deductibles that may apply thereto.
(d) The name, address, and telephone number of the warranty
administrator, and the emergency telephone number for emergency
complaint.
(e) If the participating homebuilder has contracted with a
licensed insurance company or licensed surety insurance company to
provide insurance coverage for the warranty obligations assumed by
the homebuilder, the home warranty shall provide the name, address,
and telephone number of the licensed insurance company and shall
conspicuously state that upon failure of the participating
homebuilder to perform under the contract, the homeowner is entitled
to make a claim directly against the insurance company and the
process for making that claim.
(f) If the participating homebuilder has not contracted with a
licensed insurance company or licensed surety insurance company to
provide insurance coverage for the warranty obligations assumed by
the homebuilder, the home buyer warranty shall conspicuously state
that upon the failure of the homebuilder to perform under the
contract, the homeowner is entitled to make a claim directly against
the guarantors of the homebuilder's warranty obligations and the
process for making the claim.
(g) The circumstances under which the homeowner is required to
obtain prior approval from the participating homebuilder to correct a
covered defect, the procedure for obtaining prior approval to
correct a covered defect, and the process for making an emergency
complaint.
(h) The terms, restrictions, and conditions covering the
transferability of the California Home Construction Warranty, and a
conspicuous statement indicating that the warranty automatically
transfers with title to subsequent purchasers during the term of the
warranty and the homeowner may be required to disclose the existence
of the warranty to subsequent purchasers.
(i) A conspicuous statement that, subject to the terms and
conditions of the warranty, the warranty may not be cancelled or
otherwise terminated by either the homeowner or the participating
homebuilder.
(j) A conspicuous statement indicating the circumstances under
which the warranty may be voided by either party.
(k) The process for the complaint and inquiry process and for the
claim process for mediation or resolution of complaints, claims,
controversies, and disputes arising under the warranty. The warranty
may not establish a complaint and inquiry process that delays the
written notice required by subdivision (c) of Section 17830 more than
30 days from the date the participating homebuilder receives an
initial notice of complaint or inquiry. This paragraph does not
prohibit an extension of time pursuant to subdivision (c) of Section
17830.
(l) If the home construction warranty provides for alternative
dispute resolution, this must be conspicuously stated in the warranty
agreement.
(m) If the home construction warranty provides for alternative
dispute resolution of any and all complaints, claims, disputes, and
controversies arising from the construction of the residential home
of the homeowner, including any complaints, claims, disputes, and
controversies being made directly against a licensed insurance
company that has contracted with the participating homebuilder to
cover the homebuilder's warranty obligations, this shall be
conspicuously stated in the warranty agreement.
17827. (a) The home construction warranty coverage language shall
conspicuously state that the warranty provides coverage for
construction defects as defined in this chapter, for a minimum period
of 10 years from the date of substantial completion of the
construction of the residential home to which the warranty applies,
and that during the minimum 10-year coverage period of the warranty,
upon proper notice from the homeowner, the participating homebuilder
shall be responsible for the correction of any construction defect
covered by the warranty.
(b) For purposes of this section, the phrase "correction of any
construction defect" shall include repair, replacement, or payment of
reasonable costs to repair or replace, pursuant to existing
construction codes and standards of construction practice in effect
at the time of original construction, or at the builder's option,
either of the following:
(1) Rebuild the structure in accordance with the original plans
and specifications and in accordance with any modifications required
as a condition of obtaining a building permit.
(2) Pay the reasonable market value of the property established
without a reduction for existing construction defects, plus
relocation costs.
(c) The choice between repair, replacement, or payment is the
builder's, subject to the dispute resolution provisions of the
warranty.
(d) The builder shall be responsible for all physical damages
proximately caused by construction defects covered under the warranty
and for the actual reasonable cost of alternative shelter expenses
during the period of repairs.
17828. (a) During the term of a home construction warranty, the
warranty shall be transferred to subsequent purchasers of the home,
at the time legal title to the home is transferred. The transfer of
the warranty shall neither extend nor reduce the original termination
date of the warranty.
(b) The participating homebuilder may not change the terms and
conditions of the home construction warranty during the term of the
warranty.
(c) Subject to terms and conditions of the warranty, a California
Home Construction Warranty, upon becoming effective, may not be
canceled by either the homeowner or the participating homebuilder
during the term of the warranty.
17829. Nothing in this chapter shall be construed to discourage
or prohibit participating homebuilders from offering home
construction warranties that provide coverage for construction
defects for a period of longer than 10 years or that provide for
differing coverage periods for different components of the home,
provided that the coverage provided meets the minimum requirements of
this section.
17830. The following fair complaint and claims-handling standards
shall apply to participating homebuilders, warranty administrators,
and licensed insurance companies under contract with participating
homebuilders to administer and process complaints and claims arising
from warranties issued pursuant to this chapter:
(a) A homebuilder may contract with a warranty administrator or
licensed insurance company to administer and process complaints and
claims under home construction warranties issued pursuant to this
chapter.
(1) If a participating homebuilder contracts with a warranty
administrator or licensed insurance company to administer and process
complaints and claims under a home construction warranty, the
warranty shall conspicuously state the identity, address, and
telephone number of the warranty administrator or insurance company
for purposes of the noticing of complaints, construction defects, or
other construction deficiencies arising from construction of a new
residential home that is subject to the warranty.
(2) If the participating homebuilder replaces a warranty
administrator who has been processing complaints and claims under a
warranty subject to this chapter, the participating homebuilder shall
immediately notify the homeowner of the identity, address, and
telephone number of the new warranty administrator for the noticing
of complaints and claims, the participating homebuilder shall notify
the Contractors' State License Board within 30 days of the identity
of the new warranty administrator.
(b) The participating homebuilder shall establish and maintain, or
contract with a warranty administrator or licensed insurance company
to establish and maintain, a process for responding to complaints
and inquiries arising under the California Home Construction
Warranty.
(1) A participating homebuilder or warranty administrator, or
licensed insurance company under contract with the homebuilder to
administer and process complaints and claims, shall acknowledge
receipt of an initial nonemergency complaint or inquiry within 15
days of receipt.
(2) Where necessary for resolution of the complaint or inquiry,
the participating homebuilder and homeowner shall schedule a mutually
agreeable time for the inspection of the conditions giving rise to
the complaint or inquiry.
(3) Upon completion of the inspection of the condition giving rise
to the complaint or inquiry, and no later than 30 days from receipt
of the complaint or inquiry, or 45 days if the complaint or inquiry
is from a homeowners' association, unless an extension of this time
period is agreed to by the parties, the participating homebuilder
shall provide the homeowner with a written statement indicating
whether or not the condition giving rise to the complaint or inquiry
is covered under the warranty and any corrective action the
homebuilder intends to take regarding the condition giving rise to
the complaint or inquiry.
(4) If the participating homebuilder determines that the condition
giving rise to the complaint or inquiry is not covered under the
warranty, the written statement required by this subdivision shall
include a description of the process for filing a claim under the
warranty.
(5) If the participating homebuilder determines that the condition
giving rise to the complaint or inquiry is covered under the
warranty, the written statement required by this subdivision shall
indicate the specific action the builder will take to correct the
condition and the schedule for taking that corrective action.
(6) The homeowner shall comply with the complaint and inquiry
procedures provided in the warranty including the inspection provided
for in paragraph (2) of subdivision (b) of Section 17830, before
initiating the claim process under the warranty. A participating
homebuilder and homeowner may mutually agree to extend the complaint
and inquiry process beyond the time in the warranty.
(c) At any time in the complaint and inquiry process, or during
the claim process under the warranty, the participating homebuilder
and homeowner may mutually agree to directly invoke the dispute
resolution procedures set forth in the warranty. If the dispute
resolution procedures are directly invoked, the parties may mutually
agree to either shorten or extend the timelines for complaints and
claims as set forth in this subdivision, and all of the following
shall apply:
(1) Upon receipt of a written notice of claim from the homeowner
under the warranty, the participating homebuilder shall acknowledge
receipt of the notice within 15 days and make a good faith effort to
meet with the homeowner and inspect the basis for the claim.
(2) Upon inspection of the claim, and within 30 days of the
initial notice of claim, the participating homebuilder shall provide
the homeowner with a written statement indicating whether or not the
claim is covered under the warranty and any corrective action the
homebuilder intends to take regarding the covered defect.
(3) If the participating homebuilder determines that the claim is
not covered under the warranty, the written statement required by
this subdivision shall include a statement indicating that the claim
is not covered and shall include a description of the process for
resolution of disputes under the warranty.
(4) If the participating homebuilder determines that the claim is
covered under the warranty, the written statement required by this
subdivision shall indicate the specific action the builder will take
to correct the defect and the schedule for taking that corrective
action.
(d) If the California Home Construction Warranty provides for
alternative dispute resolution to resolve disputes under the
warranty, the process and procedures for alternative dispute
resolution shall comply with the requirements of Section 17835.
17835. (a) A California Home Construction Warranty may include a
provision to submit all complaints, claims, disputes, and
controversies relating to construction defects, construction
deficiencies, or any and all issues arising from the construction of
the new residential home, regardless of the nature of the claim, the
injury or damage sustained or the type of remedy sought, to a dispute
resolution conference with subsequent referral to judicial
arbitration pursuant to Section 1141.12 of the Code of Civil
Procedure as a means of alternative dispute resolution.
(b) A home construction warranty may include a provision to submit
any and all disputes or controversies regarding scope of coverage
under the warranty or breach of the warranty to a dispute resolution
conference with subsequent referral to judicial arbitration pursuant
to Section 1141.12 of the Code of Civil Procedure.
(c) A home construction warranty may include a provision to submit
any and all disputes or controversies directly against a warranty
administrator or licensed insurance company under contract with a
participating homebuilder to a dispute resolution conference with
subsequent referral to judicial arbitration pursuant to Section
1141.12 of the Code of Civil Procedure.
(1) A home construction warranty which includes a provision for a
dispute resolution conference with subsequent referral to judicial
arbitration pursuant to Section 1141.12 of the Code of Civil
Procedure shall conspicuously state the following procedures for
conducting the dispute resolution conference:
(A) The process and time periods for delivery of written notice
from one party to the agreement to the other, for initiating the
dispute resolution conference, and for specifying the nature of the
dispute, the amount involved, and the remedy sought.
(B) The process for responding to a written notice initiating a
dispute resolution conference.
(C) If the agreement provides for an expedited dispute resolution
process for certain claims based upon the amount in controversy, the
type of claim in dispute, or any other criteria, and the rules and
process for that expedited dispute resolution process.
(D) The process and time periods for any dispute resolution
conferences and requests for information.
(E) The process for appointment of a neutral and impartial
facilitator. The facilitator shall be appointed within a specified
period of time, which may not be more than 60 days from the warranty
administrator's receipt of a written request from a party to resolve
the claim or dispute.
(F) The venue of the dispute resolution proceedings which shall be
the county where the home is located unless the parties agree in
writing to some other location.
(G) The responsibility of the parties for the fees and expenses of
the dispute resolution proceedings, provided that the homebuilder
shall be responsible for and shall reimburse the homeowner for the
cost of the initial dispute resolution conference.
(2) A home construction warranty subject to this subdivision shall
also conspicuously state that the process for conducting judicial
arbitration is as contained in Chapter 2.5 (commencing with Section
1141.10) of Title 3 of Part 3 of the Code of Civil Procedure.
(e) The parties to the home construction warranty shall have the
right to be represented by an attorney at any proceeding, hearing, or
other meeting between the parties to discuss any dispute arising
under the warranty.
(f) Any agreement to resolve disputes arising under a California
Home Construction Warranty, and the provision setting forth the rules
and procedures to be used in the dispute resolution process, as
required by this section, shall be filed with the board by the
participating homebuilder.
(g) If during the process authorized by this section, a homeowner
or homeowners' association unreasonably rejects an offer made by the
builder, the homeowner, or homeowners' association may not recover an
amount in excess of the reasonable cost of the repairs that are
necessary to correct the construction defect and that are covered
under the warranty and may recover only the amount of reasonable and
necessary attorney's fees and costs incurred before the offer was
rejected.
(h) If a participating builder fails to make a reasonable offer
during the process authorized by this section, or fails to complete,
in a good and workmanlike manner, the repairs specified in an
accepted offer made pursuant to that process, the limitations on
damages and remedies provided for in this chapter shall not apply.
(i) The arbitrator to which the dispute is referred after a
dispute resolution conference shall determine the reasonableness of a
rejection of an offer of settlement made under this section and the
reasonableness of an offer made under this section.
(j) Notwithstanding any other provision of this chapter, a
participating builder who receives written notice of a construction
defect covered by the warranty and creating an imminent threat to the
health or safety of the inhabitants of the house shall take
reasonable steps to correct the defect as soon as practicable. If
the participating builder fails to correct the defect in a reasonable
time, the homeowner or homeowners' association may have the defect
corrected and may recover from the participating builder the
reasonable cost of repairs, plus attorney's fees and costs in
addition to any other damages recoverable under any law not
inconsistent with the provisions of this chapter.
(k) Except as provided in subdivision (i), a dispute resolution
conference initiated pursuant to this chapter shall be conducted in
accordance with Chapter 2 (commencing with Section 1115) of Division
9 of the Evidence Code.
17840. A participating homebuilder who offers a California Home
Construction Warranty pursuant to this chapter shall develop and
maintain a quality assurance program which has the purpose that the
homes built meet high quality standards, and shall include all of the
following:
(a) A process for the inspection of workmanship at appropriate
stages of the construction process, with a management and oversight
process that seeks to eliminate the occurrence of construction
defects in all of the following areas:
(1) Structural.
(2) Exterior.
(3) Interior.
(4) Site preparation.
(5) Foundations.
(6) Installation of doors and windows.
(7) Roofing.
(8) Plumbing.
(9) Electrical.
(10) Heating, air-conditioning, insulation, and ventilation
systems.
(b) A program for the hiring, training, and continuing education
for employees of the participating homebuilder who participate in the
actual construction or inspection of residential housing.
(c) A program for contracting with independent contractors and
subcontractors who participate in the actual construction or
inspection of residential housing:
(1) The participating homebuilder shall enter into written
contracts with all independent contractors and subcontractors for the
completion of the work being contracted for.
(2) The participating homebuilder shall contact the Contractors'
State License Board regarding the licensure and bonding of all
independent contractors and subcontractors who work on the
construction site and are under contract.
(3) The participating homebuilder may include performance
incentives and targets for quality construction in contracts with
independent contractors and subcontractors.
(4) The participating homebuilder shall disclose in its
certification filing made pursuant to Section 17815 any training or
continuing education programs applicable to independent contractors
and subcontractors.
(d) A participating homebuilder may contract with a warranty
administrator, licensed insurance company, or third-party inspection
service to meet the requirements of this section.
17841. When a California Home Construction Warranty covers a
common interest development, a participating home builder shall
provide to the homeowners' association an approved set of original
plans and specifications, as-built drawings, working drawings, and
change orders.
17845. If a homeowner elects by contract to purchase a home
subject to a warranty that meets the minimum standards for California
Home Construction Warranties, the contractual provisions of that
warranty shall be deemed to be the exclusive election of recourse by
that homeowner and the participating homebuilder for the claims
covered by the warranty. The parties to the warranty contract are
deemed to have waived any tort remedies, including negligence, strict
liability, implied warranties, or any other common law remedy other
than for breach of warranty contract and the provisions therein. To
the extent that a home construction warranty does not contain
coverage for certain alleged defects, there is no election of
recourse. The homeowner who is party to the warranty contract,
should the warranty so provide, waives any noncontractual claims
against any design, professional, or trade contractors covered by the
warranty who performed professional services or works of improvement
on the subject property. This section does not preclude or limit
any right of action for bodily injury, wrongful death, or fraud and
intentional misrepresentation.
SEC. 11. Section 1351 of the Civil Code is amended to read:
1351. As used in this title, the following terms have the
following meanings:
(a) "Association" means a nonprofit corporation or unincorporated
association created for the purpose of managing a common interest
development.
(b) "California Home Construction Warranty" means a warranty
issued by a participating homebuilder pursuant to Chapter 4
(commencing with Section 17800) of Part 3 of Division 7 of the
Business and Professions Code.
(c) "Common area" means the entire common interest
development except the separate interests therein. The estate in the
common area may be a fee, a life estate, an estate for years, or any
combination of the foregoing. However, the common area for a
planned development specified in paragraph (2) of subdivision (k) may
consist of mutual or reciprocal easement rights appurtenant to the
separate interests.
(c)
(d) "Common interest development" means any of the
following:
(1) A community apartment project.
(2) A condominium project.
(3) A planned development.
(4) A stock cooperative.
(d)
(e) "Community apartment project" means a development in
which an undivided interest in land is coupled with the right of
exclusive occupancy of any apartment located thereon.
(e)
(f) "Condominium plan" means a plan consisting of (1) a
description or survey map of a condominium project, which shall refer
to or show monumentation on the ground, (2) a three-dimensional
description of a condominium project, one or more dimensions of which
may extend for an indefinite distance upwards or downwards, in
sufficient detail to identify the common areas and each separate
interest, and (3) a certificate consenting to the recordation of the
condominium plan pursuant to this title signed and acknowledged by
the following:
(i) The record owner of fee title to that property included in the
condominium project.
(ii) In the case of a condominium project which will terminate
upon the termination of an estate for years, the certificate shall be
signed and acknowledged by all lessors and lessees of the estate for
years.
(iii) In the case of a condominium project subject to a life
estate, the certificate shall be signed and acknowledged by all life
tenants and remainder interests.
(iv) The certificate shall also be signed and acknowledged by
either the trustee or the beneficiary of each recorded deed of trust,
and the mortgagee of each recorded mortgage encumbering the
property.
Owners of mineral rights, easements, rights-of-way, and other
nonpossessory interests do not need to sign the condominium plan.
Further, in the event a conversion to condominiums of a community
apartment project or stock cooperative has been approved by the
required number of owners, trustees, beneficiaries, and mortgagees
pursuant to Section 66452.10 of the Government Code, the certificate
need only be signed by those owners, trustees, beneficiaries, and
mortgagees approving the conversion.
A condominium plan may be amended or revoked by a subsequently
acknowledged recorded instrument executed by all the persons whose
signatures would be required to record a condominium plan
pursuant to this subdivision.
(f)
(g) A "condominium project" means a development consisting
of condominiums. A condominium consists of an undivided interest in
common in a portion of real property coupled with a separate interest
in space called a unit, the boundaries of which are described on a
recorded final map, parcel map, or condominium plan in sufficient
detail to locate all boundaries thereof. The area within these
boundaries may be filled with air, earth, or water, or any
combination thereof, and need not be physically attached to land
except by easements for access and, if necessary, support. The
description of the unit may refer to (1) boundaries described in the
recorded final map, parcel map, or condominium plan, (2) physical
boundaries, either in existence, or to be constructed, such as walls,
floors, and ceilings of a structure or any portion thereof, (3) an
entire structure containing one or more units, or (4) any combination
thereof. The portion or portions of the real property held in
undivided interest may be all of the real property, except for the
separate interests, or may include a particular three-dimensional
portion thereof, the boundaries of which are described on a recorded
final map, parcel map, or condominium plan. The area within these
boundaries may be filled with air, earth, or water, or any
combination thereof, and need not be physically attached to land
except by easements for access and, if necessary, support. An
individual condominium within a condominium project may include, in
addition, a separate interest in other portions of the real property.
(g)
(h) "Construction defect" means "construction defect" as defined
in subdivision (c) of Section 17806 of the Business and Professions
Code.
(i) "Declarant" means the person or group of persons
designated in the declaration as declarant, or if no declarant is
designated, the person or group of persons who sign the original
declaration or who succeed to special rights, preferences, or
privileges designated in the declaration as belonging to the signator
of the original declaration.
(h)
(j) "Declaration" means the document, however denominated,
which contains the information required by Section 1353.
(i)
(k) "Exclusive use common area" means a portion of the
common areas designated by the declaration for the exclusive use of
one or more, but fewer than all, of the owners of the separate
interests and which is or will be appurtenant to the separate
interest or interests.
(1) Unless the declaration otherwise provides, any shutters,
awnings, window boxes, doorsteps, stoops, porches, balconies, patios,
exterior doors, door frames, and hardware incident thereto, screens
and windows or other fixtures designed to serve a single separate
interest, but located outside the boundaries of the separate
interest, are exclusive use common areas allocated exclusively to
that separate interest.
(2) Notwithstanding the provisions of the declaration, internal
and external telephone wiring designed to serve a single separate
interest, but located outside the boundaries of the separate
interest, are exclusive use common areas allocated exclusively to
that separate interest.
(j)
(l) "Governing documents" means the declaration and any
other documents, such as bylaws, operating rules of the association,
articles of incorporation, or articles of association, or a
California Home Construction Warranty, which govern the
operation of the common interest development or association.
(k)
(m) "Planned development" means a development (other than a
community apartment project, a condominium project, or a stock
cooperative) having either or both of the following features:
(1) The common area is owned either by an the
association or in common by the owners of the separate interests who
possess appurtenant rights to the beneficial use and enjoyment of the
common area.
(2) A power exists in the association to enforce an obligation of
an owner of a separate interest with respect to the beneficial use
and enjoyment of the common area by means of an assessment which may
become a lien upon the separate interests in accordance with Section
1367.
(l)
(n) "Separate interest" has the following meanings:
(1) In a community apartment project, "separate interest" means
the exclusive right to occupy an apartment, as specified in
subdivision (d).
(2) In a condominium project, "separate interest" means an
individual unit, as specified in subdivision (f).
(3) In a planned development, "separate interest" means a
separately owned lot, parcel, area, or space.
(4) In a stock cooperative, "separate interest" means the
exclusive right to occupy a portion of the real property, as
specified in subdivision (m).
Unless the declaration or condominium plan, if any exists,
otherwise provides, if walls, floors, or ceilings are designated as
boundaries of a separate interest, the interior surfaces of the
perimeter walls, floors, ceilings, windows, doors, and outlets
located within the separate interest are part of the separate
interest and any other portions of the walls, floors, or ceilings are
part of the common areas.
The estate in a separate interest may be a fee, a life estate, an
estate for years, or any combination of the foregoing.
(m)
(o) "Stock cooperative" means a development in which a
corporation is formed or availed of primarily for the purpose of
holding title to, either in fee simple or for a term of years,
improved real property, and all or substantially all of the
shareholders of the corporation receive a right of exclusive
occupancy in a portion of the real property, title to which is held
by the corporation. The owners' interest in the corporation, whether
evidenced by a share of stock, a certificate of membership, or
otherwise, shall be deemed to be an interest in a common interest
development and a real estate development for purposes of subdivision
(f) of Section 25100 of the Corporations Code.
A "stock cooperative" includes a limited equity housing
cooperative which is a stock cooperative that meets the criteria of
Section 33007.5 of the Health and Safety Code.
SEC. 12. Section 1354 of the Civil Code is amended to read:
1354. (a) The covenants and restrictions in the declaration
, including a California Home Construction Warranty, if applicable,
shall be enforceable equitable servitudes, unless unreasonable,
and shall inure to the benefit of and bind all owners of separate
interests in the development. Unless the declaration states
otherwise, these servitudes may be enforced by any owner of a
separate interest or by the association, or by both.
(b) Unless Except where the terms and
conditions of a California Home Construction Warranty are applicable,
unless the applicable time limitation for commencing the
action would run within 120 days, prior to the filing of a civil
action by either an association or an owner or a member of a common
interest development solely for declaratory relief or injunctive
relief, or for declaratory relief or injunctive relief in conjunction
with a claim for monetary damages, other than association
assessments, not in excess of five thousand dollars ($5,000), related
to the enforcement of the governing documents, the parties shall
endeavor, as provided in this subdivision, to submit their dispute to
a form of alternative dispute resolution such as mediation or
arbitration. The form of alternative dispute resolution chosen may
be binding or nonbinding at the option of the parties. Any party to
such a dispute may initiate this process by
serving on another party to the dispute a Request for Resolution.
The Request for Resolution shall include (1) a brief description of
the dispute between the parties, (2) a request for alternative
dispute resolution, and (3) a notice that the party receiving the
Request for Resolution is required to respond thereto within 30 days
of receipt or it will be deemed rejected. Service of the Request for
Resolution shall be in the same manner as prescribed for service in
a small claims action as provided in Section 116.340 of the Code of
Civil Procedure. Parties receiving a Request for Resolution shall
have 30 days following service of the Request for Resolution to
accept or reject alternative dispute resolution and, if not accepted
within the 30-day period by a party, shall be deemed rejected by
that party. If alternative dispute resolution is accepted by the
party upon whom the Request for Resolution is served, the alternative
dispute resolution shall be completed within 90 days of receipt of
the acceptance by the party initiating the Request for Resolution,
unless extended by written stipulation signed by both parties. The
costs of the alternative dispute resolution shall be borne by the
parties.
(c) At the time of filing a civil action by either an association
or an owner or a member of a common interest development solely for
declaratory relief or injunctive relief, or for declaratory relief or
injunctive relief in conjunction with a claim for monetary damages
not in excess of five thousand dollars ($5,000), related to the
enforcement of the governing documents, the party filing the action
shall file with the complaint a certificate stating that alternative
dispute resolution has been completed in compliance with subdivision
(b). The failure to file a certificate as required by subdivision
(b) shall be grounds for a demurrer pursuant to Section 430.10 of the
Code of Civil Procedure or a motion to strike pursuant to Section
435 of the Code of Civil Procedure unless the filing party certifies
in writing that one of the other parties to the dispute refused
alternative dispute resolution prior to the filing of the complaint,
that preliminary or temporary injunctive relief is necessary, or that
alternative dispute resolution is not required by subdivision (b),
because the limitation period for bringing the action would have run
within the 120-day period next following the filing of the action, or
the court finds that dismissal of the action for failure to comply
with subdivision (b) would result in substantial prejudice to one of
the parties.
(d) Once a civil action specified in subdivision (a) to enforce
the governing documents has been filed by either an association or an
owner or member of a common interest development, upon written
stipulation of the parties the matter may be referred to alternative
dispute resolution and stayed. The costs of the alternative dispute
resolution shall be borne by the parties. During this referral, the
action shall not be subject to the rules implementing subdivision (c)
of Section 68603 of the Government Code.
(e) The requirements of subdivisions (b) and (c) shall not apply
to the filing of a cross-complaint.
(f) In any action specified in subdivision (a) to enforce the
governing documents, the prevailing party shall be awarded reasonable
attorney's fees and costs. Upon motion by any party for attorney's
fees and costs to be awarded to the prevailing party in these
actions, the court, in determining the amount of the award, may
consider a party's refusal to participate in alternative dispute
resolution prior to the filing of the action.
(g) Unless consented to by both parties to alternative dispute
resolution that is initiated by a Request for Resolution under
subdivision (b), evidence of anything said or of admissions made in
the course of the alternative dispute resolution process shall not be
admissible in evidence, and testimony or disclosure of such a
statement or admission may not be compelled, in any civil action in
which, pursuant to law, testimony can be compelled to be given.
(h) Unless consented to by both parties to alternative dispute
resolution that is initiated by a Request for Resolution under
subdivision (b), documents prepared for the purpose or in the course
of, or pursuant to, the alternative dispute resolution shall not be
admissible in evidence, and disclosure of these documents may not be
compelled, in any civil action in which, pursuant to law, testimony
can be compelled to be given.
(i) Members of the association shall annually be provided a
summary of the provisions of this section, which specifically
references this section. The summary shall include the following
language:
"Failure by any member of the association to comply with the
prefiling requirements of Section 1354 of the Civil Code may result
in the loss of your rights to sue the association or another member
of the association regarding enforcement of the governing documents."
The summary shall be provided either at the time the pro forma
budget required by Section 1365 is distributed or in the manner
specified in Section 5016 of the Corporations Code.
(j) Any Request for Resolution sent to the owner of a separate
interest pursuant to subdivision (b) shall include a copy of this
section.
SEC. 13. Section 1355.5 of the Civil Code is amended to read:
1355.5. (a) Notwithstanding any provision of the governing
documents of a common interest development to the contrary, the board
of directors of the association may, after the developer of the
common interest development has completed construction of the
development, has terminated construction activities, and has
terminated his or her marketing activities for the sale, lease, or
other disposition of separate interests within the development, adopt
an amendment deleting from any of the governing documents any
provision which is unequivocally designed and intended, or which by
its nature can only have been designed or intended, to facilitate the
developer in completing the construction or marketing of the
development. However, provisions of the governing documents relative
to a particular construction or marketing phase of the development
may not be deleted under the authorization of this subdivision until
that construction or marketing phase has been completed.
(b) The provisions which may be deleted by action of the board
shall be limited to those which provide for access by the developer
over or across the common area for the purposes of (a) completion of
construction of the development, and (b) the erection, construction,
or maintenance of structures or other facilities designed to
facilitate the completion of construction or marketing of separate
interests.
(c) At least 30 days prior to taking action pursuant to
subdivision (a), the board of directors of the association shall mail
to all owners of the separate interests, by first-class mail, (1) a
copy of all amendments to the governing documents proposed to be
adopted under subdivision (a) and (2) a notice of the time, date, and
place the board of directors will consider adoption of the
amendments. The board of directors of an association may consider
adoption of amendments to the governing documents pursuant to
subdivision (a) only at a meeting which is open to all owners of the
separate interests in the common interest development, who shall be
given opportunity to make comments thereon. All deliberations of the
board of directors on any action proposed under subdivision (a)
shall only be conducted in such an open meeting.
(d) The board of directors of the association may not amend the
governing documents pursuant to this section without the approval of
the owners, casting a majority of the votes at a meeting or election
of the association constituting a quorum and conducted in accordance
with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2
of Title 1 of, and Section 7613 of, the Corporations Code. For the
purposes of this section, "quorum" means more than 50 percent of the
owners who own no more than two separate interests in the
development.
(e) Nothing in this section shall be construed to affect the
rights of a participating homebuilder under a California Home
Construction Warranty that is applicable to the common interest
development or the individual units contained therein.
SEC. 14. Section 1356 of the Civil Code is amended to read:
1356. (a) If in order to amend a declaration, the declaration
requires owners having more than 50 percent of the votes in the
association, in a single class voting structure, or owners having
more than 50 percent of the votes in more than one class in a voting
structure with more than one class, to vote in favor of the
amendment, the association, or any owner of a separate interest, may
petition the superior court of the county in which the common
interest development is located for an order reducing the percentage
of the affirmative votes necessary for such an amendment. The
petition shall describe the effort that has been made to solicit
approval of the association members in the manner provided in the
declaration, the number of affirmative and negative votes actually
received, the number or percentage of affirmative votes required to
effect the amendment in accordance with the existing declaration, and
other matters the petitioner considers relevant to the court's
determination. The petition shall also contain, as exhibits thereto,
copies of all of the following:
(1) The governing documents.
(2) A complete text of the amendment.
(3) Copies of any notice and solicitation materials utilized in
the solicitation of owner approvals.
(4) A short explanation of the reason for the amendment.
(5) Any other documentation relevant to the court's determination.
(b) Upon filing the petition, the court shall set the matter for
hearing and issue an ex parte order setting forth the manner in
which notice shall be given.
(c) The court may, but shall not be required to, grant the
petition if it finds all of the following:
(1) The petitioner has given not less than 15 days written notice
of the court hearing to all members of the association, to any
mortgagee of a mortgage or beneficiary of a deed of trust who is
entitled to notice under the terms of the declaration, and to the
city, county, or city and county in which the common interest
development is located that is entitled to notice under the terms of
the declaration.
(2) Balloting on the proposed amendment was conducted in
accordance with all applicable provisions of the governing documents.
(3) A reasonably diligent effort was made to permit all eligible
members to vote on the proposed amendment.
(4) Owners having more than 50 percent of the votes, in a single
class voting structure, voted in favor of the amendment. In a voting
structure with more than one class, where the declaration requires a
majority of more than one class to vote in favor of the amendment,
owners having more than 50 percent of the votes of each class
required by the declaration to vote in favor of the amendment voted
in favor of the amendment.
(5) The amendment is reasonable.
(6) Granting the petition is not improper for any reason stated in
subdivision (e).
(d) If the court makes the findings required by subdivision (c),
any order issued pursuant to this section may confirm the amendment
as being validly approved on the basis of the affirmative votes
actually received during the balloting period or the order may
dispense with any requirement relating to quorums or to the number or
percentage of votes needed for approval of the amendment that would
otherwise exist under the governing documents.
(e) Subdivisions (a) to (d), inclusive, notwithstanding, the court
shall not be empowered by this section to approve any amendment to
the declaration that:
(1) Would change provisions in the declaration requiring the
approval of owners having more than 50 percent of the votes in more
than one class to vote in favor of an amendment, unless owners having
more than 50 percent of the votes in each affected class approved
the amendment.
(2) Would eliminate any special rights, preferences, or privileges
designated in the declaration as belonging to the declarant, without
the consent of the declarant.
(3) Would impair the security interest of a mortgagee of a
mortgage or the beneficiary of a deed of trust without the approval
of the percentage of the mortgagees and beneficiaries specified in
the declaration, if the declaration requires the approval of a
specified percentage of the mortgagees and beneficiaries.
(4) Would impair the rights, duties, and obligations of
the parties to a California Home Construction Warranty.
(f) An amendment is not effective pursuant to this section until
the court order and amendment have been recorded in every county in
which a portion of the common interest development is located. The
amendment may be acknowledged by, and the court order and amendment
may be recorded by, any person designated in the declaration or by
the association for that purpose, or if no one is designated for that
purpose, by the president of the association. Upon recordation of
the amendment and court order, the declaration, as amended in
accordance with this section, shall have the same force and effect
as if the amendment were adopted in compliance with every requirement
imposed by the governing documents.
(g) Within a reasonable time after the amendment is recorded the
association shall mail a copy of the amendment to each member of the
association, together with a statement that the amendment has been
recorded.
SEC. 15. Section 1357 of the Civil Code is amended to read:
1357. (a) The Legislature finds that there are common interest
developments that have been created with deed restrictions which do
not provide a means for the property owners to extend the term of the
declaration. The Legislature further finds that covenants and
restrictions, contained in the declaration, are an appropriate method
for protecting the common plan of developments and to provide for a
mechanism for financial support for the upkeep of common areas
including, but not limited to, roofs, roads, heating systems, and
recreational facilities. If declarations terminate prematurely,
common interest developments may deteriorate and the housing supply
of affordable units could be impacted adversely.
The Legislature further finds and declares that it is in the
public interest to provide a vehicle for extending the term of the
declaration if owners having more than 50 percent of the votes in
the association choose to do so.
(b) A declaration which specifies a termination date, but which
contains no provision for extension of the termination date, may be
extended by the approval of owners having more than 50 percent of the
votes in the association or any greater percentage specified in the
declaration for an amendment thereto. If the approval of owners
having more than 50 percent of the votes in the association is
required to amend the declaration, the term of the declaration may be
extended in accordance with Section 1356.
(c) Any amendment to a declaration made in accordance with
subdivision (b) shall become effective upon recordation in
accordance with Section 1355.
(d) No single extension of the terms of the declaration made
pursuant to this section shall exceed the initial term of the
declaration or 20 years, whichever is less. However, more than one
extension may occur pursuant to this section.
(e) Nothing in this section shall be construed to allow for the
extension of the terms of a California Home Construction Warranty.
SEC. 16. Section 1364 of the Civil Code is amended to read:
1364. (a) Unless otherwise provided in the declaration of a
common interest development, and subject ot the terms and
conditions of a California Home Construction Warranty, if applicable,
the association is responsible for repairing, replacing, or
maintaining the common areas, other than exclusive use common areas,
and the owner of each separate interest is responsible for
maintaining that separate interest and any exclusive use common area
appurtenant to the separate interest.
(b) (1) In a community apartment project, condominium project, or
stock cooperative, as defined in Section 1351, unless otherwise
provided in the declaration, the association is responsible for the
repair and maintenance of the common area occasioned by the presence
of wood-destroying pests or organisms.
(2) In a planned development as defined in Section 1351, unless a
different maintenance scheme is provided in the declaration, each
owner of a separate interest is responsible for the repair and
maintenance of that separate interest as may be occasioned by the
presence of wood-destroying pests or organisms. Upon approval of the
majority of all members of the association, the responsibility for
such repair and maintenance may be delegated to
the association, which shall be entitled to recover the cost thereof
as a special assessment.
(c) The costs of temporary relocation during the repair and
maintenance of the areas within the responsibility of the association
shall be borne by the owner of the separate interest affected.
(d) (1) The association may cause the temporary, summary removal
of any occupant of a common interest development for such
periods and at such times as may be
necessary for prompt, effective treatment of wood-destroying pests or
organisms.
(2) The association shall give notice of the need to temporarily
vacate a separate interest to the occupants and to the owners, not
less than 15 days nor more than 30 days prior to the date of the
temporary relocation. The notice shall state the reason for the
temporary relocation, the date and time of the beginning of
treatment, the anticipated date and time of termination of treatment,
and that the occupants will be responsible for their own
accommodations during the temporary relocation.
(3) Notice by the association shall be deemed complete upon
either:
(A) Personal delivery of a copy of the notice to the occupants,
and sending a copy of the notice to the owners, if different than
the occupants, by first-class mail, postage prepaid at the most
current address shown on the books of the association.
(B) By sending a copy of the notice to the occupants at the
separate interest address and a copy of the notice to the owners, if
different than the occupants, by first-class mail, postage prepaid,
at the most current address shown on the books of the association.
(e) For purposes of this section, "occupant" means an owner,
resident, guest, invitee, tenant, lessee, sublessee, or other person
in possession on the separate interest.
(f) Notwithstanding the provisions of the declaration, the owner
of a separate interest is entitled to reasonable access to the common
areas for the purpose of maintaining the internal and external
telephone wiring made part of the exclusive use common areas of a
separate interest pursuant to paragraph (2) of subdivision (i) of
Section 1351. The access shall be subject to the consent of the
association, whose approval shall not be unreasonably withheld, and
which may include the association's approval of telephone wiring upon
the exterior of the common areas, and other conditions as the
association determines reasonable.
SEC. 17. Section 1365 of the Civil Code is amended to read:
1365. Unless the governing documents impose more stringent
standards, the association shall prepare and distribute to all of its
members the following documents:
(a) A pro forma operating budget, which shall include all of the
following:
(1) The estimated revenue and expenses on an accrual basis.
(2) A summary of the association's reserves based upon the most
recent review or study conducted pursuant to Section 1365.5, which
shall be printed in bold boldface type
and include all of the following:
(A) The current estimated replacement cost, estimated remaining
life, and estimated useful life of each major component.
(B) As of the end of the fiscal year for which the study is
prepared:
(i) The current estimate of the amount of cash reserves necessary
to repair, replace, restore, or maintain the major components.
(ii) The current amount of accumulated cash reserves actually set
aside to repair, replace, restore, or maintain major components.
(iii) If applicable, the amount of funds received from either a
compensatory damage award or settlement to an association from any
person or entity for injuries to property, real or personal, arising
out of any construction or design defects, and the expenditure or
disposition of funds, including the amounts expended for the direct
and indirect costs of repair of construction or design defects.
These amounts shall be reported at the end of the fiscal year for
which the study is prepared as separate line items under cash
reserves pursuant to clause (ii). In lieu of complying with the
requirements set forth in this clause, an association that is
obligated to issue a review of their financial statement pursuant to
subdivision (b) may include in the review a statement containing all
of the information required by this clause.
(C) The percentage that the amount determined for purposes of
clause (ii) subparagraph (B) equals of the amount
determined for purposes of clause (i) of subparagraph (B).
(3) A statement as to whether the board of directors of the
association has determined or anticipates that the levy of one or
more special assessments will be required to repair, replace, or
restore any major component or to provide adequate reserves therefor.
(4) A general statement addressing the procedures used for the
calculation and establishment of those reserves to defray the future
repair, replacement, or additions to those major components that the
association is obligated to maintain.
The summary of the association's reserves disclosed pursuant to
paragraph (2) shall not be admissible in evidence to show improper
financial management of an association, provided that other relevant
and competent evidence of the financial condition of the association
is not made inadmissible by this provision.
A copy of the operating budget shall be annually distributed not
less than 45 days nor more than 60 days prior to the beginning of the
association's fiscal year.
(b) A review of the financial statement of the association shall
be prepared in accordance with generally accepted accounting
principles by a licensee of the California State Board of
Accountancy for any fiscal year in which the gross income to the
association exceeds seventy-five thousand dollars ($75,000). A copy
of the review of the financial statement shall be distributed within
120 days after the close of each fiscal year.
(c) In lieu of the distribution of the pro forma operating budget
required by subdivision (a), the board of directors may elect to
distribute a summary of the pro forma operating budget to all of its
members with a written notice that the pro forma operating budget is
available at the business office of the association or at another
suitable location within the boundaries of the development, and that
copies will be provided upon request and at the expense of the
association. If any member requests that a copy of the pro forma
operating budget required by subdivision (a) be mailed to the member,
the association shall provide the copy to the member by first-class
United States mail at the expense of the association and delivered
within five days. The written notice that is distributed to each of
the association members shall be in at least 10-point boldface type
on the front page of the summary of the budget.
(d) A statement describing the association's policies and
practices in enforcing lien rights or other legal remedies for
default in payment of its assessments against its members shall be
annually delivered to the members during the 60-day period
immediately preceding the beginning of the association's fiscal year.
(e) (1) A summary of the association's property, general
liability, and earthquake and flood insurance policies, which shall
be distributed within 60 days preceding the beginning of the
association's fiscal year, that includes all of the following
information about each policy:
(A) The name of the insurer.
(B) The type of insurance.
(C) The policy limits of the insurance.
(D) The amount of deductibles, if any.
(2) The association shall, as soon as reasonably practicable,
notify its members by first-class mail if any of the policies
described in paragraph (1) have lapsed, been canceled, and are not
immediately renewed, restored, or replaced, or if there is a
significant change, such as a reduction in coverage or limits or an
increase in the deductible, as to any of those policies. If the
association receives any notice of nonrenewal of a policy described
in paragraph (1), the association shall immediately notify its
members if replacement coverage will not be in effect by the date the
existing coverage will lapse.
(3) To the extent that any of the information required to be
disclosed pursuant to paragraph (1) is specified in the insurance
policy declaration page, the association may meet its obligation to
disclose that information by making copies of that page and
distributing it to all of its members.
(4) The summary distributed pursuant to paragraph (1) shall
contain, in at least 10-point boldface type, the following statement:
"This summary of the association's policies of insurance provides
only certain information, as required by subdivision (e) of Section
1365 of the Civil Code, and should not be considered a substitute for
the complete policy terms and conditions contained in the actual
policies of insurance. Any association member may, upon request and
provision of reasonable notice, review the association's insurance
policies and, upon request and payment of reasonable duplication
charges, obtain copies of those policies. Although the association
maintains the policies of insurance specified in this summary, the
association's policies of insurance may not cover your property,
including personal property or, real property improvements to or
around your dwelling, or personal injuries or other losses that occur
within or around your dwelling. Even if a loss is covered, you may
nevertheless be responsible for paying all or a portion of any
deductible that applies. Association members should consult with
their individual insurance broker or agent for appropriate additional
coverage."
(f) A summary of the terms and conditions of a California Home
Construction Warranty issued to the association, which shall include
the following information:
(1) The name, address, and telephone number of the homebuilder and
warranty administrator who is responsible for the processing of
claims.
(2) The process for the filing of a claim under the warranty.
(3) A summary of the alternative dispute resolution provisions of
the warranty, including the process for binding arbitration, if
applicable.
(4) A copy of the warranty issued to the association shall be
provided to an owner of a separate interest upon request.
SEC. 18. Section 1365.7 of the Civil Code is amended to read:
1365.7. (a) A volunteer officer or volunteer director of an
association, as defined in subdivision (a) of Section 1351, which
manages a common interest development that is exclusively
residential, shall not be personally liable in excess of the coverage
of insurance specified in paragraph (4) to any person who suffers
injury, including, but not limited to, bodily injury, emotional
distress, wrongful death, or property damage or loss as a result of
the tortious act or omission of the volunteer officer or volunteer
director if all of the following criteria are met:
(1) The act or omission was performed within the scope of the
officer's or director's association duties.
(2) The act or omission was performed in good faith.
(3) The act or omission was not willful, wanton, or grossly
negligent.
(4) The association maintained and had in effect at the time the
act or omission occurred and at the time a claim is made one or more
policies of insurance which shall include coverage for (A) general
liability of the association and (B) individual liability of officers
and directors of the association for negligent acts or omissions in
that capacity; provided, that both types of coverage are in the
following minimum amount:
(A) At least five hundred thousand dollars ($500,000) if the
common interest development consists of 100 or fewer separate
interests.
(B) At least one million dollars ($1,000,000) if the common
interest development consists of more than 100 separate interests.
(b) The payment of actual expenses incurred by a director or
officer in the execution of the duties of that position does not
affect the director's or officer's status as a volunteer within the
meaning of this section.
(c) An officer or director who at the time of the act or omission
was a declarant, as defined in subdivision (g) of Section 1351, or
who received either direct or indirect compensation as an employee
from the declarant, or from a financial institution that purchased a
separate interest, as defined in subdivision (l) of Section 1351, at
a judicial or nonjudicial foreclosure of a mortgage or deed of trust
on real property, is not a volunteer for the purposes of this
section.
(d) Nothing in this section shall be construed to limit the
liability of the association for its negligent act or omission or for
any negligent act or omission of an officer or director of the
association.
(e) This section shall only apply to a volunteer officer or
director who is a tenant of a separate interest in the common
interest development or is an owner of no more than two separate
interests in the common interest development.
(f) (1) For purposes of paragraph (1) of subdivision (a), the
scope of the officer's or director's association duties shall
include, but shall not be limited to, both of the following
decisions:
(A) Whether to conduct an investigation of the common interest
development for latent deficiencies prior to the expiration of the
applicable statute of limitations or within the term of a
California Home Construction Warranty, if applicable .
(B) Whether to commence a civil action against the builder for
defects in design or construction.
(2) It is the intent of the Legislature that this section clarify
the scope of association duties to which the protections against
personal liability in this section apply. It is not the intent of
the Legislature that these clarifications be construed to expand, or
limit, the fiduciary duties owed by the directors or officers.
SEC. 19. Section 1368 of the Civil Code is amended to read:
1368. (a) The owner of a separate interest, other than an owner
subject to the requirements of Section 11018.6 of the Business and
Professions Code, shall, as soon as practicable before transfer of
title to the separate interest or execution of a real property sales
contract therefor, as defined in Section 2985, provide the following
to the prospective purchaser:
(1) A copy of the governing documents of the common interest
development , including a copy of the California Home
Construction Warranty that may be applicable to the association or
owner of the separate interest .
(2) If there is a restriction in the governing documents limiting
the occupancy, residency, or use of a separate interest on the basis
of age in a manner different from that provided in Section 51.3, a
statement that the restriction is only enforceable to the extent
permitted by Section 51.3 and a statement specifying the applicable
provisions of Section 51.3.
(3) A copy of the most recent documents distributed pursuant to
Section 1365.
(4) A true statement in writing obtained from an authorized
representative of the association as to the amount of the association'
s current regular and special assessments and fees, any assessments
levied upon the owner's interest in the common interest development
that are unpaid on the date of the statement, and any monetary fines
or penalties levied upon the owner's interest and unpaid on the date
of the statement. The statement obtained from an authorized
representative shall also include true information on late charges,
interest, and costs of collection which, as of the date of the
statement, are or may be made a lien upon the owner's interest in a
common interest development pursuant to Section 1367.
(5) A copy or a summary of any notice previously sent to the owner
pursuant to subdivision (h) of Section 1363 that sets forth any
alleged violation of the governing documents that remains unresolved
at the time of the request. The notice shall not be deemed a waiver
of the association's right to enforce the governing documents against
the owner or the prospective purchaser of the separate interest with
respect to any violation. This paragraph shall not be construed to
require an association to inspect an owner's separate interest.
(6) A copy of the preliminary list of defects provided to each
member of the association pursuant to Section 1375, unless the
association and the builder subsequently enter into a settlement
agreement or otherwise resolve the matter and the association
complies with Section 1375.1. Disclosure of the preliminary list of
defects pursuant to this paragraph shall not waive any privilege
attached to the document. The preliminary list of defects shall also
include a statement that a final determination as to whether the
list of defects is accurate and complete has not been made.
(7) A copy of the latest information provided for in Section
1375.1.
(8) Any change in the association's current regular and special
assessments and fees which have been approved by the association's
board of directors, but have not become due and payable as of the
date disclosure is provided pursuant to this subdivision.
(b) Upon written request, an association shall, within 10 days of
the mailing or delivery of the request, provide the owner of a
separate interest with a copy of the requested items specified in
paragraphs (1) to (8), inclusive, of subdivision (a). The
association may charge a fee for this service, which shall not exceed
the association's reasonable cost to prepare and reproduce the
requested items.
(c) An association shall not impose or collect any assessment,
penalty, or fee in connection with a transfer of title or any other
interest except the association's actual costs to change its records
and that authorized by subdivision (b).
(d) Any person or entity who willfully violates this section shall
be liable to the purchaser of a separate interest which is subject
to this section for actual damages occasioned thereby and, in
addition, shall pay a civil penalty in an amount not to exceed five
hundred dollars ($500). In an action to enforce this liability, the
prevailing party shall be awarded reasonable attorneys' fees.
(e) Nothing in this section affects the validity of title to real
property transferred in violation of this section.
(f) In addition to the requirements of this section, an owner
transferring title to a separate interest shall comply with
applicable requirements of Sections 1133 and 1134.
SEC. 20. Section 1368.4 of the Civil Code is amended to read:
1368.4. (a) Not later than 30 days prior to the filing of any
civil action by the association against the declarant or other
developer of a common interest development , or the initiation
of the alternative dispute process under a California Home
Construction Warranty, if applicable, for alleged damage to the
common areas, alleged damage to the separate interests that the
association is obligated to maintain or repair, or alleged damage to
the separate interests that arises out of, or is integrally related
to, damage to the common areas or separate interests that the
association is obligated to maintain or repair, the board of
directors of the association shall a provide written notice to each
member of the association who appears on the records of the
association when the notice is provided. This notice shall specify
all of the following:
(1) That a meeting will take place to discuss problems that may
lead to the filing of a civil action.
(2) The options, including civil actions, that are available to
address the problems.
(3) The time and place of this meeting.
(b) Notwithstanding subdivision (a), if the association has reason
to believe that the applicable statute of limitations will expire
before the association files the civil action, the association may
give the notice, as described above, within 30 days after the filing
of the action.
SEC. 21. Section 1375 of the Civil Code is amended to read:
1375. (a) This section, and the procedures and requirements
established herein, shall not be applicable where the association has
contracted for a California Home Construction Warranty that provides
for both an alternative process for the filing of complaints,
inquiries, and claims, and an alternative process for the resolution
of disputes, including binding arbitration.
(b) Before an association commences an action for damages
against a builder of a common interest development based upon a claim
for defects in the design or construction of the common interest
development, all of the requirements of subdivisions (b) to
(g) (c) to (h) , inclusive, shall be met, except
as otherwise provided in this section.
(b)
(c) (1) The association shall give written notice to the
builder against whom the claim is made. This notice shall include
all of the following:
(A) A preliminary list of defects.
(B) A summary of the results of a survey or questionnaire
distributed to homeowners to determine the nature and extent of
defects, if this survey has been conducted or a questionnaire has
been distributed.
(C) Either a summary of the results of testing conducted to
determine the nature and extent of defects or the actual test
results, if this testing has been conducted.
(2) The association's notice shall, upon delivery of the notice to
the builder, commence a period of time not to exceed 90 days, unless
the association and builder agree to a longer period, during which
the association and builder shall either, in accordance with the
requirements of this section, attempt to settle the dispute or
attempt to agree to submit it to alternative dispute resolution.
(3) (A) Except as provided in this section and notwithstanding any
other provision of law, the notice by the association shall, upon
mailing, toll all statutory and contractual limitations on actions
against all parties who may be responsible for the defects claimed,
whether named in the notice or not,
including claims for indemnity applicable to the
claim, for a period of 150 days or a longer period agreed to in
writing by the association and the builder.
(B) At any time, the builder may give written notice to cancel the
tolling of the statute of limitations provided in this section.
Upon delivery of this written cancellation notice, the association
shall be relieved of any further obligation to satisfy the
requirements of this subdivision and subdivisions (c)
(d) to (e) (f) ,
inclusive. The tolling of all applicable statutes of limitations
shall cease 60 days after the written notice of cancellation by the
builder is delivered to the association.
(c)
(d) (1) Within 25 days of the date the association delivers
the notice required by subdivision (b) (c)
, the builder may request in writing to meet and confer with
the board of directors of the association, and to inspect the project
and conduct testing, including testing that may cause physical
damage to any property in the development, in order to evaluate the
claim. If the builder does not make a timely request to meet and
confer with the board of directors of the association, or to conduct
inspection and testing, the association shall be relieved of any
further obligation to satisfy the requirements of this subdivision
and subdivisions (d) (e) and
(e) (f) . Unless the builder and association
otherwise agree, the meeting shall take place no later than 10 days
from the date of the builder's written request, at a mutually
agreeable time and place. The meeting shall be subject to
subdivision (g) of Section 1363. The discussions at the meeting are
privileged communications and are not admissible in evidence in any
civil action, unless the association and builder consent to their
admission. The meeting shall be for the purpose of discussing all of
the following:
(A) The nature and extent of the claimed defects.
(B) Proposed methods of correction, to the extent there is
sufficient information.
(C) Proposals for submitting the dispute to alternative dispute
resolution.
(D) Requests from the builder to inspect the project and conduct
testing.
(2) If the builder requests in writing to meet and confer with the
board of directors of the association pursuant to paragraph (1) of
this subdivision, the builder shall deliver the notice provided by
the association to the builder pursuant to subdivision (b)
(c) to any insurer that has issued a policy to
the builder which imposes upon the insurer a duty to defend the
insured or indemnify the insured for losses resulting from the
defects identified in the notice required by subdivision (b)
(c) . The notice by the builder shall, upon
receipt, impose upon that insurer any obligation which would be
imposed under the terms of the policy if the insured had been served
with a summons and complaint for damages. The builder shall inform
the association when the builder delivers the notice to each insurer
pursuant to this paragraph.
(d)
(e) (1) If the association conducted inspection and testing
prior to the date it sent the written notice pursuant to subdivision
(b) (c) , the association shall, at the
earliest practicable date after the meeting held pursuant to
subdivision (c) (d) , make available
for inspection and testing at least those areas inspected or tested
by the association. The inspection and testing shall be completed
within 15 days from the date the association makes these areas
available for inspection and testing, unless the association and
builder agree to a longer period. If the builder does not timely
complete the inspection and testing, the association shall be
relieved of any further obligation to satisfy the requirements of
this subdivision and subdivision (e) (f)
. The manner in which the inspection and testing shall be
conducted, and the extent of any inspection and testing to be
conducted beyond that which was conducted by the association prior to
sending the notice, shall be set by agreement of the association and
builder.
(2) The builder shall pay all costs of inspection and testing that
is requested by the builder, shall restore the property to the
condition which existed immediately prior to the testing, and shall
indemnify the association and owner of the separate interest for any
damages resulting from the testing.
(3) Interior inspections of occupied separate interests and
destructive testing of any interior of a separate interest shall be
conducted in accordance with the governing documents of the
association, unless otherwise agreed to by the owner of the separate
interest. If the governing documents of the association do not
provide for inspection or testing of separate interests, this
inspection or testing shall be conducted in a manner and at a time
agreed to by the owner of the separate interest.
(4) The results of the inspection and testing shall not be
inadmissible in evidence in any civil action solely because the
inspection and testing was conducted pursuant to this section.
(e)
(f) (1) Within 30 days of the completion of inspection and
testing or within 30 days of a meeting held pursuant to subdivision
(c) (d) if no inspection and testing is
conducted pursuant to subdivision (d) (e)
, the builder shall submit to the association all of the
following:
(A) A request to meet with the board to discuss a written
settlement offer.
(B) A written settlement offer, and a concise explanation of the
specific reasons for the terms of the offer. This offer may include
an offer to submit the dispute to alternative dispute resolution.
(C) A statement that the builder has access to sufficient funds to
satisfy the conditions of the settlement offer.
(D) A summary of the results of testing conducted for the purpose
of determining the nature and extent of defects, if this testing has
been conducted, unless the association provided the builder with
actual test results pursuant to subdivision (b)
(c) , in which case the builder shall provide the
association with actual test results.
(2) If the builder does not timely submit the items required by
this subdivision, the association shall be relieved of any further
obligation to satisfy the requirements of this subdivision only.
(3) No less than 10 days after the builder submits the items
required by this paragraph, the builder and the board of directors of
the association shall meet and confer about the builder's settlement
offer, including any offer to submit the dispute to alternative
dispute resolution.
(f)
(g) (1) At any time after the notice required by subdivision
(b) (c) is delivered to the builder,
the association and builder may agree in writing to modify or excuse
any of the time periods or other obligations imposed by this section.
(2) Except for the notice required pursuant to subdivision
(g) (h) , all notices, requests,
statements, or other communications required pursuant to this section
shall be delivered by one of the following:
(A) By first-class registered or certified mail, return receipt
requested.
(B) In any manner in which it is permissible to serve a summons
pursuant to Section 415.10 or 415.20 of the Code of Civil Procedure.
(g)
(h) If the board of directors of the association rejects a
settlement offer presented at the meeting held pursuant to
subdivision (e) (f) , the board shall
comply with the requirements of paragraph (1) of this subdivision.
If the association is relieved of its obligation to satisfy the
requirements of subdivisions (a) (b) to
(e) (f) , inclusive, before all those
requirements are satisfied, the association shall comply with the
requirements of paragraph (2) of this subdivision. Under no
circumstances shall the association be required to comply with both
paragraph (1) and paragraph (2) of this subdivision.
(1) (A) If the association's board of directors rejects a
settlement offer presented at the meeting held pursuant to
subdivision (e) (f) , the board shall
hold a meeting open to each member of the association. The meeting
shall be held no less than 15 days before the association commences
an action for damages against the builder.
(B) No less than 15 days before this meeting is held, a written
notice shall be sent to each member of the association specifying all
of the following:
(i) That a meeting will take place to discuss problems that may
lead to the filing of a civil action, and the time and place of this
meeting.
(ii) The options that are available to address the problems,
including the filing of a civil action and a statement of the various
alternatives that are reasonably foreseeable by the association to
pay for those options and whether these payments are expected to be
made from the use of reserve account funds or the imposition of
regular or special assessments, or emergency assessment increases.
(iii) The complete text of any written settlement offer, and a
concise explanation of the specific reasons for the terms of the
offer submitted to the board pursuant to paragraph (1) of subdivision
(e) (f) , received from the builder
and of any offer by the builder to submit the dispute to alternative
dispute resolution.
(iv) The preliminary list of defects provided by the association
to the builder pursuant to subdivision (b)
(c) and a list of any other documents provided by the
association to the builder pursuant to subdivision (b)
(c) , and information about where and when
members of the association may inspect those documents.
(C) The builder shall pay all expenses attributable to sending the
settlement offer and any offer for alternative dispute resolution to
all members of the association. The builder shall also pay the
expense of holding the meeting, not to exceed three dollars ($3) per
association member.
(D) The discussions at the meeting and the contents of the notice
and the items required to be specified in the notice pursuant to
subparagraph (B), are privileged communications and are not
admissible in evidence in any civil action, unless the association
consents to their admission.
(E) Compliance with this paragraph shall excuse the association
from satisfying the requirements of Section 1368.4.
(2) If the association is relieved of its obligation to satisfy
the requirements of subdivisions (a) (b)
to (e) (f) , inclusive, before
all those requirements have been satisfied, the association may
commence an action for damages against the builder 30 days after
sending a written notice to each member specifying all of the
following:
(A) The preliminary list of defects provided by the association to
the builder pursuant to subdivision (b) (c)
, and a list of any other documents provided by the association
to the builder pursuant to subdivision (b)
(c) , and information about where and when members of the
association may inspect those documents.
(B) The options, including civil actions, that are available to
address the problems.
(C) A statement that if 5 percent of the members of the
association request a special meeting of the members to discuss the
matter within 15 days of the date the notice is mailed or delivered
to the members of the association, a meeting of the members shall be
held, unless governing documents of the association provide for a
different procedure for calling a special meeting of the members, in
which case, the statement shall inform the members of that procedure.
(D) Compliance with this paragraph shall excuse the association
from satisfying the requirements of Section 1368.4.
(h)
(i) (1) The only method of seeking judicial relief for the
failure of the association to comply with this section shall be the
assertion, as provided for in this subdivision, of a procedural
deficiency to an action for damages by the association against the
builder after such an action has been filed. A verified application
asserting such a procedural deficiency shall be filed with the court
no later than 90 days after the answer to the plaintiff's complaint
has been served, unless the court finds that extraordinary conditions
exist.
(2) Upon the verified application of the association or the
builder alleging substantial noncompliance with this section, the
court shall schedule a hearing within 21 days of the application to
determine whether the association or builder has substantially
complied with this section. The issue may be determined upon
affidavits or upon oral testimony, in the discretion of the court.
(3) (A) If the court finds that the association did not
substantially comply with this section, the court shall stay the
action for up to 90 days to allow the association to establish
substantial compliance. The court shall set a hearing within 90 days
to determine substantial compliance by the association. At any
time, the court may, for good cause shown, extend the period of the
stay upon application of the association.
(B) If, within the time set by the court pursuant to this section,
the association has not established that it has substantially
complied with this section, the court shall determine if, in the
interest of justice, the action should be dismissed without
prejudice, or if another remedy should be fashioned. Under no
circumstances shall the court dismiss the action with prejudice as a
result of the association's failure to substantially comply with this
section. In determining the appropriate remedy, the court shall
consider the extent to which the builder has complied with this
section.
(C) If the alleged noncompliance of either the builder or the
association resulted from the unreasonable withholding of consent for
inspection or testing by an owner of a separate interest, it shall
not be considered substantial noncompliance, provided that the party
alleged to be out of compliance did not encourage the withholding of
consent.
(4) If the court finds that the builder did not pay all of the
costs of inspection and testing pursuant to paragraph (3) of
subdivision (a) (b) , or that the
builder did not pay its required share of the costs of holding the
meeting and of all expenses attributable to sending the settlement
offer pursuant to subparagraph (C) of paragraph (1) of subdivision
(g) (h) of this section, the court shall
order the builder to pay any deficiencies within 30 days, with
interest, and any additional remedy which the court determines, in
the interest of justice, should be fashioned.
(i)
(j) As used in this section:
(1) "Association" shall have the same meaning as defined in
subdivision (a) of Section 1351.
(2) "Builder" means the declarant, as defined in subdivision (g)
of Section 1351.
(D)
(3) "Common interest development" shall have the same
meaning as in subdivision (c) of Section 1351, except that it shall
not include developments or projects with less than 20 units.
SEC. 22. Section 1375.1 of the Civil Code is amended to read:
1375.1. (a) As soon as is reasonably practicable after the
association and the builder have entered into a settlement agreement
or the matter has otherwise been resolved , including the
resolution of alleged defects pursuant to the terms and conditions of
a California Home Construction Warranty, if applicable,
regarding alleged defects in the common areas, alleged defects in the
separate interests that the association is obligated to maintain or
repair, or alleged defects in the separate interests that arise out
of, or are integrally related to, defects in the common areas or
separate interests that the association is obligated to maintain or
repair, where the defects giving rise to the dispute have not been
corrected, the association shall, in writing, inform only the members
of the association whose names appear on the records of the
association that the matter has been resolved, by settlement
agreement or other means, and disclose all of the following:
(1) A general description of the defects that the association
reasonably believes, as of the date of the disclosure, will be
corrected or replaced.
(2) A good faith estimate, as of the date of the disclosure, of
when the association believes that the defects identified in
paragraph (1) will be corrected or replaced. The association may
state that the estimate may be modified.
(3) The status of the claims for defects in the design or
construction of the common interest development that were not
identified in paragraph (1) whether expressed in a preliminary list
of defects sent to each member of the association or otherwise
claimed and disclosed to the members of the association.
(b) Nothing in this section shall preclude an association from
amending the disclosures required pursuant to subdivision (a), and
any amendments shall supersede any prior conflicting information
disclosed to the members of the association and shall retain any
privilege attached to the original disclosures.
(c) Disclosure of the information required pursuant to subdivision
(a) or authorized by subdivision (b) shall not waive any privilege
attached to the information.
(d) For the purposes of the disclosures required pursuant to this
section, the term "defects" shall be defined to include any damage
resulting from defects.
SEC. 23. Section 1298 of the Code of Civil Procedure is amended to
read:
1298. (a) Whenever any contract to convey real property, or
contemplated to convey real property in the future, including
marketing contracts, deposit receipts, real property sales contracts
as defined in Section 2985 of the Civil Code, leases together with
options to purchase, or ground leases coupled with improvements, but
not including powers of sale contained in deeds of trust or
mortgages, contains a provision for binding arbitration of any
dispute between the principals in the transaction, including
disputes arising under a California Homebuyer Warranty issued
pursuant to Chapter 4 (commencing with Section 17800) of Part 3 of
Division 7 of the Business and Professions Code that may apply to the
real property in question, the contract shall have that
provision clearly titled "ARBITRATION OF DISPUTES."
If a provision for binding arbitration is included in a printed
contract, it shall be set out in at least 8-point bold
boldface type or in contrasting red in at least
8-point type, and if the provision is included in a typed contract,
it shall be set out in capital letters.
(b) Whenever any contract or agreement between principals and
agents in real property sales transactions, including listing
agreements, as defined in Section 1086 of the Civil Code, contains a
provision requiring binding arbitration of any dispute between the
principals and agents in the transaction, the contract or agreement
shall have that provision clearly titled "ARBITRATION OF DISPUTES."
If a provision for binding arbitration is included in a printed
contract, it shall be set out in at least 8-point bold
boldface type or in contrasting red in at least
8-point type, and if the provision is included in a typed contract,
it shall be set out in capital letters.
(c) Immediately before the line or space provided for the parties
to indicate their assent or nonassent to the arbitration provision
described in subdivision (a) or (b), and immediately following that
arbitration provision, the following shall appear:
"NOTICE: BY INITIALLING INITIALING IN
THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF
THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES' PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING
INITIALING IN THE SPACE BELOW YOU ARE GIVING UP
YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES' PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS
PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF
THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY."
"WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES' PROVISION TO NEUTRAL ARBITRATION."
If the above provision is included in a printed contract, it shall
be set out either in at least 10-point bold
boldface type or in contrasting red print in at least 8-point
bold boldface type, and if the
provision is included in a typed contract, it shall be set out in
capital letters.
(d) Nothing in this section shall be construed to diminish the
authority of any court of competent jurisdiction with respect to real
property transactions in areas involving court supervision or
jurisdiction, including, but not limited to, probate, marital
dissolution, foreclosure of liens, unlawful detainer, or eminent
domain.
(e) In the event an arbitration provision is contained in an
escrow instruction, it shall not preclude the right of an
escrowholder to institute an interpleader action.
SEC. 24. Section 1298.7 of the Code of Civil Procedure is amended
to read:
1298.7. In the event an arbitration provision is included in a
contract or agreement covered by this title, it shall not preclude or
limit any right of action for bodily injury or wrongful death
, or any right of action to which Section 337.1 or 337.15 is
applicable .
SEC. 25. Section 120 of the Insurance Code is amended to read:
120. Miscellaneous insurance includes insurance against loss from
damage done, directly or indirectly by lightning, windstorm,
tornado, earthquake or insurance under an open policy indemnifying
the producer of any motion picture, television, theatrical, sport, or
similar production, event, or exhibition against loss by reason of
the interruption, postponement, or cancellation of such
that production, event, or exhibition due to
death, accidental injury, or sickness preventing performers,
directors, or other principals from commencing or continuing their
respective performance or duties; and any insurance not included in
any of the foregoing classes, and which is a proper subject of
insurance. Miscellaneous insurance also includes insurance
indemnifying a participating homebuilder, as defined in Section 17808
of the Business and Professions Code, for losses incurred under a
California Homebuyer Warranty issued pursuant to Chapter 4
(commencing with Section 17800) of Part 3 of Division 7 of the
Business and Professions Code.