Amended in Senate April 22, 2013

Senate BillNo. 652


Introduced by Senator DeSaulnier

February 22, 2013


An act to amend Sections 910begin insert, 916,end insert and 944 of the Civil Code, relating to construction defect litigation.

LEGISLATIVE COUNSEL’S DIGEST

SB 652, as amended, DeSaulnier. Residential construction defect litigation: notice requirements.

Existing law prescribes a process for determining liability in an action seeking the recovery of damages arising out of, or related to, deficiencies in residential construction, design, and related issues and sets forth specified standards in this regard. Existing law requires a claimant alleging a violation of these standards to follow a specified, prelitigation procedure, which includes providing a builder who has allegedly violated those standards a notice describing the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the claimed violation. Existing law limits the damages that a claimant may recover in an action in this regard.begin insert Existing law also allows a builder to inspect the claimed unmet standards within 14 days after acknowledgment of the receipt of a claim and, if the builder intends to hold specified parties responsible for its contribution for an unmet standard, requires the builder to provide notice to the specified parties in order to attend an inspection.end insert

This bill wouldbegin delete reviseend deletebegin insert requireend insert the notice given to the builder tobegin delete require that the noticeend delete describe the claim in reasonable, specific detailbegin insert, including observed evidence, that isend insert sufficientbegin insert for the builderend insert to determine the nature and location of the claimed violation, the way in which the standard was not met, and the date and time that the claimed violation was observed or determined not to meet the standardbegin delete, so that a reasonable person would be able to determine the location and nature of the defectend delete. The bill would require a homeowner who makes a claim for damages to record the claimbegin delete in the chain of title for the property prior to any saleend deletebegin insert in a Notice of Settlement, as provided,end insert and to notify a subsequent potential purchaser of the claim and the status of the repairs. Failure tobegin delete record andend delete make this disclosure would be the basis for a cause of action by a subsequent purchaser of the property to require the seller to make the identified repairs or pay the subsequent purchaser the amount of damages necessary to make the repairs. The bill would also require the notice provided to the builder to contain an acknowledgment of these obligations.begin insert This bill would additionally revise the timeline in which a builder may inspect a claimed unmet standard and the timeline and manner in which the builder may notify a specified third party of an inspection.end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

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

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SECTION 1.  

Section 910 of the Civil Code is amended to read:

2

910.  

Prior to filing an action against any party alleged to have
3contributed to a violation of the standards set forth in Chapter 2
4(commencing with Section 896), the claimant shall initiate the
5following prelitigation procedures:

6(a) The claimant or his or her legal representative shall provide
7written notice via certified mail, overnight mail, or personal
8delivery to the builder, in the manner prescribed in this section, of
9the claimant’s claim that the construction of his or her residence
10violates any of the standards set forth in Chapter 2 (commencing
11with Section 896). That notice shall provide the claimant’s name,
12address, and preferred method of contact, and shall state that the
13 claimant alleges a violation pursuant to this part against the builder,
14and shall describe the claim in reasonable, specific detailbegin insert, including
15the specific observed evidence of the violation and its location
16within the home or common area, that isend insert
sufficientbegin insert for the builder end insert
17 to determine the nature and location of the claimed violation, the
18way in which the standard was not met, and the date and time that
19the claimed violation was observed or determined not to meet the
P3    1standardbegin delete, so that a reasonable person would be able to determine
2the location and nature of the defect. In the case of a group of
3homeowners or an association, the notice may identify the
4claimants solely by address or other description sufficient to apprise
5the builder of the locations of the subject residencesend delete
.begin insert The notice
6shall be signed by the claimant certifying that each claimed
7violation is known to the claimant to exist in the locations
8described.end insert
That document shall have the same force and effect as
9a notice of commencement of a legal proceeding.

begin delete

10(b) The notice shall contain an acknowledgment of a
11homeowner’s obligation to record in the chain of title for the
12property an allegation of damages and to make a disclosure to a
13subsequent potential purchaser as required by Section 944.

end delete
begin insert

14(b) The notice shall be a written statement signed and verified
15by the claimant containing all of the following:

end insert
begin insert

16(1) An acknowledgment of the claimant’s obligation to make a
17disclosure to a subsequent potential purchaser as required by
18Section 944.

end insert
begin insert

19(2) The name of the property owner or reputed owner.

end insert
begin insert

20(3) A statement of the claimant’s allegation of damages.

end insert
begin insert

21(4) A legal description of the property.

end insert

22(c) The notice requirements of this section do not preclude a
23homeowner from seeking redress through any applicable normal
24customer service procedure as set forth in any contractual,
25warranty, or other builder-generated document; and, if a
26homeowner seeks to do so, that request shall not satisfy the notice
27requirements of this section.

begin insert

28(d) It is the intent of the Legislature that a form may be
29 developed and provided by the builder prior to the close of escrow
30that includes the elements of the notice required by this section.
31If the builder provides the form to the original purchaser, the
32claimant or his or her legal representative shall fill out the form,
33signed by the claimant, in order to initiate a claim pursuant to this
34title. The claimant shall acknowledge that the claimant has read
35and understood the section of the claim form regarding the
36requirement to disclose any lawsuits for construction defects to
37future purchasers pursuant to Section 1102.6 and the penalties
38for filing fraudulent claims.

end insert
39begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 916 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert

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916.  

(a) If a builder elects to inspect the claimed unmet
2standards, the builder shall complete the initial inspection and
3testingbegin delete withinend deletebegin insert no sooner than 10 business days but no later thanend insert
4 14begin insert businessend insert days after acknowledgment of receipt of the notice of
5the claim, at a mutually convenient date and timebegin insert. Any delay in
6reaching agreement on the date and time of the inspection shall
7automatically extend the 14-day time limit contained in this section
8for a period of time equal to the delayend insert
. If the homeowner has
9retained legal representation, the inspection shall be scheduled
10with the legal representative’s office at a mutually convenient date
11and time, unless the legal representative is unavailable during the
12relevant time periods. All costs of builder inspection and testing,
13including any damage caused by the builder inspection, shall be
14borne by the builder. The builder shall also provide written proof
15that the builder has liability insurance to cover any damages or
16injuries occurring during inspection and testing. The builder shall
17restore the property to its pretesting condition within 48 hours of
18the testing. The builder shall, upon request, allow the inspections
19to be observed and electronically recorded, video recorded, or
20photographed by the claimant or his or her legal representative.

21(b) Nothing that occurs during a builder’s or claimant’s
22inspection or testing may be used or introduced as evidence to
23support a spoliation defense by any potential party in any
24subsequent litigation.

25(c) If a builder deems a second inspection or testing reasonably
26necessary, and specifies the reasons therefor in writing within three
27days following the initial inspection, the builder may conduct a
28second inspection or testing. A second inspection or testing shall
29be completed within 40 days of the initial inspection or testing.
30All requirements concerning the initial inspection or testing shall
31also apply to the second inspection or testing.

32(d) If the builder fails to inspect or test the property within the
33time specified, the claimant is released from the requirements of
34this section and may proceed with the filing of an action. However,
35the standards set forth in the other chapters of this title shall
36continue to apply to the action.

37(e) If a builder intends to hold a subcontractor, design
38professional, individual product manufacturer, or material supplier,
39including an insurance carrier, warranty company, or service
40company, responsible for its contribution to the unmet standard,
P5    1the builder shall provide noticebegin delete toend deletebegin insert soend insert that person or entity
2begin delete sufficiently in advance to allow them to attendend deletebegin insert receives notice ofend insert
3 the initial, or if requested, second inspectionbegin insert, including date, time,
4and location, and a copy of the claim, at least five business days
5in advance,end insert
of any alleged unmet standard andbegin delete toend deletebegin insert mayend insert participate
6in the repair process.begin insert The subcontractor, design professional,
7individual product manufacturer, or material supplier, including
8an insurance carrier, warranty company, or service company,
9shall provide an updated email and physical address at which this
10notice may be provided. The builder shall rely on the most recent
11email or physical address the subcontractor, design professional,
12individual product manufacturer, or material supplier, including
13an insurance carrier, warranty company, or service company, has
14provided.end insert
The claimant and his or her legal representative, if any,
15shall be advised in a reasonable time prior to the inspection as to
16the identity of all persons or entities invited to attend. This
17subdivision does not apply to the builder’s insurance company.
18Except with respect to any claims involving a repair actually
19conducted under this chapter, nothing in this subdivision shall be
20construed to relieve a subcontractor, design professional, individual
21product manufacturer, or material supplier of any liability under
22an action brought by a claimant.

23

begin deleteSEC. 2.end delete
24begin insertSEC. 3.end insert  

Section 944 of the Civil Code is amended to read:

25

944.  

(a) If a claim for damages is made under this title, the
26homeowner is only entitled to damages for the reasonable value
27of repairing any violation of the standards set forth in this title, the
28reasonable cost of repairing any damages caused by the repair
29efforts, the reasonable cost of repairing and rectifying any damages
30resulting from the failure of the home to meet the standards, the
31reasonable cost of removing and replacing any improper repair by
32the builder, reasonable relocation and storage expenses, lost
33business income if the home was used as a principal place of a
34 business licensed to be operated from the home, reasonable
35investigative costs for each established violation, and all other
36costs or fees recoverable by contract or statute.

begin delete

37(b) (1) A homeowner who makes a claim for damages shall
38record the claim in the chain of title for the property prior to any
39sale and shall notify a subsequent potential purchaser of the
P6    1property of the amount of the claim and whether or not the claimed
2violation was repaired.

end delete
begin insert

3(b) (1) Upon settlement of a claim, or upon completion of
4repairs by the builder in response to a claim, the claimant shall
5immediately record a Notice of Settlement in the Office of the
6County Recorder where the property is located. The Notice of
7Settlement shall include the original Notice of Claim and shall be
8signed by the claimant. In addition, the Notice of Settlement shall
9state either that the repairs were made to the satisfaction of the
10homeowner or that payment was made by the builder in lieu of
11repairs.

end insert
begin insert

12(2) A claimant shall notify a subsequent potential purchaser of
13the property of the amount and nature of the claim and whether
14or not the claimed violation was repaired consistent with
15subdivision (a) of Section 1102.1, which provides that it is the
16existing obligation of the parties to a real estate contract, or their
17agents, to disclose any fact materially affecting the value and
18desirability of the property, including, but not limited to, the
19physical conditions of the property.

end insert
begin delete

25 20(2)

end delete

21begin insert(3)end insert Failure to satisfy the requirements of paragraph (1) shall be
22the basis for a cause of action by a subsequent purchaser of the
23property to require thebegin delete seller of the propertyend deletebegin insert claimantend insert to make the
24repairs identified in the claim or pay a subsequent purchaser the
25amount of damages necessary to make the repairs.



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