Amended in Senate April 30, 2013

Amended in Senate April 22, 2013

Senate BillNo. 652


Introduced by Senator DeSaulnier

February 22, 2013


begin delete An act to amend Sections 910, 916, and 944 of the Civil Code, relating to construction defect litigation. end deletebegin insertAn act to add Section 1102.3b to the Civil Code, relating to real property.end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 652, as amended, DeSaulnier. begin deleteResidential construction defect litigation: notice requirements. end deletebegin insertReal property disclosures: construction defect litigation.end insert

begin insert

Existing law requires the transferor of residential property to make certain disclosures to a prospective transferee and requires these disclosures to be made on a specified form. Under existing law, the transferor is required to disclose any lawsuits by or against the transferor threatening to or affecting the real property, as specified. Existing law makes any person who willfully or negligently violates or fails to perform any specified duty liable in the amount of actual damages suffered by a transferee.

end insert

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.begin delete 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. 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 delete

This bill would requirebegin delete the notice given to the builder to describe the claim in reasonable, specific detail, including observed evidence, that is sufficient for the builder 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 standard. The bill would require a homeowner who makes a claim for damages to record the claim in a Notice of Settlement, as provided, and to notify a subsequent potential purchaser of the claim and the status of the repairs. Failure to 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. 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 deletebegin insert the transferor of any real property to additionally disclose to a potential transferee all claims for damages relating to deficiencies in residential construction, as specified, made by the transferor and the status of those claims.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:

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 1102.3b is added to the end insertbegin insertCivil Codeend insertbegin insert, to
2read:end insert

begin insert
3

begin insert1102.3b.end insert  

In addition to the disclosures required by Section
41102.6, the transferor of any real property subject to this article
5shall disclose to a potential transferee all claims for damages
6made by the transferor pursuant to Title 7 (commencing with
7Section 895) of Part 2 of Division 2 and the status of these claims.

end insert
begin delete
8

SECTION 1.  

Section 910 of the Civil Code is amended to read:

P3    1

910.  

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

5(a) The claimant or his or her legal representative shall provide
6written notice via certified mail, overnight mail, or personal
7delivery to the builder, in the manner prescribed in this section, of
8the claimant’s claim that the construction of his or her residence
9violates any of the standards set forth in Chapter 2 (commencing
10with Section 896). That notice shall provide the claimant’s name,
11address, and preferred method of contact, and shall state that the
12 claimant alleges a violation pursuant to this part against the builder,
13and shall describe the claim in reasonable, specific detail, including
14the specific observed evidence of the violation and its location
15within the home or common area, that is sufficient for the builder
16to determine the nature and location of the claimed violation, the
17way in which the standard was not met, and the date and time that
18the claimed violation was observed or determined not to meet the
19standard. The notice shall be signed by the claimant certifying that
20each claimed violation is known to the claimant to exist in the
21locations described. That document shall have the same force and
22effect as a notice of commencement of a legal proceeding.

23(b) The notice shall be a written statement signed and verified
24by the claimant containing all of the following:

25(1) An acknowledgment of the claimant’s obligation to make a
26disclosure to a subsequent potential purchaser as required by
27Section 944.

28(2) The name of the property owner or reputed owner.

29(3) A statement of the claimant’s allegation of damages.

30(4) A legal description of the property.

31(c) The notice requirements of this section do not preclude a
32homeowner from seeking redress through any applicable normal
33customer service procedure as set forth in any contractual,
34warranty, or other builder-generated document; and, if a
35homeowner seeks to do so, that request shall not satisfy the notice
36requirements of this section.

37(d) It is the intent of the Legislature that a form may be
38 developed and provided by the builder prior to the close of escrow
39that includes the elements of the notice required by this section.
40If the builder provides the form to the original purchaser, the
P4    1claimant or his or her legal representative shall fill out the form,
2signed by the claimant, in order to initiate a claim pursuant to this
3title. The claimant shall acknowledge that the claimant has read
4and understood the section of the claim form regarding the
5requirement to disclose any lawsuits for construction defects to
6future purchasers pursuant to Section 1102.6 and the penalties for
7filing fraudulent claims.

8

SEC. 2.  

Section 916 of the Civil Code is amended to read:

9

916.  

(a) If a builder elects to inspect the claimed unmet
10standards, the builder shall complete the initial inspection and
11testing no sooner than 10 business days but no later than 14
12business days after acknowledgment of receipt of the notice of the
13claim, at a mutually convenient date and time. Any delay in
14reaching agreement on the date and time of the inspection shall
15automatically extend the 14-day time limit contained in this section
16for a period of time equal to the delay. If the homeowner has
17retained legal representation, the inspection shall be scheduled
18with the legal representative’s office at a mutually convenient date
19and time, unless the legal representative is unavailable during the
20relevant time periods. All costs of builder inspection and testing,
21including any damage caused by the builder inspection, shall be
22borne by the builder. The builder shall also provide written proof
23that the builder has liability insurance to cover any damages or
24injuries occurring during inspection and testing. The builder shall
25restore the property to its pretesting condition within 48 hours of
26the testing. The builder shall, upon request, allow the inspections
27to be observed and electronically recorded, video recorded, or
28photographed by the claimant or his or her legal representative.

29(b) Nothing that occurs during a builder’s or claimant’s
30inspection or testing may be used or introduced as evidence to
31support a spoliation defense by any potential party in any
32subsequent litigation.

33(c) If a builder deems a second inspection or testing reasonably
34necessary, and specifies the reasons therefor in writing within three
35days following the initial inspection, the builder may conduct a
36second inspection or testing. A second inspection or testing shall
37be completed within 40 days of the initial inspection or testing.
38All requirements concerning the initial inspection or testing shall
39also apply to the second inspection or testing.

P5    1(d) If the builder fails to inspect or test the property within the
2time specified, the claimant is released from the requirements of
3this section and may proceed with the filing of an action. However,
4the standards set forth in the other chapters of this title shall
5continue to apply to the action.

6(e) If a builder intends to hold a subcontractor, design
7professional, individual product manufacturer, or material supplier,
8including an insurance carrier, warranty company, or service
9company, responsible for its contribution to the unmet standard,
10the builder shall provide notice so that person or entity receives
11notice of the initial, or if requested, second inspection, including
12date, time, and location, and a copy of the claim, at least five
13business days in advance, of any alleged unmet standard and may
14participate in the repair process. The subcontractor, design
15professional, individual product manufacturer, or material supplier,
16including an insurance carrier, warranty company, or service
17company, shall provide an updated email and physical address at
18which this notice may be provided. The builder shall rely on the
19most recent email or physical address the subcontractor, design
20professional, individual product manufacturer, or material supplier,
21including an insurance carrier, warranty company, or service
22company, has provided. The claimant and his or her legal
23representative, if any, shall be advised in a reasonable time prior
24to the inspection as to the identity of all persons or entities invited
25to attend. This subdivision does not apply to the builder’s insurance
26company. Except with respect to any claims involving a repair
27actually conducted under this chapter, nothing in this subdivision
28shall be construed to relieve a subcontractor, design professional,
29individual product manufacturer, or material supplier of any
30liability under an action brought by a claimant.

31

SEC. 3.  

Section 944 of the Civil Code is amended to read:

32

944.  

(a) If a claim for damages is made under this title, the
33homeowner is only entitled to damages for the reasonable value
34of repairing any violation of the standards set forth in this title, the
35reasonable cost of repairing any damages caused by the repair
36efforts, the reasonable cost of repairing and rectifying any damages
37resulting from the failure of the home to meet the standards, the
38reasonable cost of removing and replacing any improper repair by
39the builder, reasonable relocation and storage expenses, lost
40business income if the home was used as a principal place of a
P6    1 business licensed to be operated from the home, reasonable
2investigative costs for each established violation, and all other
3costs or fees recoverable by contract or statute.

4(b) (1) Upon settlement of a claim, or upon completion of
5repairs by the builder in response to a claim, the claimant shall
6immediately record a Notice of Settlement in the Office of the
7County Recorder where the property is located. The Notice of
8Settlement shall include the original Notice of Claim and shall be
9signed by the claimant. In addition, the Notice of Settlement shall
10state either that the repairs were made to the satisfaction of the
11homeowner or that payment was made by the builder in lieu of
12repairs.

13(2) A claimant shall notify a subsequent potential purchaser of
14the property of the amount and nature of the claim and whether or
15not the claimed violation was repaired consistent with subdivision
16(a) of Section 1102.1, which provides that it is the existing
17obligation of the parties to a real estate contract, or their agents,
18to disclose any fact materially affecting the value and desirability
19of the property, including, but not limited to, the physical
20conditions of the property.

21(3) 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 the claimant to make the repairs identified in
24the claim or pay a subsequent purchaser the amount of damages
25 necessary to make the repairs.

end delete


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