BILL ANALYSIS Ó
AB 1963
Page 1
Date of Hearing: March 29, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
AB 1963
(Calderon) - As Introduced February 12, 2016
PROPOSED CONSENT (As Proposed to be Amended)
SUBJECT: COMMON INTEREST DEVELOPMENTS: CONSTRUCTION DEFECTS
KEY ISSUE: should THE SUNSET DATE for provisions establshing a
pre-litigation process in construction defect cases involving
common interest developments be extended for an additional
seven years?
SYNOPSIS
Before a homeowner's association may file a complaint for
damages against a builder, developer, or general contractor of a
common interest development based upon a claim for defects in
the design or construction of the development, the association
must first engage in the extensive pre-litigation process
specified by Civil Code Section 6000, under the Davis-Stirling
Act. This process was initially established by the Legislature
in 1995, and since then has been revised and reauthorized twice
before for seven-year trial periods, the last one of which ends
on July 1, 2017. As proposed to be amended, this bill seeks to
extend the existing sunset date by seven years, until July 1,
AB 1963
Page 2
2024, and retain existing law authorizing this pre-litigation
process. According to the legislative history of this
pre-litigation process (aka "the Calderon process"), was the
product of extensive negotiations involving many stakeholders,
including the California Building Industry Association (the
sponsor of this bill), the Consumer Attorneys of California, and
homeowners' associations. When contacted by the Committee,
these stakeholders reported varying degrees of satisfaction with
the process, including some comments that the process needs
further examination or clarification in order to be effective.
However, no group or organization expressed opposition to
extending the sunset date an additional seven years, as proposed
to be amended in this Committee. The bill is supported by the
California Building Industry Association and the California
Professional Association of Specialty Contractors, and has no
registered opposition.
SUMMARY: Retains existing law, Civil Code Section 6000,
establishing special pre-litigation procedures in construction
defect disputes involving common interest developments.
Specifically, this bill extends the existing sunset date for
seven years, until July 1, 2024, for Civil Code Section 6000,
and repeals these provisions as of January 1, 2025, unless a
later enacted statute becomes operative on or before that date.
EXISTING LAW:
1)Requires, until July 1, 2017, that the parties in a
construction defect dispute involving a common interest
development follow a specified pre-litigation process
("Section 6000 process"), including mandatory mediation,
before a plaintiff homeowner association may file a complaint
for damages against the builder and others based upon a claim
for defects in the design or construction of the development.
Among other things, the Section 6000 process:
AB 1963
Page 3
a) Requires the association to provide the builder,
developer, or general contractor (respondent) with a
written "Notice of Commencement of Legal Proceedings" which
includes certain information regarding defects in the
development. This notice tolls the statute of limitations
on all construction defect claims for all potentially
responsible parties for 180 days, which can be extended by
another 180 days with the consent of all the parties.
(Civil Code Section 6000 (b). Further references are to
this code, unless otherwise stated.)
b) Provides that within 25 days of the notice, the
respondent may request to meet with the association's board
of directors within 10 days. (Section 6000 (d).)
c) Requires, within 60 days of the notice, that the
association and the respondent exchange certain information
regarding defects, and that the respondent provide written
notice to all subcontractors, design professionals, and
insurers known or reasonably ascertainable to the
respondent whose potential responsibility appears on the
face of the notice. (Section 6000 (e).)
d) Requires, within 20 days of the above notice to
subcontractors, that the association, respondent, and all
noticed parties meet to select a special mediator to handle
the dispute resolution, and establishes procedures to apply
to the court to select the mediator if the parties cannot
reach agreement. (Section 6000 (f)(1).)
e) Provides that the costs of the mediator be apportioned
equally between the association, the respondent, and any
subcontractors, with cost allocations among the
subcontractors made by the mediator. (Section 6000
AB 1963
Page 4
(f)(6).)
f) Establishes procedures to be followed during the
mediation process for the collection and sharing of
relevant information between the parties necessary to
facilitate the mediation, requires preparation of a case
management statement, and allows the mediator considerable
discretion to set timelines and requirements for the
mediation process. (Section 6000, subd. (h) to (j).)
g) Permits the parties to petition the court, upon a
showing of good cause, to issue an order or appoint a
referee to resolve disputes involving various aspects of
the mediation process, including, among other things,
whether a deposition of any party should be taken, to
resolve any dispute over inspection, testing or production
of documents, and whether a settlement offer is in good
faith. (Section 6000 (n).)
h) Sunsets on July 1, 2017, and, as of January 1, 2018, is
repealed, unless a later enacted statute, that becomes
operative on or before January 1, 2018, deletes or extends
the dates on which it becomes inoperative and is repealed.
(Section 6000 (s).)
2)Establishes a comprehensive procedural scheme for handling
construction defect litigation generally (whether or not a
common interest development is involved), as established by SB
800 (Burton), Ch. 770, Stats. 2012 (hereafter "SB 800
process"). Under the SB 800 process:
a) Construction defects are defined to ensure specified
performance standards. (Section 896.)
AB 1963
Page 5
b) Homeowners must follow a specified procedure before
bringing suit against a builder, including providing
written notice to the builder regarding alleged violations.
(Section 910.)
c) Builders are guaranteed an absolute right to repair
alleged defects before a claimant may sue. (Sections 917
to 919.)
d) Homeowners retain the right to sue and pursue remedies
if the repair is not made or is inadequate. (Sections 941
to 945.5.)
FISCAL EFFECT: As currently in print this bill is keyed
non-fiscal.
COMMENTS: Before a homeowners' association may file a complaint
for damages against a builder, developer, or general contractor
of a common interest development (CID) based upon a claim for
defects in the design or construction of the development, the
association must first engage in the extensive pre-litigation
process specified by Civil Code Section 6000, part of the
Davis-Stirling Act. Pursuant to Section 6000, the association
must, among other things: (1) file a notice regarding the
commencement of legal proceedings; (2) engage in a meet and
confer process to exchange documents relevant to the defects
claimed and to select a mediator; (3) prepare a case management
statement; and (4) participate in a mandatory mediation process
to seek resolution of the dispute, as provided.
Legislative history and background of these provisions. This
pre-litigation dispute resolution process now contained in
Section 6000 was initially established by AB 1029 (Charles
AB 1963
Page 6
Calderon) in 1995, and was later revised and expanded by AB 267
(Steinberg) and AB 1700 (Steinberg) in 2001, at which time it
was also reauthorized until 2010. It should also be noted,
however, that in 2002, after a year of negotiations between many
of the same stakeholders, the Legislature approved and the
Governor signed SB 800 ((Burton and Wesson), Ch. 722, Stats.
2002), a historic piece of legislation that established
significant reforms in the area of construction defect
litigation generally, including cases not involving community
interest developments. The requirements enacted by SB 800,
including pre-litigation notice of alleged violations and a
builder's right to repair alleged defects before a claimant may
sue, were not subject to any sunset date and remain current law
that applies in CID-related cases, on top of the so-called
"Calderon process" provisions under Section 6000.
In 2009, the Legislature approved and the Governor signed AB 927
(Charles Calderon) which again reauthorized the Section 6000
provisions, this time until July 1, 2017. As proposed to be
amended, this bill would extend the sunset date for an
additional seven years, retaining existing law in this area
until July 1, 2024.
According to the legislative history of this pre-litigation
process, the statute was the product of extensive negotiations
involving many stakeholders, including the California Building
Industry Association, the Consumer Attorneys of California, and
homeowners' associations, among others. (Senate Judiciary
Committee analysis of AB 267; August 28, 2001.) When this
Committee revisited the question of whether to reauthorize the
process in 2009, it found that "by all accounts, existing law
appears to be working adequately." (Assembly Judiciary Committee
analysis of AB 927; April 14, 2009.)
Evaluation of the existing Calderon process. According to the
California Building Industry Association (CBIA), the sponsor of
AB 1963
Page 7
this bill and the original sponsor of AB 1029 (1995), the
pre-litigation process "encourages disputes about construction
defects in common interest developments to be settled or sent to
alternative dispute resolution before a lawsuit is filed . . .
(and) allows parties to discuss the claim while still preserving
legal recourse. In the twenty years since its establishment,
the process has worked well to avoid costly, time consuming
litigation."
When contacted by the Committee, representatives of the
Community Associations Institute, representing homeowners'
associations, reported that they were unaware of any major
problems with the law experienced by their members, and adopted
a neutral position on the bill.
While not opposing the extension of the sunset date for
another seven years, the Consumer Attorneys of California
(CAOC) stated that they believe the Calderon process needs
further examination or clarification because their members
report that it is rarely used, overlaps with the SB 800
process (described above), and often creates additional delay
for homeowners who need to get their homes repaired. CAOC
expressed willingness to work with the sponsors as the bill
moves forward to address these problems, and remains neutral
on the bill as proposed to be amended.
Author's proposed amendment to extend the sunset date until July
1, 2024. As proposed to be amended, this bill simply seeks to
extend the 2017 sunset date for these provisions for an
additional seven years, until July 1 2024. The amendment is:
On page 13, line 25, insert:
(s) This section shall become inoperative on July 1,
AB 1963
Page 8
2024, and, as of January 1, 2025, is repealed, unless a
later enacted statute, that becomes operative on or
before January 1, 2025, deletes or extends the dates on
which it becomes inoperative and is repealed.
REGISTERED SUPPORT / OPPOSITION:
Support
California Building Industry Association (CBIA) (sponsor)
California Professional Association of Specialty Contractors
Opposition
None on file
Analysis Prepared by:Anthony Lew / JUD. / (916) 319-2334
AB 1963
Page 9