BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1963|
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CONSENT
Bill No: AB 1963
Author: Calderon (D)
Amended: 4/4/16 in Assembly
Vote: 21
SENATE JUDICIARY COMMITTEE: 7-0, 6/14/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
ASSEMBLY FLOOR: 77-0, 4/7/16 (Consent) - See last page for
vote
SUBJECT: Common interest developments: construction defects
SOURCE: California Building Industry Association
DIGEST: This bill extends, until July 1, 2024, a requirement
that a homeowner association in a common interest development of
more than 20 units follow a pre-litigation dispute resolution
procedure before commencing a design or construction defect
action against a builder, developer, or general contractor.
ANALYSIS:
Existing law:
1) Defines, in the Davis-Stirling Common Interest Development
Act (Davis-Stirling Act), and regulates residential common
interest developments (CIDs), including the ability of an
association to levy regular and special assessments
sufficient to perform its obligations. (Civ. Code Sec. 4000
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et seq.)
2) Requires, before an association files a complaint for
damages against a builder, developer, or general contractor
(respondent) of a CID based upon a claim for defects in the
design or construction of the CID, certain specified
requirements to be satisfied. (Civ. Code Sec. 6000 et seq.)
3) Requires an association to serve upon the respondent a
"Notice of Commencement of Legal Proceedings," indicating the
name and location of the project, an initial list of defects
sufficient to apprise the respondent of the general nature of
the defects at issue, a description of the results of the
defects, if known, a summary of the results of a survey or
questionnaire distributed to homeowners to determine the
nature and extent of defects, if a survey has been conducted
or a questionnaire has been distributed, and either a summary
of the results of testing conducted to determine the nature
and extent of defects or the actual test results, if that
testing has been conducted. (Civ. Code Sec. 6000(b).)
4) Specifies that service of the notice shall commence a
period, not to exceed 180 days, during which the association,
the respondent, and all other participating parties shall try
to resolve the dispute through a specified process, and
states that service of the notice shall toll all applicable
statutes of limitation and repose, whether contractual or
statutory, by and against all potentially responsible
parties, regardless of whether they were named in the notice,
including claims for indemnity. (Civ. Code Sec. 6000(b),
(c).)
5) States that upon receipt of the notice, the respondent shall
provide the association with access to specified information
for the project reasonably calculated to lead to the
discovery of admissible evidence regarding the defects
claimed within 60 days. (Civ. Code Sec. 6000(e).)
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6) States that within 20 days of sending the notice, the
association, respondent, subcontractors, design
professionals, and their insurers shall meet and confer in an
effort to select a dispute resolution facilitator to preside
over the specified mandatory dispute resolution process.
(Civ. Code Sec. 6000(f).)
7) Provides, among other things, that the respondent may submit
to the association a request to meet with the association's
board of directors to discuss a written settlement offer. If
the board rejects a settlement offer presented at the
meeting, the board shall hold a meeting open to each member
of the association no less than 15 days before the
association commences an action for damages against the
respondent. 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:
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;
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; and
The complete text of any written settlement offer, and
a concise explanation of the specific reasons for the
terms of the offer received from the respondent. (Civ.
Code Sec. 6000(k).)
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1) States that all defect lists and demands, communications,
negotiations, and settlement offers made in the course of the
pre-litigation dispute resolution process shall be
inadmissible, as specified. (Civ. Code Sec. 6000(l).)
2) States that any party may at any time petition the superior
court in the county where the project is located, upon a
showing of good cause, to resolve a dispute or make a
determination, as specified. (Civ. Code Sec. 6000(n).)
3) States that the pre-litigation dispute resolution process
shall become inoperative 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. (Civ. Code Sec. 6000(s).)
This bill extends the above sunset date by seven years, stating
that the pre-litigation dispute resolution process shall become
inoperative on July 1, 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.
Background
In California, residential CIDs are governed by the
Davis-Stirling Act. Owners of separate property in a CID have
an undivided interest in the common property of the development
and are subject to the CID's covenants, conditions, and
restrictions. Residential CIDs are governed by a homeowner
association, which is run by volunteer directors that may or may
not have prior experience managing an association.
In 1995, the Davis-Stirling Act was amended to require homeowner
associations to take part in specified pre-litigation dispute
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resolution procedures before commencing a design or construction
defect action against the builder, developer, or general
contractor of the CID. (See SB 1029, Calderon, Chapter 864,
Statutes of 1995; Civ. Code Sec. 6000.) According to the Senate
Judiciary Committee analysis of that bill:
The author has introduced [SB 1029] because in many instances,
expensive and time-consuming litigation alleging defects in
the design or construction of common interest developments are
commenced before the parties have a reasonable opportunity to
discuss the merits of the claim, or to consider alternative
proposals to resolve the claim. The author believes that the
initiation of such litigation prior to a meaningful
opportunity for the parties to meet and confer is detrimental
because of the substantial costs to both parties, and to the
courts, of complex construction defect litigation which in
many instances could be avoided. (Sen. Com. on Judiciary,
Analysis of Sen. Bill No. 1029 (1995-1996 Reg. Sess.) as
amended Mar. 29, 1995, p. 7 [for hearing on May 9, 1995].)
In 2001, the Act was further amended to require an association
to serve a "Notice of Commencement of Legal Proceedings" on the
respondent builder, developer, or general contractor, including
an initial list of defects sufficient to apprise the respondent
of the general nature of the defects at issue, and also
specified timelines and procedures for parties to follow during
the pre-litigation dispute resolution process. (See AB 1700,
Steinberg, Chapter 824, Statutes of 2001.) AB 1700 included a
sunset provision that would have rendered the CID pre-litigation
dispute resolution requirement inoperative on July 1, 2010. In
2009, AB 927 (Calderon, Chapter 7, Statutes of 2009) extended
the effective date of the CID pre-litigation dispute resolution
requirement to July 1, 2017, and repeals the requirement on
January 1, 2018, unless a later enacted statute deletes or
extends these dates.
This bill extends until July 1, 2024, the requirement that
homeowner associations take part in the pre-litigation dispute
resolution process, and repeals this requirement on January 1,
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2025, unless a later enacted statute deletes or extends these
dates.
Comments
According to the author:
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. This process is also
referred to as the "Section 6000 process" and requires among
other things:
the plaintiff to provide notice;
within 25 days, the respondent may request a meeting
with the [association] board of directors within 10 days;
the association and respondent to exchange information
about the defect within 60 days of the notice;
the respondent to provide notice to subcontractors,
design professionals, and insurers within 60 days of the
notice;
within 20 days of the notice to subcontractors, that all
parties meet to select a mediator and establish a procedure
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to request the court to select a mediator if they cannot
agree; and
mediation costs to be split equally.
AB 1963 would extend the sunset for the "Section 6000"
pre-litigation process for an additional seven years. It
encourages disputes about construction defects in common
interest developments to be settled or sent to alternative
dispute resolution before a lawsuit is filed. This process
has worked for the last twenty years, by providing an avenue
for dispute resolution prior to costly and time-consuming
lawsuits. In an era of overcrowded court dockets, the
Legislature should act to preserve a process that relieves
some of this pressure on our already overburdened courts. AB
1963 will ensure that homeowners and builders are able to
continue to resolve disagreements in a cost effective manner
that is careful to preserve the legal options of those
involved.
Prior Legislation
AB 927 (Calderon, Chapter 7, Statutes of 2009) See Background.
AB 1700 (Steinberg, Chapter 824, Statutes of 2001) See
Background.
SB 1029 (Calderon, Chapter 864, Statutes of 1995) See
Background.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
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SUPPORT: (Verified6/14/16)
California Building Industry Association (source)
American Subcontractors Association California, Inc.
California Land Surveyors Association
California Professional Association of Specialty Contractors
Community Associations Institute
Construction Employers' Association
OPPOSITION: (Verified6/14/16)
None received
ASSEMBLY FLOOR: 77-0, 4/7/16
AYES: Achadjian, Alejo, Travis Allen, Atkins, Baker, Bigelow,
Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Rendon
NO VOTE RECORDED: Campos, Levine
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
6/17/16 15:03:41
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