BILL ANALYSIS �
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|Hearing Date:July 2, 2012 |Bill No:AB |
| |1892 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 1892Author:Halderman
As Amended:April 16, 2012 Fiscal:Yes
SUBJECT: Department of Consumer Affairs: construction defect
solicitations.
SUMMARY: Requires the Department of Consumer Affairs to post a notice
on its Internet website advising consumers who receive a construction
defect solicitation to check with their builder in addition to taking
any further action.
Existing law:
1) Establishes the Department of Consumer Affairs (DCA), which
oversees more than 36 boards, bureaus, committees, and a
commission, and other programs that regulate more than 100
businesses and 240 professional categories, including doctors,
nurses, dentists, engineers, architects, contractors,
cosmetologists and automotive repair facilities, and other diverse
industries. These regulatory entities license, register, or
certify more than 2.5 million professionals and health care
practitioners, investigate complaints, and discipline violators.
They also establish the minimum qualifications and levels of
competency for licensure.
2)Provides construction defect liability standards for newly
constructed housing and a process for the resolution of construction
defect disputes, including a pre-litigation process that allows
builders to repair defects before a homeowner can file suit.
(Civil Code (CC) �� 896, 897, 910 et seq.)
This bill: Requires DCA to post the following statement on its
Internet Web site: "If you receive a construction defect
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solicitation, please check with your builder in addition to taking any
further action."
FISCAL EFFECT: The Assembly Appropriations Committee analysis dated
May 9, 2012 cites minor and absorbable costs for DCA to post the
required advisory.
COMMENTS:
1. Purpose. This bill is sponsored by the Author . The Author states
that existing law includes a detailed "pre-litigation" process for
addressing construction defects known as the SB 800 process. The
process is complex, and it is difficult for homeowners to navigate
without the assistance of an attorney. As a result, the Author
proposes that homeowners first investigate whether the builder is
willing to fix a construction defect. In an ideal situation, a
homeowner would have their defect fixed by a builder without
needing to invoke the assistance of the
SB 800 process or an attorney. Builders have stated that they are
often willing to fix construction defects, but are not able to
express this to homeowners until they have already hired a lawyer.
Thus, it is important that homeowners have all available
information before deciding how to resolve their construction
defect.
2.Background. SB 800 (Burton and Wesson, Chapter 722, Statutes of
2002) was considered landmark legislation in the area of
construction defect litigation. The bill affected two significant
reforms. First, the bill established definitions of construction
defects for the first time, in order to provide a measure of
certainty and protection for homeowners, builders, subcontractors,
design professionals and insurers.
Second, the bill imposed a procedure that a homeowner must follow
before bringing suit against a builder. The homeowner must send a
written notice to the builder setting out the nature of the claim.
The builder must acknowledge the claim in writing. The builder may
then elect to conduct inspection and testing of the alleged defect
within a specified period, and must provide certain documentation to
the homeowner on request regarding building plans and
specifications.
The builder may then offer to repair the alleged violation within a
prescribed period. Such an offer to repair must also compensate the
homeowner for all applicable damages recoverable. Upon receipt of
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the offer to repair, the homeowner has a prescribed period in which
to authorize the builder to proceed with the repair. The offer to
repair must also be accompanied by an offer to mediate the dispute
if the homeowner so chooses.
The homeowner is relieved from any further pre-litigation process if
the builder fails to acknowledge the claim within the time
specified, elects to not go through this statutory process, fails to
request an inspection within the time specified, fails to make the
offer to repair or otherwise strictly comply with the obligations of
the statute within the times specified, or if the contractor
performing the repair does not complete the repair in the time or
manner specified.
3. Department of Consumer Affairs. The mission of DCA is to protect
and serve California consumers while ensuring a competent and fair
marketplace. DCA helps consumers learn how to protect themselves
from unscrupulous and unqualified individuals and protects
professionals from unfair competition by unlicensed practitioners.
The DCA issues licenses for more than 100 business and 200
professional categories, including doctors, dentists, contractors,
cosmetologists and automotive repair facilities. The DCA includes
40 regulatory entities (nine bureaus, one program, twenty-five
boards, three committees, one commission, and one office) which
establish minimum qualifications and levels of competency for
licensure. They also license, register, or certify practitioners,
investigate complaints and discipline violators. The DCA's
operations are funded exclusively by license and regulatory fees.
The DCA provides these entities with administrative support. The
committees, commission and boards are semi-autonomous bodies whose
members are appointed by the Governor and the Legislature.
4.Related Legislation. AB 20 (Halderman, 2011) required an attorney
who solicits or consults with a client or potential client for
purposes of filing an action for defects in the design or
construction of an improvement to residential real property to
provide a written notice at the time of the solicitation or
consultation, as specified. This bill was held in Assembly
Judiciary Committee.
AB 2803 (Parra, 2006) required a direct mail solicitation that urges a
person or entity to take an action that may lead to the filing of a
claim for residential construction deficiencies to disclose
alternatives to litigation and potential adverse consequences of
litigation. This bill was held in Assembly Judiciary Committee.
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AB 612 (Houston, 2006) required an advertisement or other solicitation
sent by mail that urges a person or entity to take an action that
may lead to the filing or a claim for residential construction
deficiencies to disclose specified information. This bill was held
in Assembly Judiciary Committee.
AB 108 (Houston, 2005) required an advertisement by an attorney or law
firm that urges a person or entity to take an action that may lead
to the filing or a claim for residential construction deficiencies
to disclose specified information. This bill was held in Assembly
Judiciary Committee.
AB 2689 (Houston, 2004) required an advertisement by an attorney or law
firm that urges a person or entity to take an action that may lead
to the filing or a claim for residential construction deficiencies
to disclose specified information. This bill was held in Assembly
Judiciary Committee.
AB 752 (Briggs, 2001) imposed substantial disclosure requirements with
regard to advertising by attorneys who practice in the area of
construction defect litigation. This bill was held in Assembly
Judiciary Committee.
SB 800 (Burton and Wesson, Chapter 722, Statutes of 2002) provides for
detailed and specific liability standards for newly constructed
housing, creates a pre-trial process that includes a builder's right
to repair an alleged defect, and provides third-party inspectors
with immunity from liability.
AB 1700 (Steinberg, Chapter 824, Statutes of 2001) substantially
reformed the pre-litigation dispute resolution process for
construction defect actions involving common interest developments.
5.Arguments in Support. The California Building Industry Association
supports the bill. In their letter they state: "The Bill will
alert consumers to the possibility of having their claim addressed
without resorting to costly and time-consuming litigation while also
preserving their right to litigate if unsatisfied with repairs. In
short, the bill provides additional guidance to homeowners on how to
address unresolved concerns without placing burdens on the justice
system."
6. Policy Issues. The Committee notices that there is a lack of
specification regarding the process for posting the notice.
Specifically, this bill does not provide any detailed information
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as to where, how, or when the notice is to be posted. The
Committee also questions the necessity of this legislation. Would
a better policy option be to post the notice on the DCA website or
on one of the licensing board's website, which is often the
practice of the boards that make up the DCA such as the Contractors
State License Board, Board for Professional Engineers, Land
Surveyors and Geologists, and the California Architects Board? The
Author should further clarify the nature of this proposed policy
with the Committee.
SUPPORT AND OPPOSITION:
Support:
California Building Industry Association
Opposition:
None on file as of June 26, 2012.
Consultant:Le Ondra Clark / G. V. Ayers