The Myth of Public Agency protection in the Building Permit Process
During the last decade the Bay Area has experienced a dramatic surge in the amount of construction projects undertaken by private property owners. In the City of Santa Clara, for instance, the value of building permits issued in 1996 was $251,175,782.00, the highest since 1984. As another example, the City and County of San Francisco issued 51,000 residential and commercial building permits for the 1997 fiscal year which totaled $873 million dollars. For the 1998 fiscal year the San Francisco Department of Building Inspection estimates the value of building permits issued to be a staggering $1 billion dollars. Despite the large number of privately-financed construction projects in the Bay Area, there is a common public misconception in California concerning the building permit process and the role that local, city and state agencies play in overseeing this process. It is commonly perceived that the building permits that are routinely issued by city building inspectors for construction work certify that the building or "work of improvement" is quality built, safely constructed, and that all of the relevant building and state Health & Safety Code requirements have been met. The reality behind what a building permit represents, however, is quite different. Under current statutory schemes, local municipalities and city public agencies are essentially stripped of any responsibility for the work performed by their building inspector employees and the permits that these inspectors issue. In truth, a building permit is little more than a statement by the local municipality that the homeowner or developer who contracted for the work of improvement has paid the requisite fees to the local city housing authorities. A building permit does not represent that the construction that was undertaken is safe and free from defects or that all of the necessary building codes have been strictly complied with. By explaining the building permit process in detail, this article will uncover the myth that the issuance of a building permit by a public agency guarantees that your home or work of improvement is safe, free from any defects, and is code compliant.
The Building Permit Process
A Primer Building a home or contracting for a work of improvement on your property can be an uneasy, eye-opening experience. Property owners seeking to build or improve their property often need to rely on the expertise of a licensed contractor who is competent in the particular work that must be performed. For example, if you are putting a new shingle roof on your home, you would likely hire a licensed roofing contractor who specializes in installing shingle roofs. Difficulties soon arise however, because many property owners are not familiar with the myriad regulatory building requirements that state and local agencies impose upon those who seek to improve their own private property. The legislative body of a city is empowered under the California Constitution to regulate the building, construction, and removal of buildings within the city. The relevant state and local building agencies have adopted building requirements that are, in large measure, based upon the Uniform Building Code (UBC). The UBC is published every three years by the International Conference of Building Officials (ICBO) and its intent is to impress reasonable standards of construction and safety upon the building public. As such, the UBC applies to virtually anything that is built or constructed (including single and two-family dwellings), except for work located primarily in a public way, public utility and power poles, and other mechanical equipment not specifically regulated by the code. As part of its general police power, cities and counties may and do require that a building permit be obtained prior to the erection of a structure on privately owned property. As part of its many detailed requirements, the UBC requires that a building permit first be obtained from the applicable public agency/building official prior to any construction, repair or alteration of a building or structure. To obtain a permit, the building applicant must pay a statutory fee and file an application in writing on a form furnished by the code enforcement agency which identifies and describes the work to be covered by the permit. Plans, diagrams, computations and specifications are also required to be submitted along with the application for the building permit. Once submitted, the application and its accompanying data are then reviewed by the building official and by any other required departments to verify that the proposed work of improvement complies with the applicable building laws of the jurisdiction. If the building official finds that the requisite fee has been paid, and the work described in the permit application conforms to the requirements of the local building code and other pertinent laws and ordinances, the official will issue a building permit to the applicant. Most cities set specific time limits for the expiration of building permits that are issued, for example the UBC specifies that a permit will expire and become null and void if the work authorized by the permit is not commenced within 180 days. Once a building permit has been issued by the city building department, the inspection process begins. Under the UBC, all construction or work for which a permit is required is subject to inspection by the building official. Employees of city building authorities, often called "building inspectors," have the authority to make routine visits to the construction site to inspect the work that is being performed and to ensure that it complies with the city's particular building codes and various state codes such as the California Health & Safety Code. After inspecting the construction during a given visit, the building inspector will typically make an entry on an inspection record card that has been posted by the contractor in order to chart the progress of the work of improvement. The inspector will either indicate that the completed portions of the construction are satisfactory, or will notify the permit holder that the work to date is not in compliance with the relevant building codes. Any portions of the work which do not comply must be corrected before they can otherwise be concealed or covered up. Once the construction is fully completed, the building inspector will make a final inspection to approve the building or structure as being ready for occupancy and use. In the construction of commercial buildings and structures, the final approval is marked by the issuance of a final Certificate of Occupancy. It is this final stage of the building permit process that is greatly misunderstood by property owners. Suppose that a year after the construction of a wood patio in the back yard of your home, one of the floor boards comes loose because the nails used by the contractor were too small and not code compliant. As a result, your child steps through the loose board while playing on the patio and injures herself. What legal recourse do you have available? While you may have a cause of action against the contractor (assuming you used one) for the negligent and defective workmanship, you likely have no legal right to sue the building inspector and/or the city building authority for negligently granting its approval of the construction in the first place. The reality is that if a building inspector fails to inspect your property or inspects the work that was done in an incompetent manner and then issues a final approval for the work that was inspected (or a Certificate of Occupancy for commercial structures), and an injury later occurs because the work turns out to be defective, the city is almost always immune from any liability. The reason for this seemingly unfair result is based upon the long-standing legal doctrine in California known as "sovereign immunity."
Public Agencies and the Principle of Sovereign Immunity Founded on the ancient principle that "the King can do no wrong," sovereign immunity is a judicially created doctrine which precludes private parties from bringing suit against the government for the torts of its officers or agents unless the government waives its immunity by statute. The doctrine arose originally to allow states to exercise their governmental functions without fear of being sued as a result of the carelessness or mistakes of its officers and agents in the discharge of their official duties. In California, the doctrine of sovereign immunity is codified in Government Code section 815. Section 815, enacted by the legislature in 1963 as part of the "Government Tort Claims Act," abolished all common law or judicially declared forms of liability for public entities, except for such liability as may be required by the federal or state Constitution. Thus, in the absence of some constitutional requirement, public entities may only be held legally responsible if a statute specifically declares them to be liable. In short, the legal doctrine of sovereign immunity is the rule in California and governmental liability is therefore limited to exceptions specifically set forth by statute. In regard to licensing activities by public agencies, Government Code section 818.4 provides that a public entity is not liable for an injury caused by the issuance (or by the failure or refusal to issue) "any permit, license, certificate, approval, order, or similar authorization" if the public entity or an employee of the public entity is authorized by enactment to determine whether or not such a permit should be issued. Further, Government Code section 818.6 deals specifically with inspections of physical property and provides in relevant part: [a] public entity is not liable for injury caused by its failure to make an inspection, or by reason of making an inadequate or negligent inspection, of any property, other than its property..., for the purpose of determining whether the property complies with or violates any enactment or contains or constitutes a hazard to health or safety. This sovereign immunity for public agencies is extended to public employees through Section 821.4 The scope of public agency immunity under the statutes is quite broad since the term "injury" is defined in Government Code section 815 as "death, injury to a person, damage to or loss of property, or any other injury that a person may suffer to his or her person, reputation, character, feelings, or estate, of such nature that it would be actionable if inflicted by a private person." Thus, in the context of public building agencies which are empowered to regulate and oversee the construction of a work of improvement on your private property, these agencies or their building inspectors cannot be held liable if you or someone else is injured on your property, or your property is damaged due to a defective condition in that work of improvement that was previously approved as being code compliant by that agency or inspector.
The Realities of Public Agency Immunity
The Harshbarger Decision The harsh realities of the sovereign immunity doctrine in the area of a public agency's issuance of building permits is clearly illustrated in the case of Harshbarger v. City of Colton, a 1988 opinion from the California Court of Appeal, Fourth District. In April of 1984, the Harshbargers contracted with a general contractor for construction of a single family residence to be built on their property in the City of Colton. During the time the Harshbargers' residence was under construction, two building inspectors inspected the residence to ensure that each stage of construction complied with applicable building codes. As a result of their inspections, the two inspectors were aware that certain areas of construction did not meet various building code standards. Nevertheless, after each of their inspections, both inspectors signed the job card maintained in connection with the construction of the residence, the signing of which constituted their acknowledgment that construction at that stage complied with applicable building codes and permitted the next stage of construction to begin. Neither inspector ever disclosed to the Harshbargers that the construction on their residence violated the City's building codes. The general contractor stopped work on the residence in late July or early August of 1985. In August of 1985, the Harshbargers received a letter from the City of Colton stating that the residence did not comply with numerous applicable building codes. As a result of the defects in construction, the Harshbargers paid approximately $295,000 for reconstruction of their residence to bring it up to code standards. The Harshbargers subsequently sued the inspectors for intentional misrepresentation and suppression of fact, as well as the City of Colton for negligent hiring. The trial court dismissed the Harshbargers' complaint against Colton on the ground that the complaint failed to state a valid legal theory of liability against the City. The Harshbargers appealed the trial court's decision. On appeal, the Harshbargers argued that by signing the job card the city inspectors misrepresented that the residence complied with code standards when in fact they knew the construction work was defective. As a result, the Harshbargers argued they suffered damages in expending an additional $295,000 to reconstruct their residence so that it met code standards. The court of appeal, however, saw things differently. The court agreed that California's Health & Safety Code imposes a mandatory duty on the City of Colton to enforce code provisions and other rules and regulations pertaining to the construction of dwellings. However, the court found that section 818.6 specifically provides immunity to public entities for failure to make any, or adequate, inspection of property for compliance with codes and regulations. In support of this rule, the court stated the strong public policy at work: "If the immunity were not applicable in situations such as that presented by the facts of this case, municipalities would be exposed to unwarranted and unsupportable risk of liability." As such, the court came to the conclusion that, although a public employee may be liable for fraudulent inspections, the public entity is immune from liability under section 818.6. Therefore, the Harshbargers could not, as a matter of law, maintain a cause of action against Colton based on fraudulent inspections by its employees, or for the negligent hiring and supervision of such inspectors. The Harshbarger opinion remains good law, and this principle of sovereign immunity for public agencies has even been extended to cases involving persons who have suffered personal injury on private property that was allegedly negligently inspected.
The Effects of Public Agency Immunity on Homeowners Associations
The doctrine of sovereign immunity applies with equal force to homeowners associations. In 1986, the Cancun Homeowners Association, Inc. filed a complaint against the developer, landscaper, plumbing company, soil engineers, and the City of San Juan Capistrano ("the City") for damages suffered by its condominium unit owners from the subsidence of the land underlying the property. With respect to the City, the Association contended the building inspector shirked his mandatory duty under a City ordinance to ensure that all soils be compacted to 90 percent. The complaint stated that the City had a mandatory duty to require the developers "to adequately and sufficiently compact the soils" at the property to the requirements prescribed in the ordinance before issuing grading and building permits to the developer and subcontractors to erect structures on the property. The Association sought damages against the City and other defendants in excess of $1 million to correct the defect conditions. The City moved for summary judgment, alleging the pertinent ordinance was discretionary in nature and, consequently, the City was immune under sections 815 and 818.4 from any perceived negligence occurring in the issuance of the grading and building permits to the developers and subcontractors. The trial court agreed and ruled that the City was in fact immune under the California Tort Claims Act. The Association then appealed the trial court's ruling. On appeal, the Court focused on section 818.4 and affirmed the rule that a public entity is not liable for an injury caused by the refusal to issue a permit where the entity is authorized by law to determine whether or not the permit should be issued. The Court found that this was such a case. Moreover, the Court stated that "claims for damages resulting in large part from private improvement and development of property in which the county and city played no part other than their approval of plans and issuance of permits are not actionable. Thus, the Court concluded, the City is immune from tort liability for any injury allegedly occurring as a result of the issuance of permits.
As the above cases reveal, unknowledgeable property owners, including unit owners in homeowners associations, may be the ones to suffer if they depend on the public agency to stand behind the building permit it issues and the inspectors it hires to oversee ongoing private works of improvement. These cases reinforce the point that a building permit issued by a public agency is neither a guarantee of the quality of the contractor's work, nor is it a representation of the adequacy of the work that was performed on the property. Building codes, the issuance of building permits, and building inspections are merely devices used by municipalities to collect the revenues that help fund the municipality. When viewed from this perspective, the building permits issued by public agencies are not meant to serve as insurance policies by which the municipality guarantees that each building is built in compliance with the building and zoning codes. The fees a city collects for issuing building permits merely act to offset expenses incurred by the city in promoting the public interest in general, and in no way function as insurance premiums which make the city liable for each item of defective construction on the improved premises. A building permit simply represents to the property owner that the work that was inspected is complete and that all of the required administrative details have been performed by the contractor to the building inspector's satisfaction. Armed with this knowledge of what a building permit truly represents, association boards of directors and private property owners can plan accordingly and take affirmative protective steps when planning to fund a work of improvement on their property. Such simple measures as requiring the hired contractor to maintain greater limits of insurance coverage, or hiring an independent construction manager to diligently oversee that the contractor's ongoing work complies with the relevant building codes, will ensure that the association is protected after the construction process has been completed.