by Lucas J. Olona, Esq.
When confronted with construction defects at your home or in your association, the first questions that an owner will likely ask almost always relate to money. How much will it cost to pursue claims against the builder? Who will ultimately pay for the repairs? The answers to these questions depend, to a certain extent, on how well and how soon the owner or association is prepared to support their claims … but we will get to that in a minute.
In an effort to avoid construction defect litigation, the California State Senate proposed, and the Legislature passed, Senate Bill 800. With an effective date of January 1, 2003, this legislation (now codified as California Civil Code Section 895, et seq.,) imposes certain "Requirements for Actions for Construction Defects" within the State of California. Within the legal community these requirements are interchangeably referred to as the "SB800," "Title 7," or "pre-litigation" procedures and are now well known by construction defect attorneys.
The stated purpose for the SB800 pre-litigation procedures is certainly worthwhile: among other things, it seeks to reduce the number of construction defect lawsuits in California; it seeks to improve the standards and procedures for early disposition of construction defect cases; and it is intended to facilitate the ability of the builder to obtain liability insurance for the housing that is constructed. To accomplish this, the law prescribes certain steps that construction defect claimants must follow prior to filing suit.
One result of this legislation is that insurance companies are more willing to issue a liability policy to a general contractor for the construction of a major development because SB800 is in place to lessen the threat of a potential lawsuit (and thus lessen the exposure that the insurer faces). On the other hand, the same general liability policies typically state that coverage is provided only for sums that an insured "is legally obligated to pay as damages" - a phrase that insurers continually argue requires the filing of a lawsuit before any coverage obligations are triggered.
This raises two questions: will a builder be willing to fund the resolution of a substantial claim when it has paid premiums for an insurance policy that is supposed to cover those same claims? What does this mean for homeowners or associations hoping to resolve disputes through the required SB800 pre-litigation procedures?
In the end, it means that preparation is paramount.
By Lucas J. Olona, Esq.
I am a new board member for my condominium association and am concerned about our record keeping practices. What sort of documents should we be keeping?
In addition to any record keeping requirements that your governing documents may contain, California law requires that Associations retain accounting records, minutes of meetings, and member lists. Additionally, and in order to expedite any potential claims that may arise, we strongly recommend that Associations retain all documentation pertaining to construction defects and/or property damage that may exist in the building or any units for at least ten years from the time the project was built. Work closely with your property manager to formulate a retention policy for these types of documents.
You can read more about statutes of limitations and similar issues in the Construction Defect articles on our website.
Traps for the Unwary in recent CC&Rs - Part 2
By Matt Malone
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