Construction Defect Law - California

Q. What is a construction defect?

A. A defective condition can be the result of faulty design, materials, and/or workmanship. A construction defect includes: "...a failure of the building or home to be constructed in a reasonably workmanlike manner and/or to perform in the manner that is reasonably intended by the buyer."

Common examples of defective construction may include: Significant cracks in the slab and/or foundation; unevenness in floor slabs caused by abnormal soils movement; leaky roofs and/or windows; moisture problems due to improper drainage and/or waterproofing; faulty or corroded plumbing; faulty framing; over stressed structural members, bowing or slanting of floors and walls; doors and windows that bind and are difficult to open and close; and cabinets or counter tops that are separated from walls or ceilings. (This is not an all-inclusive list.) Any condition in your property which makes it unsuitable for its intended use may be considered a defect. (California Civil Code 896)

Q. How do I know if I have a claim?

A. Of course, some conditions may be obvious, such as large cracks in the foundation, floor slab, or walls. However, as a general rule, most defective conditions become apparent approximately 3 to 5 years after the completion of construction. They initially appear as hairline cracks or other minor problems.

In our experience, if you own a tract home or condominium, the problems or concerns you have are not unique to your property. Talk to your neighbors-chances are, they will have similar conditions. In all circumstances, we suggest that you contact your builder/developer for an explanation concerning the potential problem as well as assistance in fixing it. Be careful to make sure that the problem is fully identified and that the proposed fix is not a temporary "band-aid." For the most objective opinions, we strongly suggest that you have a qualified construction expert inspect your property as soon as you suspect that a problem exists.

Q. Who is responsible for defective conditions?

A. The builder/developer is responsible for all defective conditions even if the actual work was performed by a subcontractor or if the defective materials used in construction are manufactured by someone else. Of course, the involved design professionals and subcontractors remain responsible for their work. However, in light of the builder/developer's responsibility for the work of others, it is easier for the property owner to go directly to the builder/developer for recourse. Many of our clients relate horror stories in which the builder/developer disavowed his/her own responsibility and advised the property owner to "chase" the subcontractors. We advise our clients that in many cases, this is unnecessary and fails to result in a satisfactory resolution. (California Civil Code 895)

Q. What are my rights under California law for faulty construction?

A. California law favors the property owner. In the case of mass produced tract homes or condominiums, the builder/developer is strictly responsible for all defective conditions that may exist within your property or community. Claims may also be pursued for negligence, and breach of warranty.

Q. What are my recoverable damages?

A. Damages may include damages for the reasonable value of repair, the reasonable cost of repairing any damages caused by the repair efforts, the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards, the reasonable cost of removing and replacing any improper repair by the builder, reasonable relocation and storage expenses, lost business income if the home was used as a principal place of a business licensed to be operated from the home, reasonable investigative costs for each established violation, and all other costs or fees recoverable by contract or statute. (California Civil Code 944)

Q. Who may assert claims for construction defects?

A. Any individual or entity whose interest in the real property has been harmed may assert a claim for construction defects. One need not be the original owner. A subsequent purchaser has the same rights to pursue claims as the original owner. However, a subsequent purchaser's claims may be limited to the extent possession of the property was acquired with knowledge of the defects. Similarly, a homeowners association in a common interest development such as a condominium project may assert claims for damages to the common areas, as well as for damage to an individual owner's separate interests which arises out of, or are integrally related to, damage to the common areas or separate interests that the association is obligated to maintain or repair. (California Civil Code 895) (Siegel v. Anderson Homes, 118 Cal. App. 4th 994 (2004)).

Q. How much time do I have to make a claim?

A. Do not be fooled by a builder's one-year warranty disclaimer. In certain circumstances, you may have up to ten years from the date of substantial completion or when the date the builder relinquishes control over the association's ability to decide whether to initiate a claim (whichever is later), to file an action to recover damages. The following time limits are applicable to homes built after January 1, 2003:

1 year

Noise (from original occupancy of adjacent unit)
Fit and finish warranty
Irrigation and drainage
Manufacture products

2 year

Decay of untreated wood posts
Landscaping systems
Dryer ducts

4 years

Plumbing and sewer
Electrical
Cracks in exterior hardscape, pathways, driveways, landscape, sidewalls, sidewalks, patios
Corrosion of steel fences

5 years

Deterioration of building surfaces due to paint or stain
All other defects or violation of building standards
Air Conditioning in living spaces
Balconies and balcony systems
Ceramic tile and tile backing, Ceramic tile and tile countertops
Decks and deck systems
Doors
Exterior stairs and stair systems
Exterior stucco, siding, walls, framing, finishes and fixtures
Fire Protection
Foundation systems and slabs
Foundations, load bearing components, slabs and underlying soils
Hardscape, paths, patios, irrigation systems, landscape systems and drainage systems
Heating
Plumbing lines, sewer lines and utility lines
Retaining and site walls, associated drainage systems
Roofing materials
Roofs, roofing systems, chimney caps and ventilation
Shower and bath enclosures
Soils and engineered retaining walls
Structure
Windows, patio doors, deck doors and related systems

Q. Can I sell or re-finance my home during construction defect litigation?

A. Although some lending institutions have policies against financing properties involved in construction defect litigation, numerous other lenders regularly provide these types of financing. In addition, there are certain companies that provide private loans to those who are involved in litigation.

Q. Do I have to disclose my defects to a potential buyer?

A. Yes. Regardless of whether you are involved in a construction defect claim, owners have a common law duty to disclose any construction defects that they are aware of, or should be aware of.

Q. Will a construction defect lawsuit reduce the value of my home?

A. Unfortunately, the value of your home may have already been reduced by the discovered defects. Under Nevada law, you must disclose all known defects to potential buyers. By filing a construction defect suit you are actually serving to protect the value of your home by recovering funds to make the necessary repairs.

Q. Why are experts necessary and what do they do?

A. We use a team of experts to help prove your construction defect claim. Experts help determine the nature and extent of your construction defect problems, design methods of repair, and estimate the cost of those repairs. Some of the experts we use are:

Architects
Civil Engineers
Soil Engineers
Mechanical Engineers
Sound Engineers
Appraisers
Economists
Stucco Experts

Q. How do I make a claim?

A. The procedures which should be followed vary depending on whether you are pursuing claims on your own behalf, or if your homeowners association is pursuing claims for damages against the builder/developer, based upon defects to the common interest development in which you reside.

Individuals:

Generally, we advise our clients to first contact the builder/developer and detail the condition(s) that concern you. (This contact should always be done in writing via certified mail, return receipt requested.) Second, allow the builder/developer to inspect the property and submit a written report (including any repair recommendations). Third, hire a competent construction expert to inspect your home and review the builder's explanation concerning the construction problem(s) as well as the proposed repairs. Fourth, if you have a discrepancy in the identification of the problem and/or the repair, we suggest that you have the experts (yours and theirs) discuss it and find out why the differences exist and then explain them to you. Fifth, if the builder/developer does not agree to a permanent repair or to the damages that you claim are owed, or denies responsibility, contact an experienced construction defect attorney to advise you as to additional steps that may result in a resolution or in the filing and presentation of a lawsuit.

Homeowners Associations:

The State of California has enacted legislation dictating procedures which must be followed by an association when asserting claims against a builder/ developer for defects in the design or construction of a common interest development, such as a condominium project. The process is complicated. Therefore, we recommend an association with construction deficiencies retain an experienced attorney for assistance and to ensure compliance with all statutory procedures.

Q. Can the building inspector be held responsible for my construction defects?

In just about every case, we are asked by our clients: "Why did the building inspector ever approve our property when it is defective?" And, "Why can't we sue that inspector?" The answer is: We would like to, but public employees are generally immune from suit for acts within their discretion. Further, building officials who act in good faith and without malice (ill will or evil intent) in the discharge of their duties are statutorily immune from liability.

Q. Will any governmental agency help me?

A. A governmental agency that is promoted to protect the consumer is the Contractors State License Board. This state-run program will take a consumer's complaint and attempt to investigate the matter with the involved contractor and come to some resolution. In certain cases, it may be appropriate to make a claim with this agency and to seek its assistance.

Q. Do I need to hire a lawyer that is experienced in construction defect litigation to represent me?

A. Today, most attorneys work in a specific area to provide greater service and expertise to their clients. In the area of construction defect law, your lawyer must be knowledgeable in all the following:

Insurance Contracts and Coverage
Soils Engineering
Mechanical Engineering
Structural Engineering
Cost Estimating
Real Estate Appraising
Statistical Analysis and Random Sampling Methodologies
Complex Litigation Techniques

Effective counsel typically has a track record of successful settlements and court verdicts from which you can gauge his/her ability to fully and adequately represent you. As a potential client, do not be afraid to ask about a lawyer's experience.

Q. How much will it cost me to retain a construction defect attorney?

A. Most experienced construction defect lawyers provide a no charge consultation with a potential client to determine the merits of a claim. In most cases where a significant defect exists, the lawyer will take the case on a contingency (no recovery/no fee) basis. Although the attorney will work on a contingency fee, the client will be expected to pay the costs of the expert investigation, as well as the out-of-pocket expenses of the litigation.

Q. Can I still recover money damages if my builder/ developer or other responsible party filed for bankruptcy protection?

A. Most likely yes! The mere fact that the builder/ developer filed for bankruptcy protection does not afford protection to any liability insurance policies for the builder/developer, subcontractor or whoever it is that filed bankruptcy. Typically, upon a motion made before the bankruptcy court, or by agreement with the attorney appointed by the insurance company to defend the developer, the bankruptcy court will allow the lawsuit to proceed, with the recovery limited to the proceeds of insurance policies. In all instances where bankruptcy has occurred, there must be a careful evaluation of the potential for insurance coverage, and the nature of the bankruptcy proceeding.

Q. Can I recover my attorney fees and costs of litigation?

A. Insofar as attorney fees are concerned, typically, these are not recoverable in the absence of a contract, or a special statute. In some instances, where the developer has prepared and filed the CC&R's for the Association, there are attorney fee provisions contained in the CC&R's. We have made arguments in the past to try and recover attorney fees from developers through the CC&R's, and as of yet, the courts have been reluctant to permit such recovery. However, each case must be evaluated on its own facts.

Typical costs of suit (i.e., depositions, filing fees, and subpoena costs, etc.), can be recovered by the prevailing party. Expert fees can generally be recovered as investigative costs. Additionally, if a C.C.P. 998 offer is used (this is a pre-trial offer to settle in a certain form), there is a potential to recover additional expert witness fees related to preparing for depositions and testifying at trial.

Q. What if it becomes necessary to file a lawsuit?

A. When all else fails, and you receive no satisfaction from the builder/developer of your property, the next step is to file a lawsuit. To make the litigation process easier and more efficient, you should fully and timely cooperate with your attorney and provide specific information regarding your property and the damage it has suffered. The lawsuit will go much more smoothly if this information is provided to your lawyer prior to filing the suit.

It will be necessary for your lawyer to know:

The full name, address, driver's license number, occupation, employer and length of time with that employer, employment for the past five years, and educational background for each person who is named on the grant deed to the property.
The address of the property.
The date you purchased the property.
From whom you purchased the property.
The amount you paid for the property.
The name and address of the builder/developer of the property.
A concise list of the defective conditions at the property. List every problem you have had with the property, where the problem is located in the property, and when the problem was first discovered. (For example: Door to master bedroom no longer fits properly. It sticks in the door frame and the latch is no longer aligned. First noticed the problem around January of 1990).
Any contact you have had with the builder. (For example: Phone call to builder, February 2, 1990, to tell them that the master bedroom door no longer fits properly.) List any complaints you made to the builder, and any response you have gotten from the builder.
Any and all improvements you have made to the property, the cost of those improvements, the name and address of the contractor that did the improvement work, the dates the work was done, and the cost of the work.
Any and all repair work done at your property by the builder, and the date the work was done.
If you have had any construction experts look at the property, provide the name and address of the expert or experts, as well as the findings.
A concise, complete list of the damage caused by each leak. (For example: Leak in the ceiling above the guest bathroom. Leak damaged the drywall on the ceiling and walls, damaged the insulation; and the water damaged a bunch of cosmetics on the countertop).
The cost of repairs (if repairs have not been completed, provide an estimate of the cost) and give the name and address of the person or company that performed (is performing) the repairs.
Who paid for repairs, whether it was you or your insurance company

If any representations regarding the condition of your property were made to you by the builder or the builder's representatives. Give the name of the representative and relate what representations were made. (For example: Bill Smith with Build'em Right told us that it is normal for the patio slab to move up and away from the house. He told us that in March of 2011).

You will also be required to provide numerous documents, such as:

The grant deed to the property
Escrow documents
Advertising brochures from the builder/developer
Repair invoices
Correspondence to the builder or any subcontractor
Insurance policies
Photographs or videotapes of the property or any damage to the property which you know about
Reports by any construction experts retained prior to the commencement of the lawsuit
Appraisals
Refinancing documentation
Correspondence to any governmental agency
Any plans and/or contracts for installing improvements to the property
Any permit documents
Walk-through inspection reports
Any and all other documents that relate to your property

Providing your attorney with the appropriate information and dates will make the handling of your lawsuit easier and more efficient. At some point in the lawsuit, you will be required to verify this information (and possibly more) under oath.

Conclusion

As we advise each of our clients, never make a "mountain out of a molehill." Each defect that you allege to exist within your property must be later disclosed to a would-be buyer. However, there is no question that a property owner is entitled to the quality product the builder/developer represented. California law provides you, the owner, the legal right and procedures to recover the value of your home and investment when significant construction defects exist. This Construction Defect FAQ is for general informational purposes only; does not provide specific legal advice; and is not meant to be relied upon as applying to a particular set of facts or circumstances. An attorney-client relationship is not intended nor created by receipt of this Guide. Although every effort has been made to ensure the accuracy of the information contained in this Guide, no warranty is made, either express or implied, and neither the publisher nor the authors assume any liability in connection with or resulting from its use.

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