Home Builder Contract Requirements to Bring a Lawsuit Upheld

Recently, a California court upheld a home builder contract that required a homeowner to provide notice to the builder of a construction defect claim, gave the right for the builder to inspect and fix the construction defect, and required a nonbinding mediation prior to bringing a lawsuit. The McAffrey Group, Inc. v. Superior Court is an important decision for home builders, developers, and homeowners in a dispute for construction defects.

Petitioner, The McAffrey Group, Inc. (“McAffrey”) constructed single family homes. Real parties in interest own nineteen single family homes built by McAffrey. For homes purchased after January 1, 2003, McAffrey notified purchasers that the contract provisions in the purchase agreement to purchase a home from McAffrey replaced the provisions in the Right to Repair Act, Civil Code Sections 910-938, addressing construction defect claims by homeowners.

The contract required that a homeowner must notify McAffrey of the construction defect and provide an opportunity to inspect and repair the construction defect. Within 60 days of notification of a construction defect, McAffrey was required to meet and confer regarding the claims of construction defect and be provided an opportunity inspect the home. Further, mediation was required prior to a homeowner filing a lawsuit against McAffrey for construction defects.

Homeowners who purchased homes from McAffrey filed a lawsuit against McAffrey for construction defects without complying with the procedures set forth in the purchase agreements. Plaintiffs argued that the Right to Repair Act controlled and that the provisions in the purchase agreements were unconscionable because they did not provide firm deadlines to make repairs and were a “take it or leave it” method to make repairs.

The Right to Repair Act sets forth various procedures for a homeowner to follow when making a claim for construction defects. The Right to Repair Act provides strict deadlines for homebuilders to make repairs and for mediation to occur. However, the Right to Repair Act authorizes a homebuilder to require other non-adversarial procedures to resolve construction defect claims; however, a homebuilder cannot utilize both the Right to Repair Act and its own non-adversarial procedures.

On appeal, the Court found that the provisions in McAffrey’s purchase agreement were not unconscionable and were valid. Therefore, the homeowners must have complied with the procedures set forth in the purchase agreement prior to filing a lawsuit.

This case highlights why it is important to understand the terms of a contract particularly if you are interested in bringing a lawsuit. Courts require that parties follow the terms of a contract if there are terms that require certain things to be done prior to filing a lawsuit, such as requiring mediation to settle a dispute.