Tag Archives: Construction Law

Real Estate

Right to Repair Act Requires Notice to Builder Prior to Repairs

A recent California court found that under the Right to Repair Act (Civil Code Section 895 et seq.), a homeowner must provide notice of the construction defects to the home builder prior to doing any repair work subject to the Right to Repair Act. KB Homes v. Superior Court of Los Angeles County provides further clarification on the Right to Repair Act.

Dipak Roy (“Homeowner”) purchased a home from KB Homes (“Home Builder”) in 2004. The Purchase Agreement included a clause addressing prelitigation procedures and listed a corporate office where notices of defects could be sent. The Purchase Agreement allowed for a telephone notice during an emergency, but a written notice would be required to follow-up the telephone call notice.

In 2010, a property manager discovered a water leak from a broken water pipe. The home was vacant at the time. The Homeowner contacted his insurance company, Allstate. A mitigation company was hired to clean-up the damage from the water leak. Allstate sent the Home Builder a notice of the damage and its intent to pursue the Home Builder for subrogation. In 2011, Allstated filed a lawsuit against the Home Builder for negligence, breach of implied warranty, and strict liability.

The trial court found that Allstate, as the insurance company, was not required to comply with the notice procedures found in the Right to Repair Act or in the Purchase Agreement.

On appeal, the Court was required to answer whether or not a homeowner must provide notice to a home builder of a defect in order for the homeowner’s insurance company to pursue a subrogation claim against the home builder.

The Right to Repair Act applies to the sale of new homes after January 1, 2003. The Right to Repair Act requires a homeowner to provide notice of a construction defect to a home builder. Then, the home builder must acknowledge receipt of the notice within 14 days and complete an initial inspection 14 days after providing receipt of notice. The homeowner may file a lawsuit if the home builder fails to acknowledge receipt or to inspect the property.

Here, the Court found that the Homeowner did not provide notice to the Home Builder and did not allow the Home Builder the opportunity to make repairs or pay damages to the Homeowner. In sum, as a result of not providing proper notice, the homeowner’s insurance company could not pursue the claim against the Home Builder.

This case is an important reminder for parties to a contract to review prelitigation procedures prior to filing a lawsuit because failing to follow such procedures may doom a plaintiff during litigation. In particular, under the Right to Repair Act, it is important for homeowners of new homes purchased after January 1, 2003 to be aware of the provisions in the Right to Repair Act and in the purchase agreement.

Real Estate

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.