SPRING 2003

SPECIAL EDITION: SENATE BILL 800

How to Comply with the New Statutory Requirements of SB 800

By way of background, SB 800 is a new approach to resolving construction-related problems which requires a homeowner to allow a builder to repair problems before engaging in litigation. Born from a need to reform California construction defect dispute resolution, SB 800 is a “right-to-repair” law that serves the following purposes:

• provides homebuilders the absolute right to repair problems that may arise in a home
  
• mandates certain maintenance guidelines for homeowners
  
• establishes certain affirmative defenses to protect homebuilders
  
• defines the standards of quality that homebuyers can expect
  
• gives alternatives to litigation that reduce costs to builders and solve problems quickly.

This legal update is intended to provide a guideline for compliance with SB 800, which became effective January 1, 2003 as discussed in our Winter, 2003 update. It is important to note that the statutory provisions of SB 800 only apply to new homes sold after January 1, 2003.

Handling a Homeowner Complaint Under SB 800

Under the new law, a homeowner has a duty to notify the builder upon discovery of a breach of one of the “functionality standards” established by the new law. These functionality standards are a new way of defining construction defects and have been developed according to industry standards concerning the manner in which a home and its many components should properly function. Once the builder is notified of a problem, the builder has an obligation to respond within the following timeline. If the builder exceeds the timeline set forth in SB 800, it loses the benefit of the statutory protections. Therefore, compliance with the timetables set forth below is critical.

Response Timeline

Step 1:
Builder conducts an initial inspection of the problem within 14 days of acknowledgment of the homeowner’s claim.

Step 2:
If a second inspection is necessary, the builder provides written notice to the homeowner of second inspection within three days of the initial inspection and completes the second inspection within 40 days of initial inspection. If the builder believes another party is responsible for the breach of a functionality standard, the builder must provide sufficient notice to that party to allow them to participate in the inspection and repair process.

Step 3:
Builder publishes a notice to repair within 30 days of the final inspection.

Step 4:
Homeowner provides a response to the notice to repair within 30 days of the builder’s notice to repair, either accepting the repair plan offered or requesting that alternate contractors complete the repair. If alternate contractors are requested by the homeowner, the builder is entitled to an additional inspection within 20 days. The builder must present the alternate contractor choices to the homeowner within 35 days of the homeowner’s request. Within 20 days of receiving the alternate contractor names, the homeowner must authorize the repair plan.

Step 5:
Builder begins repair within 14 days of the final selection of a contractor. If the homeowner still disputes any term of the repair plan, SB 800 has provisions for mediation of that issue. If mediation is necessary, repair must begin within seven days after mediation is completed.

Step 6:
Repair must be completed in a “diligent” manner and all efforts must be made to complete repair within 120 days. However, in no case may the builder exceed the timeframe specified in the repair plan.

The Contents of a Repair Plan

As set forth above, the repair procedure set forth in SB 800 intends for the builder and the homeowner to agree upon a repair plan prior to the repair. By statute, the repair plan must include the following:

• A listing of all breaches of functionality standards encompassed by the repair plan
  
• A detailed statement of the nature and scope of the repair
  
• A specific time frame in which the repair will be conducted
  
• Specification of the contractor(s) who will perform the work
  
• All plans and technical information and documentation (to the extent available) relating to the repair if requested by the homeowner
  
• A provision advising the homeowner of his/her right to request up to three additional contractors from which to select to perform the repair
  
• An offer to mediate if the homeowner elects mediation prior to the repair which sets forth the terms of mediation:

  1. The mediator is chosen and paid by the builder, unless the homeowner opts to participate in the selection of the mediator. If the homeowner chooses to participate in the selection of the mediator, then the cost of mediation is shared between the parties

  2. The mediation must not exceed four hours

  3. The mediation must occur within 15 days of the request for mediation

  4. If the mediation fails to resolve the dispute between the builder and homeowner, the builder may still proceed with the repair as proposed.

If the builder fails to complete the repair according to the repair plan, the homeowner is released from the statutory pre-litigation process and may immediately commence legal action. Further, if a dispute arises after the repair regarding the adequacy of the repair, the homeowner may proceed to file suit without repeating the SB 800 statutory scheme.

Alternative Nonadversarial Procedures

SB 800 does allow the builder some flexibility in deciding how to handle homeowner complaints. For example, nothing in the new law prevents a builder from obtaining a release for a cash offer in lieu of repair. In addition, the builder may establish a different right-to-repair procedure through contract that would pre-empt the statutory procedures set forth in SB 800. Regardless of whether the builder chooses the statutory procedure of SB 800 or a contractual right-to-repair procedure, the builder must notify the homeowner of the applicable procedure at the time the sales agreement is signed. The builder may not require adherence to both the statutory scheme and a contractual right-to-repair procedure.

If you need any assistance in interpreting SB 800, drafting a contractual right-to-repair provision, or complying with the statutory requirements of SB 800, please contact a construction law specialist in Klinedinst's Construction Law Department.

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