As many are aware, the Right to Repair Act, found in Civil Code §§ 895-
945.5, often known as "SB 800", applies to residential construction defect disputes
where the purchase contract was signed on or after January 1, 2003. The Right to
Repair Act sets forth standards which construction for residential structures
must comply with and calls for substantial, non-adversarial pre-litigation
procedures in the event the homeowner or homeowners association wishes to
assert a claim for defects and the builder responds to the claim and elects to go
through a pre-litigation procedure.
Recently, the California Courts of Appeal have been called upon to
interpret various facets of the Right to Repair Act. See, Thompson v. Toll Dublin,
LLC (2008) 165 Cal.App.4th 1360 and Greystone Homes, Inc. v. Midtec, Inc.
(2008) 168 Cal.App.4th 1194. This past month, in another recent and important
decision, the California Court of Appeal, 5th District ruled, in Anders v. Superior
Court (2011) DAR 2137 ("Anders"), that the non-adversarial pre-litigation
procedures set forth in the Right to Repair Act are not available to the builder
where (i) the builder's purchase contract called for a separate, alternative, nonadversarial
pre-litigation procedure (outside of the Right to Repair Act) and (ii)
the builder's alternative, non-adversarial pre-litigation procedure is found to be
unenforceable.
In Anders, owners of 54 homes constructed by Meritage Homes of
California, Inc. ("Meritage") filed a Complaint seeking remedies for alleged
construction defects in their homes. Meritage then filed a Motion seeking to
compel the plaintiff homeowners to comply with alternative pre-litigation
procedures set forth in their purchase contracts. However, the alternative prelitigation
procedures called for in all but two of the plaintiff homeowners'
contracts were crafted by the builder and did not follow the Right to Repair Act.
The Morrison Law Journal
February 2011
Volume VI, Edition 2
Another Twist For SB 800: Court of Appeal Rules That Developer
Cannot Enforce Right to Repair Act Pre-Litigation Procedure Where The
Purchase Contract (Drafted By The Developer) Calls For Alternative Pre-
Litigation Procedure Which The Court Finds To Be Unenforceable….
By: Edward F. Morriso
n, Jr., Esq.
Larry A. Schwartz, Esq.
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We note that the builder is permitted to apply its own, alternate prelitigation
procedure under Civil Code § 914(a) which provides, in pertinent part:
"….A builder may attempt to commence nonadversarial contractual
provisions other than the nonadversarial procedures and remedies
set forth in this chapter, but may not, in addition to its own
nonadversarial contractual provisions, require adherence to the
nonadversarial procedures and remedies set forth in this chapter,
regardless of whether the builder's own alternative nonadversarial
contractual provisions are successful in resolving the dispute or
ultimately deemed enforceable.
At the time the sales agreement is executed, the builder shall notify
the homeowner whether the builder intends to engage in the
nonadversarial procedure of this section or attempt to enforce
alternative nonadversarial contractual provisions. If the builder
elects to use alternative nonadversarial contractual provisions in
lieu of this chapter, the election is binding, regardless of whether
the builder's alternative nonadversarial contractual provisions are
successful in resolving the ultimate dispute or are ultimately
deemed enforceable."
At the Trial Court level, the Court granted Meritage's Motion in part and
denied it in part. The Court first found the alternative pre-litigation procedures
set forth in the Meritage contracts to be unconscionable and unenforceable.
However, the Court found that Meritage had only made a qualified election to
follow its own alternative procedures, and the Court ruled that the plaintiff
homeowners were still required to comply with the statutory pre-litigation
procedures set forth in the Right to Repair Act.
The plaintiff homeowners then filed a Petition for Writ of Mandate,
challenging the Trial Court's order enforcing the pre-litigation procedures set
forth in the Right to Repair Act. The plaintiff homeowners argued that the Right
to Repair Act could not apply because the plaintiff homeowners had not signed a
contract calling for Right to Repair Act non-adversarial pre-litigation procedures
(and instead signed contracts which called for pre-litigation procedures which
were outside the Act).
In a lengthy opinion, the Court of Appeal interpreted Civil Code § 914 to
provide that if the builder's contract calls for alternative pre-litigation procedures
outside the Right to Repair Act, the builder has made a "binding" election. The
Court of Appeal further ruled that, when read together, the provisions of the
Right to Repair Act call for the builder to forfeit all rights for pre-litigation
procedure under the Right to Repair Act if the builder chooses its own scheme
and that scheme is found to be unenforceable.
The Anders decision is an important case. That decision will most
certainly result in more challenges to pre-litigation procedure if the procedure is
not in conformity with the Right to Repair Act. It also provides a forewarning to
builders that, if they want to use their own pre-litigation procedure, they risk
losing all rights to any pre-litigation procedure if the builder's scheme is found to
be unenforceable for any reason.
About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A.
Schwartz is Of Counsel to The Morrison Law Group, a professional corporation.
Their biographies can be viewed at www.morrisonlawgroup.com.
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Disclaimer Note: The legal article presented above is intended to provide
general information which may be of interest or use to clients and colleagues of
The Morrison Law Group and should not be construed as legal advice on any
matter.
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