This can be significant where, like in Oetiker, the latent defects were not discovered until after the 10-year statute of repose in the Act had already passed.FOOTNOTES Cal. Civ. Code, § 895, et seq.Id. at 944.[View source.]

The City of San Diego, however, continued to issue certificates of occupancy after that date.On July 6, 2017, Smart Corner Condominium Association (Smart Corner), who was not in privity with Hensel Phelps, gave notice to Hensel Phelps of its construction defect claim, alleging numerous defects. After Hensel Phelps declined to participate in the pre-litigation dispute resolution process set forth in California’s Right to Repair Act, Cal. Civ. Code § 895 et. seq., Smart Corner filed suit against Hensel Phelps. During the litigation, Hensel Phelps filed a motion for summary judgment arguing that, as set forth in the prime contract, the statute of repose began to run on May 24, 2007, when the architect issued its certificate of substantial completion.

The California Supreme Court ruled in McMillin Albany LLC et al. v. The Superior Court of Kern County, (1/18/2018) 4 cal. 5th 241, that California’s Right to Repair Act, California Civil Code sections 895 et seq. (“Act”) is the sole remedy for construction defect claims for economic loss and property damages regarding new residential construction. The Act establishes a pre-litigation dispute resolution process that must be followed before filing a construction defect action for new residential construction purchased after January 1, 2003.

The Superior Court of Kern County (Van Tassel) [Case No. S229762], the California Supreme Court held that California Civil Code §§ 895 et seq. (the “Right to Repair Act”) provides the exclusive remedy for construction defect claims for economic loss and resulting property damages arising from new residential construction. The Supreme Court also held that homeowners are required to engage in the pre-litigation notice and cure procedures under the Right to Repair Act.

Accordingly, the defendant property developer was entitled to a stay of the litigation until plaintiffs complied with the Act’s pre-litigation notice, inspection and repair procedures. The Right to Repair Act (codified at California Civil Code §§ 895 through 945.5) was passed as SB800 by the California legislature in 2002. The Act was the legislature’s response to lobbying from homeowner and construction interest groups reacting to the Supreme Court’s holding in Aas v. Superior Court (2000) 24 Cal.4th 627, 632, which held that the economic loss rule bars homeowners suing in negligence for construction defects from recovering damages where there is no showing of actual property damage or personal injury.

The CBIA advised the Assembly that the law allows parties to discuss a claim prior to an action to avoid costly and time-consuming litigation, but still preserves the right to legal action. The Consumer Attorneys of California (CAOC) have expressed concerns that the law creates delays for resolution of homeowner construction defects claims, as it overlaps with the state's Right to Repair Act (California Civil Code Sec. 895 et seq.), which went into effect in 2003, and have offered to assist in amending the law, but at this time remain neutral on the proposed bill. Absent any unexpected delay, it is anticipated that AB 1963 will move smoothly through the legislative process.

In doing so, the court rejected two controversial Court of Appeal decisions which found that the Act does not provide the exclusive remedy for damages for construction defects that have resulted in property damage: Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, 219 Cal. App. 4th 98 (2013), and Burch v. Sup. Ct., 223 Cal. App. 4th 1411 (2014). The Act, codified at California Civil Code §§895, et seq., became law in 2003, in part to address rising costs and unpredictability created by construction defect litigation. The Act sets forth functionality requirements which residential construction must meet.

The Court rejected this argument, holding that while a tort claim could not be pursued for defects in the windows themselves, the defendants could be sued in tort for harm to other portions of the homes caused by the defective windows. In the context of residential construction, the Aas ruling was largely overruled by the California Legislature with the adoption of California Civil Code sections 895 et seq. This legislation established claim and repair procedures for residential construction defects, and permits defect claims to be pursued without personal injury or property damage.

The Court rejected this argument, holding that while a tort claim could not be pursued for defects in the windows themselves, the defendants could be sued in tort for harm to other portions of the homes caused by the defective windows. In the context of residential construction, the Aas ruling was largely overruled by the California Legislature with the adoption of California Civil Code sections 895 et seq. This legislation established claim and repair procedures for residential construction defects, and permits defect claims to be pursued without personal injury or property damage.