Homebuilder Alert: Your Home Sales Contract May Not Protect

If a homebuilders alternative contractual pre-litigation provisions are found to be unconscionable, the builder cannot require homeowners to comply with SB 800’s statutory, non-adversarial procedures. (Anders v. Superior Court (Meritage) (Fifth App. Dist., Feb. 7, 2011) Case No. 643452.)

California Senate Bill 800 (“Right to Repair” or “Fix It” law; Civil Code sec. 895, et. seq.) became effective Jan. 1, 2003. Among other things, it provided for a pre-litigation process to allow developers to settle potential construction defect lawsuits by offering to repair the claimed defects, mediating the disputes, and/or making a cash offer to buy back the residence. (Civ. Code sec. 910, et seq.)

As an alternative to that method, the statutory scheme permits a seller-builder to include an alternative pre-litigation procedure in its sales contracts with buyers, subject to certain specified conditions. (Civ. Code sec. 914.)

What happens if that alternative contractual process is unenforceable for some reason? Now we know – the statutory procedure cannot be used in lieu. Rather, the homeowners can sue the homebuilder. Homeowners need not give the developer the opportunity to repair, mediate or buy back the homes. This is because Section 914 of the California Civil Code says so, despite the creative attempts of counsel to misinterpret the plain meaning of the code.

Does anyone wonder if the building industry will be asking the Legislature for an amendment? What will plaintiffs’ constructuction defect attorneys do? More negotiations may be on the way. It took a while for SB 800 to be enacted in the first place. We’ll see if it gets amended.

In the meantime, new home sellers should review their contracts and may want to scrap pre-litigation procedures that do not essentially replicate the process in SB 800, thereby avoiding the risk of an adverse ruling about the contract’s terms, resulting in unnecessary litigation.

Disclaimer

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