McMillan Albany, LLC v. Superior Court
TAKEAWAY - The prelitigation construction defect dispute resolution procedures of the Right to Repair Act are mandatory for all property damage claims, and cannot be avoided simply by pursuing only common law based theories of liability.
3. CONSTRUCTION DEFECTS: N DEFECTS
Branches Neighborhood Corporation v. Calatlantic Group, Inc.
TAKEAWAY – Common interest development must strictly comply with CC&Rs, requiring a membership vote as prerequisite to initiating legal proceedings against a developer/builder, in order to preserve, assert and avoid waiver of construction defect claims. Failure to comply cannot be retroactively remedied after legal proceedings have been initiated.
FACTS – Te CID’s governing documents contained multiple provisions regarding construction defect claims, including a requirement that the written consent of its members be obtained prior to initiating formal legal proceedings against the builder. When the CID learned of extensive construction defects at the property, it served a written notice of violation of building standards under California’s Right to Repair Law.
Te CID’s lawyers
entered into a mediation process with the builder in hope of resolving the claim without formal legal proceedings. After the builder failed to offer a reasonable settlement amount, the CID initiated formal legal proceedings by demanding arbitration. Tereafter, the CID held a membership meeting and the members voted to ratify the prosecution of the construction defect claim. However, the arbitrator found that the failure to timely comply with the voting requirement necessitated dismissal of all the claims against the builder. Both the Superior Court and the Court of Appeal confirmed the arbitrator’s award.
FACTS - Plaintiff, the buyer of thirty-seven (37) single family homes from defendant developer, filed an action alleging a multitude of construction defects. In order to avoid the prelitigation dispute resolution process and builders’ opportunity to cure the defects, Plaintiff dismissed its causes of action under the Right to Repair Act and sought to proceed only on its common law-based claims to recover for actual property damages. When the trial court denied the defendant builder’s motion to stay the action pending completion of the statutory dispute resolution process, a writ petition was granted, and the action was stayed. Both the Court of Appeal and the Supreme Court agreed that the Legislature intended that the Act fully displace all common law construction defect liability.
BACKGROUND - Te Right to Repair Act sets forth detailed statewide standards that the components of a dwelling must satisfy, and establishes a prelitigation dispute resolution process that affords the opportunity to cure such defects, while granting the right to sue for deficiencies even in the absence of property damage or personal injury.
COURT’S RULING - All construction defect property damage claims are subject to the Act’s prelitigation procedures, and the Court of Appeal was correct to order a stay until those procedures have been followed. Although the presumption against displacement of the common law is strong, abrogation of the common law does not require an express declaration. It is enough that “the language or evident purpose of the statute manifest a legislative intent to repeal” a common law rule. Based on a careful examination of the text and legislative history of the Right to Repair Act, the Supreme Court concluded the California Legislature intended a broad displacement of common law remedies for construction defects, and made the Act the virtually exclusive remedy not just for economic loss but also for property damage arising from construction defects.
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