The Senate Bill 800 statute was intended to provide an alternative process to resolve certain types of construction defect disputes without an expensive and time consuming lawsuit involving mediations and/or trial. SB800 became the construction defect law in California for any home purchased after January 1, 2003. SB 800, as it is commonly referred to, is sometimes called the “The Homebuilder Right to Repair Law” or “The Fix It Law”. The statute provides functionality standards and timelines for most building components which when followed can determine appropriate repair protocol that the developer/contractor can perform in order to resolve issues prior to a lawsuit. We have seen many SB 800 cases over the past 13 years, and expect there will continue to be many more cases that will be dealt with through the SB 800 functionality standards and guidelines. I am writing this to provide perspective as to the positive and negative aspects of the statute and its implementation.
To Repair or Not to Repair
On non-SB 800 cases through the years, most were settled through mediation. The few cases unable to find resolution in the mediation process would proceed to arbitration or trial. The costs of defense that are incurred to take a case beyond mediation through arbitration or trial are very expensive and often exceed the cost of performing the required repair. The idea behind SB 800 was to reduce that expense of mediation and trial by providing the functionality standards and timelines for determination of what issues were defects and allowing the builder to repair the defects that are identified within the SB 800 law.
If the developer/contractor does the repair, does SB 800 give them the hope of avoiding a lawsuit? The challenge facing an expert for the builders is to know the SB 800 functionality standards and timelines in order to provide a relevant documentation and scope of repair for the issues that fall within the respective guidelines for each of the building components. When properly considered and implemented the repair gives the homeowner resolution and saves the developer/contractor significant litigation costs. The problem with performing the repair occurs when the plaintiff attorney sues the contractor even if the repairs were done. When the developer/contractor does the repairs they have to pay the costs incurred and there is no release provided by the homeowner or plaintiff attorney. A release would give the contractor some hope of avoiding further litigation. We often hear the defense side wonder why they should pay the associated costs to perform the repair when they get sued anyway and may have to pay additional money to settle the case.
Our experience with the expert reports issued from plaintiff experts and attorneys is that they are sadly lacking in the required specificity and in some cases the appropriate knowledge of the statute. Rather than providing the builders and their experts with a roadmap of the alleged defects and their respective locations, the norm is to provide a document that is so general it makes the inspection and documentation process resemble an Easter egg hunt rather than the guidelines as prescribed in SB 800.
Typically, within the SB 800 process there are vast differences in the statute interpretation and the approaches prescribed by plaintiff and defense respectively regarding the repairs that are expected, prescribed and/or performed. From our perspective, the statute, while somewhat ambiguous, does provide the necessary guidance and direction in order that rational and reasonable minds can come to an agreement.
In the past, the defense side would accuse the plaintiffs of taking any money acquired in settlement or judgment and use the funds to buy a new car or take a vacation rather than applying the money to repair the alleged defects at their homes. The plaintiff side would accuse the defense side of making loads of money building and selling homes and not standing behind their product when there were legitimate defective issues. Both sides can make their respective arguments for their position. Paraphrasing the old saying, there are three sides to every story – plaintiff side, defense side, and the truth. This is where the rational and reasonable minds thing comes in. A well prepared expert should provide their client with information and guidance, and must be an expert that provides honest issue evaluation rather than becoming an advocate for a position. The attorneys will be the advocates the experts should be the consultants.
I am not sure SB 800 repairs will ever provide the developer/contractor insulation from litigation, but it does give them a position to present if trial does ensue. In addition, the defense repairs can significantly reduce the actionable defects that the plaintiff has available for a continuing litigation. Plaintiff should be required by judges, arbitrators and discovery referees to provide the necessary information to the defense side in order for the experts to be able to properly investigate and observe the alleged defects. That information must include a defect list with listed SB 800 statute line items as well as the specific locations of the defects. Even with the developer/contractor providing proper repairs of the actionable items per the SB 800 guidelines as described in the Offer to Repair; without a release, it is likely that the repairs will not get the developer/contractor out of harm’s way.
The ambiguous nature of the SB 800 functionality standards creates a few different challenges for the defense side. The first consideration is the nature of the repair that is contemplated based on the interpretation of the statute. Next would be whether or not to make the offer to perform repairs. When the decision is made to perform the repairs one has to keep in mind the plaintiff may sue them regardless of quality of the repairs or how the functionality standards are interpreted. The cost of the repairs is always a concern and must be considered both as an alternative to a potential money settlement as well as in addition to a post repair settlement.