A homeowners’ association (“HOA”) governing common interest developments is subject to a different set of requirements for construction defect claims as opposed to single-family developments. In 1995, the California legislature enacted the Calderon Act (formerly CA Civil Code §1374) which set forth the requirements for an HOA to bring forth a construction defect action against a builder or developer including a series of pre-litigation procedures aimed at attempting to resolve the matter prior to formal litigation. The Calderon Act required dispute resolution before a common interest development with 20 or more units can sue a developer for construction defects.
In 2013, the California legislature enacted the Davis-Stirling Act (Civil Code §6000), which replaced the Calderon Act and established a statutory framework that regulates HOAs for all types of common interest developments. The Act provides the HOA the power to impose fees that are cycled back into the community for the community’s benefit, and allows the HOA enforcement powers under the CC&R’s to regulate and maintain the “atmosphere” of the community.
Pre-Litigation Procedures Under the Davis-Stirling Act (Civil Code §6000)
Before filing a complaint for damages against a builder, developer or general contractor, the HOA must comply with the following pre-litigation requirements:
- The HOA must provide a “Notice of Commencement of Legal Proceedings” to the builder’s registered agent. The Notice must contain the following information: (a) name and location of the project; (b) an initial list of defect sufficient to apprise the builder of the general nature of the alleged defects at issue; (c) a description of the resultant damages from said defects; (d) a summary of the results of any surveys taken by the unit owners to determine the nature and extent of the alleged defects; and (e) a summary of any testing performed on the common interests allegedly suffering from construction deficiencies.
- Key Deadlines: The HOA has 180 days to serve the Notice and attempt to resolve the dispute with the builder. The parties may mutually agree to extend this deadline. The builder has 25 days to serve a response to the HOA’s Notice and meet and confer with the HOA on a proposed resolution of the claim. After receipt of the Notice, the builder has 60 days to inspect the property, receive and review the construction documents and HOA reports (defect list, surveys, testing reports, etc.), and engage the implicated subcontractors and design professionals as needed.
- The Pre-Litigation protocol will be governed by a Dispute Resolution Facilitator (“DRF”) who will oversee the discovery, inspections/testing and settlement negotiations. The DRF will conduct case management meetings, mediations and expert exchanges to assist in the resolution of this matter.
- After the deadlines are met and settlement efforts are frustrated, the HOA can then file their complaint against the builder, and all evidence obtained during the pre-litigation process can be used as evidence for the litigation and eventual trial.
HOA Actions Still Governed by the Right to Repair Statute (SB800)
Once the pre-litigation procedures have been exhausted, the HOA’s construction defect action against the builder is still subject to the provisions of SB800 (Civil Code §895, et seq.). Civil Code §895(f) expressly states that a “Claimant” or “homeowner” includes the individual owners of single-family homes, individual unit owners of attached dwellings and, in the case of a common interest development, any association…” The HOA’s complaint would state a cause of action for Violation of the Functionality Standards of Civil Code §895, et seq. While the builders’ right to repair would be handled under the pre-litigation procedures of Davis-Stirling Act, the definitions of the alleged construction deficiencies would fall under the Functionality Standards of SB800.
It is important to know the proper method and timing of handling these construction defect actions involving a common area development.