Guess Who's Coming to Dinner?

By WILLIAM DEVINE
2/1/03

anessa and her partner purchase a newly built residence from Championship Homes. During a subsequent El Nino winter, the roof begins leaking in eight places and the intruding moisture damages the residence’s electrical system. Vanessa hires a consultant, who believes that the house’s roofing should be replaced, because the roofing materials are substandard, and that the house’ s electrical system should be rewired, because both the system’s layout and its wiring are substandard. The work may take two months or more.

Vanessa demands that Championship perform the work her consultant recommends. Championship inspects the damage and offers to replace damaged sheetrock, and to patch the roof and electrical system. They refuse to upgrade materials or rewire the residence. The work they propose may take several weeks.

The parties spend a day mediating their differences. Tempers flare and the parties dig into their positions. Vanessa leaves mediation with no interest in substandard materials, and no trust in the workmanship, judgment or word of Championship or anyone associated with them.

The next day, Vanessa phones her consultant and authorizes commencement of the comprehensive repairs he recommends. She then phones her attorney and instructs her to sue Championship for the cost of the comprehensive repairs. Counsel advises Vanessa to postpone commencement of the comprehensive repairs, and informs her that before she can sue Championship, Vanessa must first allow into her home either them or a contractor they select, to perform the patchwork repairs.

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"I’m buying a new home from a developer,” writes P. from Santa Barbara. “ What should I look out for?” One answer is, he should avoid Vanessa’s dilemma, which is not as far-fetched as it may appear. Tucked right after the laws on rent skimming, but just before a section labeled, “Transfer of Chose in Action”—ah, the California Civil Code is such a fun place to hang out—is a new law entitled, “Requirements for Actions for Construction Defects,” the heart of which gives the builder of a new house the right to repair defects before the buyer can sue the builder for those defects.

In theory, the new law brings order to the rock ‘em sock ‘em world of California construction defect litigation. It points the parties to fixing construction problems rather than clogging lives and courts with high-priced legal jousts. It details standards for how a residence’s components must perform, and for how long. It outlines mechanisms for builder and buyer to mediate their differences, to have a repair performed by a third party, and to arrange for cash settlement instead of repair.

In theory, these measures will reduce construction defect litigation, thereby improving lives and reducing both builders’ insurance costs and the cost of the residences they build.

n practice, who knows? With the law only weeks old, predicting how it will work is a parlor game. “Windows…shall not allow excessive condensation to enter the structure…,” but how much is “excessive?” An electrical system “ shall not materially impair the use of the structure by its inhabitants…,” but what constitutes material impairment?

If, as with Vanessa, the parties disagree on the scope of the fix, must the buyer really let the builder into her home to perform an unwanted repair? Can a short-sighted builder use its right to perform an unwanted repair to lever a buyer into an unreasonable cash settlement? Many years will pass before the courts flesh out answers to such questions, and before we know whether this new law achieves its admirable aims.

Meanwhile, the best way to stay out of Vanessa’s Kenneth Coles is homework homework homework. Have the property inspected by one expert and maybe more, before you buy. Research the builder’s reputation and the subcontractors’. Talk to buyers who have purchased houses from this builder. Would each buy another?

Ask the builder what they did when a component failed in one of their houses. Determine whether you believe the builder will still be in business two years from now and ten years from now.

Determine whether the builder is installing premium building components or entry-level ones, and obtain second opinions about the reputation of the chosen components. Try to cultivate some rapport with the builder’s employees. Are they concerned about their long-term reputation? Would they behave reasonably in the event of disagreement?

Such an elaborate research project may seem daunting, but the alternative, if you are an average Bay Area home purchaser, is to hand over your half million dollars and then rely on the law or a lawsuit to bail you out. Such reliance is never a good first choice. Do the research, so you cut back the possibility of unpleasant surprise.