Many states have enacted laws requiring homeowners, with claims of construction defects, to follow certain procedures prior to filing a lawsuit against a builder. The procedures generally require that before a homeowner initiates construction defect litigation, it must notify the builder of the claims, allow the builder an opportunity to remedy the defects, pay the homeowner for the cost of repairs, and/or participate in some form of dispute resolution. If the builder fails to respond to the notice, or the process does not resolve the claims, then the homeowner may proceed with the lawsuit.
If the notification laws are not complied with by the homeowner, a lawsuit filed by the homeowner against the builder may be stayed, or possibly dismissed, with the possibility of the expiration of the applicable statute of limitations or statute of repose.
In a recent California Court of Appeal decision, Nancy Anders, et al. v. Superior Court/Meritage Homes of California, homeowners filed a construction defect complaint against the builder without first following the California notification laws set out in California Civil Code Sections 895-945.5 (entitled “Requirements for Actions for Construction Defects” hereinafter “RACD”). After the homeowners filed the lawsuit, the builder filed a motion to compel the homeowners to comply with the notification and remediation procedures contained in the sales contracts it entered into with the homeowners, which required binding arbitration, and requested that the court stay the litigation until the procedures in the sales agreement were followed. The trial court ruled the contract provisions were unconscionable and unenforceable, and instead required the homeowners to comply with the provisions of the RACD. The homeowners appealed, claiming that because the builder had elected to set out its own procedures, which were found to be unenforceable, the homeowners were under no obligation to comply with the RACD.
The Court of Appeal ruled that under the specific language of the RACD, a builder may, as an alternative to the RACD, elect to set out its own notice and resolution procedures. However, the court held that if those alternative procedures are found to be unenforceable, the homeowner is not required to comply with the RACD provisions. In other words, the builder does not get two bites at the apple. If it elects to set out its own procedures, it does so at its own risk, and cannot thereafter claim that the RACD provisions apply if the builders’ alternative provisions are unsuccessful or unenforceable.
