CASE MANAGEMENT ORDERS

Step 2: Resolve Issues Regarding Conditions Precedent to Suit

Civil Code section 1375 was added, effective January 1, 1996, to the existing California condominium statute, the Davis-Sterling Common Interest Development Act (Civil Code, § 1350 et seq.). The condominium statute deals comprehensively with the relationships created by a condominium or similar development, and among other things, gives a homeowners association (referred to in the act as a "community association") the power to sue and be sued. (Civil Code, § 1363(c); Code Civ. Proc., §383(a)).

Civil Code section 1375 creates conditions precedent to the commencement of a suit which is: (a) brought by a homeowners association; (b) against a "builder" as defined in the statute; (c) of a condominium or similar community interest development; (d) for defects in the design or construction of such a development. (Civil Code, § 1375(a)).

The purpose of the statute is to encourage the parties to either settle the dispute or submit it to alternative dispute resolution. (Civil Code, § 1375(b)(2)).

The statute creates a ninety-day period before suit is filed, during which: the association must give the builder a written notice containing a preliminary list of defects and other information (Civil Code, § 1375(b)(1); the builder may inspect the project and conduct testing, including destructive testing, in order evaluate the claim (civil Code, § 1375(c) &(d)); the builder must submit a written settlement offer to the association (Civil Code, § 1375(e)(1)(B)); the association must hold an open meeting of its members, if its board of directors rejects the builder's settlement offer (Civil Code, § 1375(g)).

The statute expressly gives both the association and the builder the right to file a verified application with the court alleging substantial non-compliance with the conditions precedent. (Civil Code, § 1375(h)(2)). The builder is required to file such an application within ninety days after the complaint has been served. (civil Code, § 1375 (h)(1)). The statute contains no time limit for the filing of such an application by the association.

Once such an application is filed, the court is required to scheduling a hearing within twenty-one days to determine whether the accused party substantially complied. The issue may be determined upon affidavits, or upon oral testimony, in the discretion of the court. (Civil Code, § 1375(h)(2)).

If the court finds that the association did not substantially comply with its duties under the statute, the court must stay the action until the association complies. If the association does not comply within 90 days, or such shorter period as is ordered by the court, the court can dismiss the action without prejudice or fashion some other remedy. (Civil Code, § 1375(h)(3)).

The builder is required by the statute to pay certain costs incurred in the testing conducted on the premises (Civil Code, § 1375(d)(2)), and in conducting the open meeting of the homeowners (Civil Code, § 1375(g)(1)(C)). If the court finds that the builder has not paid such costs, it must order the builder to do so within 30 days, with interest. (Civil Code, § 1375(h)(4)). If the builder fails or refuses to make the written settlement offer required by the statute, apparently the sole remedy is to relieve the association of any further conditions to the filing of the suit. (Civil Code, § 1375(e)(2)).

From the date that the association mails the notice required by civil Code section 1375(b)(1) to the builder, the statute of limitations is tolled for a period of 150 days (Civil Code, § 1375(b)(3)).

The results of testing and inspection done to comply with the statute are not, for that reason, made inadmissible in evidence. (Civil Code, § 1375(d)(4)).

For more information on this legislation see the California Prelitigation Steps.