August 2003 - In a further blow to the rights to sue a builder in California for
construction defects,
on August 4, 2003 the California Supreme Court has ruled that homeowners
cannot extend
the 10-year statute of limitations to sue builders during periods of
repair(s) or promised
repairs. Overruling earlier court decisions to the contrary, the Supreme
Court held in
Lantzy, et al. vs. Centex Homes, et al., that the 10-year statute of
limitations under Code
of Civil Procedure §337.15 can only be avoided if (1) a builder represents
that all damages
have been or will be repaired, thus making it unnecessary to sue; (2) the
homeowner
reasonably relies on this and does not file suit timely; (3) the statements
made by the
builder prove false after the statute has run; and (4) the homeowner then
files suit promptly
after the truth is discovered.
This is called “equitable estoppel” and is much more specific and detailed
than the
doctrine of “equitable tolling” which many homeowners, boards of directors,
property
managers and homeowner association attorneys had previously relied on to
avoid the filing
of a lawsuit in an effort to work out a solution to the defect problems.
Equitable tolling had
allowed the owners/boards to tack on any additional time the developer
promised or
actually made repairs, whether at the beginning, in the middle, or towards
the end of the
10-year statute of limitations.
What does this mean to us as an industry? We cannot simply stand by and
allow
builders to make attempted repairs and assume that the statute will
automatically be
extended for the time repairs are made or promised. We must prepare a
10-year statute
of limitations analysis as soon as we believe the problems warrant a due
diligence
investigation of the cause of the problem so that we’re prepared to address
this issue with
the builder up front.
The statute analysis is simple to do and most experienced construction
defect
attorneys should be able to do this without charge and within 24 to 48 hours
of the request.
If the analysis still leaves doubt (because publicly filed documents are
incomplete or not
available) then you should either (a) get the builder declarant (all known
builder entities
named in the CC&R’s as declarant, not just the developer’s popular or
commonly used
name) to sign a document tolling the statute of limitations while the
investigation proceeds
forward, or (b) if you’re in a CID of 20 units or more, simply file and
serve a Notice to
Builder under Civil Code §1375 along with a preliminary defect list
identifying the problems,
and that will have the effect of tolling the statute for up to six (6)
months. If you’re in a CID
with less than 20 units or an individual homeowner, you must file suit to
stop the statute
from running.
Note: CID’s and residential units first sold after January 1, 2003 are
subject to more
recent legislation affecting the statute time within which you have to file
a lawsuit for latent
defects (Civil Code §895 et seq.). The homes in this case were sold before
January 1,
2003.
The case is Lantzy, et al. vs. Centex Homes, et al., and was decided in the
California Supreme Court on August 4, 2003. (Cite as 2003 DJDAR 8638).
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If you experience problems or have questions, contact us at Info@ConstructionDefects.com.
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