Anti-homeowner bill narrowly escapes approval by legislature-but the fight is not over

BY THOMAS E. MILLER, ESQ., AND RACHEL M. MILLER, ESQ.

Attempts to create a "warranty" program that lets homebuilders completely off the hook legally, even for the most egregious failures at compliance with the legal building codes, narrowly missed approval by the California State Legislature.

The biggest tort reform threat this year stemmed from the building industry's well-funded attempt to limit homeowners' legal rights in construction defect cases. AB2112, introduced by John Dutra (D-Fremont), a former builder himself, and backed by major support from the California Building Association, would have replaced the homebuyers/consumer's right to sue with a ten-year warranty.

The current system allows builders and homebuyers to insert mandatory arbitration into their contract, and contractors have five months to fix problems before the homebuyer may sue the builder and its subcontractors. The Dutra Bill would have replaced a homeowner's rights to sue a builder for substandard construction or use of inferior materials with ten-year warranty allowing the builder to decide what the fair remedy should be instead of a mediator.

Builders were motivated to pursue AB2112 because, they argue, the lack of affordable condominium housing is caused by construction defect claims. Indeed, condominium construction is a fraction of what is used to be, but the real reason lies in consumer preference, land prices, zoning regulations and the developers' desire to build more profitable types of housing.

SB 1882, which requires an independent California Research Bureau to conduct a comprehensive study of the residential construction market, will soon be before the governor. The bill will look into the actual causes of the decline of condominium construction and the extent and impact of construction defects. This study will allow lawmakers to create policy based on actual data, not anecdotes and assumptions.

AB 2112 would have harmed homebuyers and shifted the costs of construction defects away from developers and their insurers and instead placed a disproportionate burden of costs of construction defects onto consumers. Construction defects litigation exists because of construction defects. The best way of avoiding litigation is to build quality homes. That requires adequate designs and inspection by the designer, trained labor, quality building materials and proper coordination and supervision of trades.

State Assemblyman John Dutra is a founder of Fremont's fastest growing real estate development company. Mr. Dutra and the building industry have vowed to reintroduce construction dispute overhaul bills again next year. Lobbying consumers groups will fight back through their own groups under the slogan, "Build my home safe and sound," through the new HomeSafeCampaign.com.

Thomas E. Miller and Rachel M. Miller are principals of The Miller Law, with offices in Newport Beach, Thousand Oaks and San Francisco, California

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