|
(A
version of this article will appear in the California
Construction Law Reporter, published by the West Group.)
By James E. Acret
Starting
July 1, 2002, an expanded dispute resolution procedure must
be followed before a California homeowners association can
file a complaint for damages against a builder, developer
or general contractor based on a claim for defects in the
design or construction of a project.
Under
Civil Code §§1375 and 1375.05, the association
must serve a Notice of Commencement of Legal Proceeding.
This Notice tolls all statutes of limitation and statutes
of repose by and against all potentially responsible parties
regardless of whether they are named in the Notice. The
Notice must include a list of defects, the results of any
homeowner surveys or questionnaires, and the results of
testing. Service of the Notice commences a period of up
to 180 days during which all parties must try to resolve
the dispute by going through the processes described below.
By agreement of all major parties, the period may be extended
for another 180 days.
The
builder may, by request, meet and confer with the board
of directors of the association. The discussions at the
meeting will be privileged and will not admissible be in
evidence. The request must be made within 25 days after
service of the Notice and must be held within 10 more days.
Within
60 days after receipt of the Notice, the builder shall:
- Provide
the association with access to all plans, specifications,
subcontracts and construction files. The association must
reciprocate.
- Notify
all subcontractors, design professionals and their insurers
and call a meeting to select a dispute resolution facilitator.
Notified parties are given 10 days to provide a Statement
of Insurance.
Within
20 days of sending notice to the subcontractors, the parties
shall meet and confer in an effort to select a dispute resolution
facilitator.
The
facilitator must disclose all matters that could create
an impression of bias. The facilitator shall be disqualified
by failure to comply with disclosure requirements.
If
parties fail to agree to a facilitator, then each party
shall nominate three and each party may strike one nominee
from each other party's list. The Superior Court will make
the final selection. The costs of the facilitator are to
be paid one-third by the association, one-third by the builder/general
contractor, and one-third by subcontractors and design professionals,
with allocation of that third by the facilitator. Any party
may petition the facilitator to reallocate costs. (The facilitator
is empowered to enforce all provisions of this section.)
Any
subcontractor, design professional or insurer may at any
time request designation as a peripheral party. The facilitator
shall designate peripheral parties and require them to attend
only those sessions deemed necessary. (A peripheral party
is one having total exposure of less than $25,000.)
The
parties shall generate data showing the scope of work performed
by each party and the units on which work was performed.
The
facilitator and the parties will work on a Case Management
Statement. The Case Management Statement shall provide for:
- Establishment
of a document depository.
- A
detailed list of defects.
- Non-intrusive
visual inspection of the project.
- Invasive
testing conducted by the association (if deemed appropriate),
observed and photographed by all parties. The parties
may not take samples or perform direct testing unless
costs of testing are shared by mutual agreement.
- Invasive
testing by all parties if they deem it appropriate.
- A
comprehensive demand for settlement by the association.
It may modify its demand.
- Attendance
of all appropriate parties and insurers, with settlement
authority, at settlement meetings.
Upon
mutual agreement, the facilitator may provide in the Case
Management Statement for exchange of photographs, expert
presentations, expert meetings or other appropriate mechanisms.
The
builder may submit a written settlement offer and may request
a meeting with the board to discuss it. If the offer is
not timely submitted, the association is relieved of all
obligations below. The board of directors shall meet and
confer, and if it rejects the offer, the board shall call
a meeting for the members of the association to consider
the settlement offer. Expenses of the meeting shall be paid
by builder. Discussions at the meeting are privileged.
A
party may petition the facilitator to release that party
from the process upon a showing it is not potentially responsible.
Upon
petition, the Superior Court may, upon a showing of good
cause, order appointment of a referee to resolve disputes
relating to depositions, subpenas, production of documents,
inspection, testing, exchange of information and disagreements
relative to time. The court also may hold a good faith settlement
hearing pursuant to Code of Civil Procedure §877.6.
The court shall decide petitions within 10 days after filing.
All
defect lists, demands, communications, negotiations and
offers are inadmissible under Evidence Code §§1119
to 1124.
Upon
completion of the dispute resolution process described above,
if the matter has not been settled, the association may
file a complaint that will be assigned for trial at the
earliest possible date. No additional inspection and testing
will be permitted except if, upon motion, it is shown that
a party did not have timely notice of inspections and did
not participate in inspections or testing and the party's
insurer has retained separate counsel who did not participate
in the dispute resolution process and the information obtainable
through the proposed additional inspections or testing is
not available through any reasonable alternative source.
Any
notified party who did not participate in the dispute resolution
process or who attended without settlement authority "shall
be bound by the amount of any settlement reached in the
facilitated dispute resolution in any subsequent trial"
but may introduce evidence as to the allocation of the settlement.
Except
upon a showing of good cause, the association's experts
shall be deposed prior to any percipient party depositions.
These depositions shall be followed immediately by depositions
of the defendant's experts.
The
only method of seeking judicial relief for the failure of
a party to complete the dispute resolution process shall
be the assertion of a "procedural deficiency"
in the action filed by the association. If the court finds
that a party did not substantially comply, it may stay the
action for up to 90 days to allow a party to establish compliance.
In the event of noncompliance, the court may dismiss the
action without prejudice or fashion another remedy.
If you would like to receive legal reports and updates
more quickly, by e-mail, click
here and fill out the mailing list form.
To learn more about Thelen Reid's Construction and Government Contracts Department, click here. For more information about books and other legal materials written by James Acret, click here and enter "Acret" in the Search Products Field. To learn more about topics covered in this article, contact Paul Berning at (415) 369-7229 or at pwberning@thelen.com.
©2002 Thelen Reid Brown Raysman & Steiner LLP
|
