800 significantly modifies warranty obligations owed by
developers, contractors and subcontractors on residential
construction projects. Because of SB 800's length and complexity,
a careful review and analysis of its warranty provisions
is needed to fully understand the impact of the new statute.
This article summarizes such a review.
800 was signed into law on September 20, 2002, by Gov. Davis.
It applies to new construction intended to be sold as individual
dwelling units, whether as single-family homes or attached
units. It was sought by plaintiffs' attorneys in response
to the Aas decision, which precluded recovery in tort for
construction defects that had not yet caused property damage
or physical injury. SB 800 is codified at Civil Code §§895,
The New 10-Year Warranty
Code §896 provides that a "builder" and other
participants in the construction process shall be liable
for violation of certain standards set down for new residential
construction. The standards establish quality requirements
for residential construction and use warranties as the enforcement
mechanism. A key issue is the time period for which parties
may be held liable under the warranties.
law provided a 4-year limitation for patent construction
defects and a 10-year limitation for latent defects. Code
of Civil Procedure §§337.1, 337.15. Most of
the SB 800 standards are silent as to their duration. But,
Civil Code §941 (a) provides a 10-year limitation period
for actions under the SB 800 while §941 (d) expressly
provides that §§337.1 and 337.15 "shall not
apply to actions under this title." With that, developers,
contractors and subcontractors in California now provide
10-year warranties for all but a few SB 800 standards.
those involved in residential construction generally understood
that potential liability existed for up to 10 years if a
building developed severe water leaks or experienced serious
soil subsidence and settlement, it is a safe bet that few
of them appreciate the breadth of SB 800's 10-year warranties.
Some of the more startling examples:
10 years, paths, patios and drainage systems, as installed,
shall not cause water or soil erosion to enter into or
come into contact with the structure so as to cause damage
to another building component.
10 years, "[r]etaining walls and site walls, and
their associated drainage systems, shall only allow water
to flow beyond, around or through the areas designated
10 years, "[t]he lines and components of the plumbing
system, sewer system, and utility systems shall not leak"
(regardless of whether the leaks cause resulting damage)
and "shall not corrode so as to impede the useful
life of the systems."
10 years, "[s]hower and bath enclosures shall not
leak water into the interior of walls, flooring systems,
or the interior of other components."
10 years, "[s]tucco, exterior siding, and other exterior
shall not contain significant cracks
10-year period applies even if the defect is patent or was
noticed within the first year after the residence was purchased.
Further, §901 provides that "a builder may not
limit the application of Chapter 2 (commencing with Section
896) or lower its protection through the express contract
with the homeowner." Thus, a "builder" cannot
contract out of the new 10-year warranty.
Exceptions to the 10-Year Warranty
of the broad language of §941, one must assume that
a 10-year warranty exists unless there are exceptions. There
are some. Section 896 (e), (f) and (g) revisit some of the
issues addressed in §896 (a) through (d), address some
new issues and provide the following primary limitations
periods, all of which run from the date of "close of
and stain applications.
plumbing and sewer systems (must be installed to operate
properly and shall not materially impair the use of
the structure or its inhabitants for up to four years).
pathways, driveways, hardscape, sidewalls, sidewalks
and patios ("shall not contain cracks that display
significant vertical displacement or that are excessive"
for up to four years).
systems, dryer ducts and untreated wood posts in contact
systems and drainage.
transmission from adjacent units in attached structures
(runs from date of original occupancy of the adjacent
systems are listed in different portions of the statute,
requiring careful consideration. For example, §896
(a) (14) provides that plumbing systems "shall not
leak," and §896 (a) (15) provides that plumbing
lines "shall not corrode so as to impede the useful
life of the systems." But, §896 (e) provides a
four-year limitation for material impairment of use. Thus,
an action cannot be brought for defects in plumbing systems
when their use has become materially "impaired"
after four years from close of escrow unless they leak (even
though no property damage occurs) or they have corroded
so as to impede the useful life of the system, in which
case there is a 10-year limitations period. This illustrates
the level of detail needed to determine the nature of the
warranty and the warranty period for a given defect.
term "useful life" appears in connection with
many of the standards. But, no definition of "useful
life" is provided, with one exception. Courts will
have to determine the meaning in all other contexts.
896 (g) (3) (B) does define "useful life:" the
"representation of how long the product is warranted
or represented, through its limited warranty or any written
representation, to last by its manufacturer." But,
this definition is limited to the "manufactured products"
listed in §896 (g) (3) (A), including electrical and
plumbing fixtures and appliances.
The Fit-and-Finish Warranty
§900, a "builder" is required to provide
a homebuyer with a "minimum express one-year limited
warranty covering the fit-and-finish of" several specified
building components, including cabinets, flooring, countertops,
painted finishes and trim. The "fit-and-finish"
warranty is not defined, but whatever it is, if the builder
fails to provide one, "the warranty for these items
shall be a period of one year."
have an incentive to provide the narrowest possible "fit-and-finish
warranty." If an extraordinarily limited fit-and-finish
warranty is provided, plaintiffs may argue that the limitations
are invalid. As noted above, §901 provides that "a
builder may not limit the application of Chapter 2 (commencing
with Section 896) or lower its protection through the express
contract with the homeowner." But, the "fit-and-finish"
warranty is in Chapter 3. By implication, the statutory
scheme allows builders to "lower" the protection
of the statutory fit-and-finish warranty through an express
of this, a builder should provide an express written fit-and-finish
warranty. It should contain generous tolerances, strict
notice requirements and a provision that the fit-and-finish
warranty does not extend to alleged fit-and-finish defects
that existed and could have been observed on the date of
the walk-through with the buyer and that were not included
on the buyer's punchlist. This should go a long way toward
minimizing nuisance fit-and-finish claims, an important
exercise considering the potentially extended fit-and-finish
warranty periods on condominium projects, which are discussed
Warranty Commencement Dates
941 (a) provides an outside limit of "10 years after
substantial completion" for bringing an action to recover
damages under SB 800. Thus, the new 10-year warranty does
have a definite commencement date - the date of substantial
the 1-, 2-, 4- and 5-year warranties in §896 all run
from the date of "close of escrow." In the case
of single-family homes, the "close of escrow"
date is easily determined. However, the date is not clear
for condominium projects. Section 895(e) provides:
respect to claims by an association, as defined in Section
1351, "close of escrow" means the date of substantial
completion, as defined in Section 337.15 of the Code of
Civil Procedure, or the date the builder relinquishes
control over the association's ability to decide whether
to initiate a claim under this title, whichever is later.
the statute does not define "relinquishment of control,"
presumably this date always will be well after substantial
completion, as condominium units cannot be sold until a
certificate of occupancy is obtained, which typically also
is the date of substantial completion. In theory, the date
of relinquishment of control could be several years after
the date of substantial completion because it is not unusual
for large condominium projects to take several years to
sell out. Thus, the 1-, 2-, 4- and 5-year warranties on
condominium projects may be for considerably longer periods
than if measured from the date of substantial completion.
fit-and-finish warranty under §900 also does not contain
a commencement date. Associations will argue that it is
the date of "close of escrow." For condominium
common areas, this date could be several years after substantial
completion. Thus, common interest developments may attempt
to force builders to "tune up" the fit and finish
of common areas several years after substantial completion.
Builders will attempt to flow these obligations down to
the subcontractors. Therefore, it is advisable for the developer
to provide a narrow fit-and-finish warranty for the common
areas, including a statement that the fit-and-finish warranty
for the common areas will commence not later than the date
they were first put into use.
Warranties for Individual Condominium Units
argument can be made that the warranties in §§896
and 900 do not apply to individual condominium units. Section
895 (e) provides only one definition of "close of escrow"
for the commencement date for certain claims by an association,
and it is not the date of the sale of the individual
condominium unit. Rather, the "close of escrow"
date is the date of substantial completion "or the
date the builder relinquishes control over the association's
ability to decide whether to initiate a claim," whichever
is later. Further, the definition of "claimant"
and "homeowner" is limited, in the case of common
interest developments, to the association. Thus, an argument
can be made that the warranties under §§896 and
900 do not apply to individual condominium units.
SB 800 warranties apply to the "separate interests"
in a condominium project has substantial implications. A
200-unit, high-rise condominium project provides a good
example. Usually none of the units will be sold until the
entire building is substantially completed. Subcontractors
typically will demobilize from the project shortly after
substantial completion, around the time the first units
are being sold. It is not unusual for a large condominium
project to take several years to sell out. If the fit-and-finish
warranty applies to sales of individual units, the developer
(and subcontractors) will have "punchlist" obligations
extending for many years -- until one year after the sale
of the last unit.
Contractual Responsibility for SB 800 Warranties
"builder" under SB 800 (which at least includes
the developer of a project) is the entity with the most
direct exposure for fulfilling SB 800 warranties. But, claims
also can be made directly against subcontractors and suppliers.
Developers also are likely to include provisions in their
contracts obligating general contractors to fulfill all
warranties under SB 800. Developers may even want general
contractors to agree that they are "builders"
under SB 800 and that developers may list them as "builders"
in SB 800 notices to buyers. Contractors are likely to include
provisions in their subcontracts and purchase orders obligating
subcontractors and suppliers to fulfill all SB 800 warranties
within their scopes. These added warranty obligations are
likely to increase the cost of new residential construction
in California as contractors, subcontractors and suppliers
increase their prices to cover their expanded warranty obligations.
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