SB 800: a poorly drafted law leaves many transition issues to be litigated

(This article first appeared in the April 14, 2003, issue of the San Francisco Recorder.)

The kinds of questions attorneys are hearing since passage of Senate Bill 800 reflect the widespread uncertainties and misunderstandings surrounding the law.

The general contractor on a 200-unit condominium project completed before January 1, 2003, the effective date of SB 800, is notified by the developer that the contractor is the “builder” under SB 800 and that the developer plans on listing the contractor as the “builder” in all disclosures to buyers. Is the general contractor really the SB 800 builder?

A roofing subcontractor receives an “SB 800 Addenda” from the developer of a multiunit townhouse project completed before January 1, 2003, that demands the subcontractor fulfill all warranty obligations under SB 800 without any offer of additional compensation. Must the subcontractor accede to this uncompensated burden?

This article will focus on the transitional aspects of SB 800: projects that were partially constructed or partially sold as of January 1, 2003. Because it is in the interest of all builders, contractors and subcontractors to minimize the number of projects to which SB 800 applies and to thereby expand the application of Aas v. Superior Court, 24 Cal.4th627 (2002), this article also will explore arguments for avoiding the application of SB 800 to transitional condominium projects.

Some background on SB 800 is needed to set the stage for discussing its application.

The Law

SB 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, et seq.

The Builder

Civil Code §911 defines a “builder” under SB 800 as “a builder, developer, or original seller and

applies to the sale of new residential units on and after January 1, 2003.” The entity actually selling the new residential unit to the public almost certainly will be considered the “builder” under SB 800. The statute does not expressly refer to general contractors and leaves unclear whether they are SB 800 “builders.” While “builder” is defined as “a builder, developer, or original seller,” a general contractor would not be in a position to provide much of the documentation and disclosures required of “builders” by SB800.

The Standards

Civil Code §896 provides that a “builder” and other participants in the construction process shall be liable for violation of specified standards for new residential construction. In general, the standards set forth performance requirements (doors, windows and roofs should not leak; foundations should not be structurally unsafe).

Gregory R. Shaughnessy specializes in construction and real estate and regularly advises owners, general contractors and subcontractors on their legal rights and remedies and in the negotiating and drafting of general contracts, subcontracts and related documents.

For more information about the issues discussed in this article, Mr. Shaughnessy can be reached at (415) 435-2409