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Provided Courtesy of
Hyde Mulvihill APC
Calderon Dispute Resolution Process, In Effect Until 6/30/2002
California Civil Code §
1375.
Claim against builder for defects in design or construction
(a) Before an association commences an action for damages against a builder
of a common interest development based upon a claim for defects in the design or
construction of the common interest development, all of the requirements of
subdivisions (b) to (g), inclusive, shall be met, except as otherwise provided
in this section.
(b) (1) The association shall give written notice to the builder against whom
the claim is made. This notice shall include all of the following:
(A) A preliminary list of defects.
(B) A summary of the results of a survey or questionnaire distributed to
homeowners to determine the nature and extent of defects, if this survey has
been conducted or a questionnaire has been distributed.
(C) Either a summary of the results of testing conducted to determine the
nature and extent of defects or the actual test results, if this testing has
been conducted.
(2) The association's notice shall, upon delivery of the notice to the
builder, commence a period of time not to exceed 90 days, unless the association
and builder agree to a longer period, during which the association and builder
shall either, in accordance with the requirements of this section, attempt to
settle the dispute or attempt to agree to submit it to alternative dispute
resolution.
(3) (A) Except as provided in this section and notwithstanding any other
provision of law, the notice by the association shall, upon mailing, toll all
statutory and contractual limitations on actions against all parties who may be
responsible for the defects claimed, whether named in the notice or not,
including claims for indemnity applicable to the claim, for a period of 150 days
or a longer period agreed to in writing by the association and the builder.
(B) At any time, the builder may give written notice to cancel the tolling of
the statute of limitations provided in this section. Upon delivery of this
written cancellation notice, the association shall be relieved of any further
obligation to satisfy the requirements of this subdivision and subdivisions (c)
to (e), inclusive. The tolling of all applicable statutes of limitations shall
cease 60 days after the written notice of cancellation by the builder is
delivered to the association.
(c) (1) Within 25 days of the date the association delivers the notice
required by subdivision (b), the builder may request in writing to meet and
confer with the board of directors of the association, and to inspect the
project and conduct testing, including testing that may cause physical damage to
any property in the development, in order to evaluate the claim. If the builder
does not make a timely request to meet and confer with the board of directors of
the association, or to conduct inspection and testing, the association shall be
relieved of any further obligation to satisfy the requirements of this
subdivision and subdivisions (d) and (e). Unless the builder and association
otherwise agree, the meeting shall take place no later than 10 days from the
date of the builder's written request, at a mutually agreeable time and place.
The meeting shall be subject to subdivision (g) of Section 1363. The discussions
at the meeting are privileged communications and are not admissible in evidence
in any civil action, unless the association and builder consent to their
admission. The meeting shall be for the purpose of discussing all of the
following:
(A) The nature and extent of the claimed defects.
(B) Proposed methods of correction, to the extent there is sufficient
information.
(C) Proposals for submitting the dispute to alternative dispute resolution.
(D) Requests from the builder to inspect the project and conduct testing.
(2) If the builder requests in writing to meet and confer with the board of
directors of the association pursuant to paragraph (1) of this subdivision, the
builder shall deliver the notice provided by the association to the builder
pursuant to subdivision (b) to any insurer that has issued a policy to the
builder which imposes upon the insurer a duty to defend the insured or indemnify
the insured for losses resulting from the defects identified in the notice
required by subdivision (b). The notice by the builder shall, upon receipt,
impose upon that insurer any obligation which would be imposed under the terms
of the policy if the insured had been served with a summons and complaint for
damages. The builder shall inform the association when the builder delivers the
notice to each insurer pursuant to this paragraph.
(d) (1) If the association conducted inspection and testing prior to the date
it sent the written notice pursuant to subdivision (b), the association shall,
at the earliest practicable date after the meeting held pursuant to subdivision
(c), make available for inspection and testing at least those areas inspected or
tested by the association. The inspection and testing shall be completed within
15 days from the date the association makes these areas available for inspection
and testing, unless the association and builder agree to a longer period. If the
builder does not timely complete the inspection and testing, the association
shall be relieved of any further obligation to satisfy the requirements of this
subdivision and subdivision (e). The manner in which the inspection and testing
shall be conducted, and the extent of any inspection and testing to be conducted
beyond that which was conducted by the association prior to sending the notice,
shall be set by agreement of the association and builder.
(2) The builder shall pay all costs of inspection and testing that is
requested by the builder, shall restore the property to the condition which
existed immediately prior to the testing, and shall indemnify the association
and owner of the separate interest for any damages resulting from the testing.
(3) Interior inspections of occupied separate interests and destructive
testing of any interior of a separate interest shall be conducted in accordance
with the governing documents of the association, unless otherwise agreed to by
the owner of the separate interest. If the governing documents of the
association do not provide for inspection or testing of separate interests, this
inspection or testing shall be conducted in a manner and at a time agreed to by
the owner of the separate interest.
(4) The results of the inspection and testing shall not be inadmissible in
evidence in any civil action solely because the inspection and testing was
conducted pursuant to this section.
(e) (1) Within 30 days of the completion of inspection and testing or within
30 days of a meeting held pursuant to subdivision (c) if no inspection and
testing is conducted pursuant to subdivision (d), the builder shall submit to
the association all of the following:
(A) A request to meet with the board to discuss a written settlement offer.
(B) A written settlement offer, and a concise explanation of the specific
reasons for the terms of the offer. This offer may include an offer to submit
the dispute to alternative dispute resolution.
(C) A statement that the builder has access to sufficient funds to satisfy
the conditions of the settlement offer.
(D) A summary of the results of testing conducted for the purpose of
determining the nature and extent of defects, if this testing has been
conducted, unless the association provided the builder with actual test results
pursuant to subdivision (b), in which case the builder shall provide the
association with actual test results.
(2) If the builder does not timely submit the items required by this
subdivision, the association shall be relieved of any further obligation to
satisfy the requirements of this subdivision only.
(3) No less than 10 days after the builder submits the items required by this
paragraph, the builder and the board of directors of the association shall meet
and confer about the builder's settlement offer, including any offer to submit
the dispute to alternative dispute resolution.
(f) (1) At any time after the notice required by subdivision (b) is delivered
to the builder, the association and builder may agree in writing to modify or
excuse any of the time periods or other obligations imposed by this section.
(2) Except for the notice required pursuant to subdivision (g), all notices,
requests, statements, or other communications required pursuant to this section
shall be delivered by one of the following:
(A) By first-class registered or certified mail, return receipt requested.
(B) In any manner in which it is permissible to serve a summons pursuant to
Section 415.10 or 415.20 of the Code of Civil Procedure.
(g) If the board of directors of the association rejects a settlement offer
presented at the meeting held pursuant to subdivision (e), the board shall
comply with the requirements of paragraph (1) of this subdivision. If the
association is relieved of its obligation to satisfy the requirements of
subdivisions (a) to (e), inclusive, before all those requirements are satisfied,
the association shall comply with the requirements of paragraph (2) of this
subdivision. Under no circumstances shall the association be required to comply
with both paragraph (1) and paragraph (2) of this subdivision.
(1) (A) If the association's board of directors rejects a settlement offer
presented at the meeting held pursuant to subdivision (e), the board shall hold
a meeting open to each member of the association. The meeting shall be held no
less than 15 days before the association commences an action for damages against
the builder.
(B) No less than 15 days before this meeting is held, a written notice shall
be sent to each member of the association specifying all of the following:
(i) That a meeting will take place to discuss problems that may lead to the
filing of a civil action, and the time and place of this meeting.
(ii) The options that are available to address the problems, including the
filing of a civil action and a statement of the various alternatives that are
reasonably foreseeable by the association to pay for those options and whether
these payments are expected to be made from the use of reserve account funds or
the imposition of regular or special assessments, or emergency assessment
increases.
(iii) The complete text of any written settlement offer, and a concise
explanation of the specific reasons for the terms of the offer submitted to the
board pursuant to paragraph (1) of subdivision (e), received from the builder
and of any offer by the builder to submit the dispute to alternative dispute
resolution.
(iv) The preliminary list of defects provided by the association to the
builder pursuant to subdivision (b) and a list of any other documents provided
by the association to the builder pursuant to subdivision (b), and information
about where and when members of the association may inspect those documents.
(C) The builder shall pay all expenses attributable to sending the settlement
offer and any offer for alternative dispute resolution to all members of the
association. The builder shall also pay the expense of holding the meeting, not
to exceed three dollars ($ 3) per association member.
(D) The discussions at the meeting and the contents of the notice and the
items required to be specified in the notice pursuant to subparagraph (B), are
privileged communications and are not admissible in evidence in any civil
action, unless the association consents to their admission.
(E) Compliance with this paragraph shall excuse the association from
satisfying the requirements of Section 1368.4.
(2) If the association is relieved of its obligation to satisfy the
requirements of subdivisions (a) to (e), inclusive, before all those
requirements have been satisfied, the association may commence an action for
damages against the builder 30 days after sending a written notice to each
member specifying all of the following:
(A) The preliminary list of defects provided by the association to the
builder pursuant to subdivision (b), and a list of any other documents provided
by the association to the builder pursuant to subdivision (b), and information
about where and when members of the association may inspect those documents.
(B) The options, including civil actions, that are available to address the
problems.
(C) A statement that if 5 percent of the members of the association request a
special meeting of the members to discuss the matter within 15 days of the date
the notice is mailed or delivered to the members of the association, a meeting
of the members shall be held, unless governing documents of the association
provide for a different procedure for calling a special meeting of the members,
in which case, the statement shall inform the members of that procedure.
(D) Compliance with this paragraph shall excuse the association from
satisfying the requirements of Section 1368.4.
(h) (1) The only method of seeking judicial relief for the failure of the
association to comply with this section shall be the assertion, as provided for
in this subdivision, of a procedural deficiency to an action for damages by the
association against the builder after such an action has been filed. A verified
application asserting such a procedural deficiency shall be filed with the court
no later than 90 days after the answer to the plaintiff's complaint has been
served, unless the court finds that extraordinary conditions exist.
(2) Upon the verified application of the association or the builder alleging
substantial noncompliance with this section, the court shall schedule a hearing
within 21 days of the application to determine whether the association or
builder has substantially complied with this section. The issue may be
determined upon affidavits or upon oral testimony, in the discretion of the
court.
(3) (A) If the court finds that the association did not substantially comply
with this section, the court shall stay the action for up to 90 days to allow
the association to establish substantial compliance. The court shall set a
hearing within 90 days to determine substantial compliance by the association.
At any time, the court may, for good cause shown, extend the period of the stay
upon application of the association.
(B) If, within the time set by the court pursuant to this section, the
association has not established that it has substantially complied with this
section, the court shall determine if, in the interest of justice, the action
should be dismissed without prejudice, or if another remedy should be fashioned.
Under no circumstances shall the court dismiss the action with prejudice as a
result of the association's failure to substantially comply with this section.
In determining the appropriate remedy, the court shall consider the extent to
which the builder has complied with this section.
(C) If the alleged noncompliance of either the builder or the association
resulted from the unreasonable withholding of consent for inspection or testing
by an owner of a separate interest, it shall not be considered substantial
noncompliance, provided that the party alleged to be out of compliance did not
encourage the withholding of consent. (4) If the court finds that the builder
did not pay all of the costs of inspection and testing pursuant to paragraph (3)
of subdivision (a), or that the builder did not pay its required share of the
costs of holding the meeting and of all expenses attributable to sending the
settlement offer pursuant to subparagraph (C) of paragraph (1) of subdivision
(g) of this section, the court shall order the builder to pay any deficiencies
within 30 days, with interest, and any additional remedy which the court
determines, in the interest of justice, should be fashioned.
(i) As used in this section:
(1) "Association" shall have the same meaning as defined in subdivision (a)
of Section 1351.
(2) "Builder" means the declarant, as defined in subdivision (g) of Section
1351.
(D) "Common interest development" shall have the same meaning as in
subdivision (c) of Section 1351, except that it shall not include developments
or projects with less than 20 units.
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