Court Removes Plaintiffs’ Obstruction to SB 800

The Fifth District Court of Appeal has eliminated a common tactic by the plaintiffs’ bar to avoid SB 800’s prelitigation right to repair. In Baeza v. Superior Court of Kern County (Castle & Cooke), lawyers representing both original and subsequent purchasers of homes that are subject to SB 800 claimed that the builder failed to comply with certain disclosure requirements contained in SB 800 (Civil Code section 912) and therefore the builder should lose its right to repair.

The most commonly litigated disclosure provisions are those requiring the builder to record on title a notice that the prelitigation procedure exists and applies to the home.  The notice must be signed by the builder and the buyer.  Additionally, the builder must provide a copy of SB 800 in its entirety to the buyer in the original sales documents and both parties must initial the copy.

In this case, the builder chose to write their own alternative prelitigation repair procedures but had not complied with the disclosure requirements.  The Court held that when the builder chooses not to follow the statutory prelitigation procedures set forth in SB 800 (by writing their own), the disclosure requirements do not apply and the repair procedures are enforceable as to the original purchasers.

The Court further held that irrespective of whether the alternative prelitigation repair procedures were enforceable, alternative dispute resolution procedures such as binding arbitration, mediation or judicial reference remain enforceable because SB 800 expressly requires it.

The plaintiffs also contended that the purchase agreement contained a limitation of damages provision contrary to SB 800.  The plaintiffs used this as a reason to invalidate the entire agreement or at least the prelitigation process.  The Court, assuming without deciding whether the limitation was contrary to SB 800, held that even if it were, the remedy was only to sever the invalid limitation of damages provision.  The plaintiffs are not entitled to use the limitation as cause to invalidate the agreement or avoid the right to repair process.

A copy of the decision can be found here.    For more information, please contact the author Nick Cammarota at CBIA.

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