Is homebuilder's contractual construction-defect pre-litigation procedure unenforceable due to its variance from statutory procedure, and unenforceable when used with subsequent home purchasers?
In The McCaffrey Group, Inc. v. Superior Court (filed 3/24/14) F066080, the trial court denied homebuilder McCaffrey's "Motion to Compel ADR" brought in an action filed by real parties in interest who were the owners of 24 homes built by McCaffrey which allegedly contained construction defects. McCaffrey petitioned for writ of mandate to enforce provisions in the home purchase contracts that require the homeowners to submit their construction defect claims to non-adversarial pre-litigation procedures before proceeding with a lawsuit. The trial court had found the contract provisions unenforceable as being unconscionable. The Court of Appeal, Fifth Appellate District, granted the petition.
The appellate court opinion addressed the three categories of suing homeowners: (1) pre-2003 original purchasers, (2) post-2003 original purchasers, and (3) subsequent purchasers who bought an existing McCaffrey-built home from a third party. The distinction in the first two categories derives from the Legislature's passage of the so-called "Right to Repair Act," effective January 1, 2003, found at Civil Code sections 895 through 945. Prior to 2003, there was no statutory procedure; after 2003, the builder has the option of contracting for an alternative non-adversarial procedure in lieu of the statutory procedure. Those contracts that came after this date stated that McCaffrey opted for its own procedure; essentially the same procedure it used before that date.
In short, both statutory and contract procedures provide for the homeowner giving written notice of claimed defects; some written acknowledgment by builder, followed by inspection and the opportunity to propose repairs/compensation; a determination by the homeowner to accept the builder's proposal or have the dispute mediated. If still unresolved, litigation may then follow; the contract procedure has an additional judicial reference procedure.