The Court of Appeal Significantly Expands Liability Against Design Professionals and Homeowners Are Now Required To Comply With SB 800's Notice Obligations Before Pursuing Builders

Construction Law E-Alert (February 2013)

In Beacon, a condominium homeowners' association sued several architectural and engineering professionals, alleging uninhabitable conditions due to faulty windows and ventilation systems. The design professionals moved to dismiss the complaint.  They argued then-existing law precluded negligence claims against design professionals without proof of their "control" over the construction process.  The trial court granted the motion, but the Court of Appeal reversed. The Court found the Legislature intended design professionals to be liable for defects and damages under common law theories of negligence and SB 800 (the California "Right to Repair Act," Civil Code §895, et seq.). The Court based its holding mainly on policy grounds – determining that design professionals are in a better position to foresee and prevent harm from defective work, because they designed the very systems at issue. The Court also found the multiple references to design professionals in SB 800 indicates a legislative intent to increase design professionals' responsibility for construction defects. Recently, the California Supreme Court unanimously voted to review the decision in Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP, et al., which allowed a construction defect lawsuit asserting negligence to proceed against design professionals, despite clear precedent holding to the contrary. Specifically, the Supreme Court has been asked to resolve two issues: (i) whether a design professional, contractually obligated to the condominiums' developer to provide design recommendations only, owes a duty of care to the condominiums' owners; and (ii) whether SB 800 (the "Right to Repair Act," Civil Code §895, et seq.) abrogated a design professional's common law defenses against construction defect lawsuits. The immediate impact of the Supreme Court's decision is to void the Court of Appeal opinion. Greater impact may be felt, however, if the appellate ruling is upheld.  Design professionals will incur additional risks and costs in performing their duties. In Darling, the homeowners served a builder with a document request, but failed to properly serve the notice of claim beforehand. When the builder refused to produce the documents, the homeowners filed suit. The builder requested a stay, which the trial court granted, and the homeowners appealed. The Court of Appeal held builders have no obligation to produce documents before being served a notice of claim. In essence, the Court held homeowners cannot ignore their SB 800 obligations, yet insist on a Builder's compliance. 

This holding indicates an increased willingness by the courts to bind homeowners to their obligations under SB 800 before allowing them to proceed against builders.
By Stephen A. Sunseri and Aarti Kewalramani for Gatzke Dillon & Ballance LLP