The legislature is again modifying the parameters of construction defect claims against the builders of residential units.  Assembly Bill 1903 (AB 1903) is currently pending before the California Legislature.  If passed into law in its current form, AB 1903 will change construction defect claims most notably in the following ways:

• Currently, when the owner notifies the builder of construction defects, the builder has the right to repair the defect but may not obtain a release or waiver of liability in exchange.  AB 1903 would allow the builder to obtain a release or waiver in exchange for the repair work one year after the repair.  If and when owners agree to such a release/waiver, it will effectively establish a one-year statute of limitations on the repair work, leaving the owner with no recourse if defects in the repair do not manifest until after one year.
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• Under AB 1903, creates a “certified building” classification for condominium projects and townhouse developments.  The builder of such properties would have the option of having the building inspected and certified by an independent, private inspector at various phases of the original construction.  The inspector must be a licensed architect, engineer, or general contractor who has no financial interest in the builder, has not received more than 10 percent of the inspector’s gross revenue from the builder during the preceding 2 calendar years, was not an employee or agent of the builder during the preceding 5 years, and was never an officer or director of the builder.  With certified buildings, the following, among other things, would apply: (1) if the owner refuses the builder’s offer to repair the defects or delays repairs, the repairs are deemed completed, and the builder is deemed to be released from liability, and (2) if the builder performs the repairs that the inspector inspects and approves, the builder is deemed to be released from liability.
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• Currently, the owner may make a claim for construction defects, regardless of whether the defects caused any damage to the property.  AB 1903 would require not only that the construction is defective, but also that the defect caused appreciable, nonspeculative, present physical damage to another component part of the building.
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• Currently, the owner can recover from the builder the investigation costs for the defects. AB 1903 would eliminate investigation costs from the damages that the owner could recover from the builder.