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Over two decades have passed since California's groundbreaking right to repair statutory scheme better known as SB 800 went into effect. Since that time, trial courts have similarly blazed new trails when interpreting various provisions of SB 800. Recently, the Fourth Appellate District clarified speculative damages or concerns over future defects in the as-built construction were insufficient for recovery.

By way of background, SB 800 promised a dramatic transformation of California's construction defect laws. Hailed by builders as a much-needed hedge against frivolous lawsuits, and needed to encourage residential development, the statutory scheme allowed builders the right to repair construction defects without protracted litigation was groundbreaking.

In this regard, the Fourth Appellate District ruling in Gerlach v. K. Hovnanian's Four Seasons at Beaumont falls squarely in what the legislature meant to enact as it clarified concerns over future defects or speculation is simply not recoverable. In other words, this falls in the category of a frivolous lawsuit which harkened back to the early 2000s when frequent litigation created concerns over affordable housing and available insurance in the first instance.

In the Gerlach case, Riverside County homeowners in an active senior community had to definitively show the presence of a past or current violation of the construction performance standards outlined by SB 800 in order to recover damages. Without such proof (either material falling from the roof or actual water intrusion), their claims were speculative and prohibited by the legislative policy and clear language of the statute. Concern of a future roof leak or failure was insufficient to sustain the claim without actual evidence of actual water intrusion.

The defendant developed the Four Seasons at Beaumont (Four Seasons), which served as an active community for adults aged 55 and older. Gerlach and Seals were homeowners in the Four Seasons community. Gerlach's escrow closed on March 16, 2006. Seals purchased her home in August of 2015 from the original owners who had closed escrow on the home in May of 2007. In October 2015 and January 2016, respectively, the plaintiffs served a notice of claims on the defendants under the Right to Repair Act (the "Act") for alleged defects in their roofing systems.

Both notices of claims identified section 896, subdivisions (a)(4), (g)(3)(A) and (g)(11) as the governing statutes. Specifically they cited a section that read: "Roof eaves along the front, back, left and right side of the home suffer from staining and/ or deterioration due to a compromise to the roof's weatherproofing system. Roofing system exhibits evidence of excessive ponding of water, improper tile fastening, improper valley sheet metal installation, overexposed field tiles over pan metal, broken field tiles, missing pipe collars and no drip eave metal."

According to facts stipulated to by both parties, the defendant acknowledged the claims and conducted a timely inspection. Defendants also offered to repair and actually made various repairs to the alleged issues with the roofs. In September 2016, the plaintiffs filed a claim against the defendants to recover damages caused by the defendants alleged failure to adhere to statutorily imposed building standards that are detailed in section 896. Plaintiffs contended that the roof defects would eventually allow water to enter the structure and cause roof materials to fall. Plaintiffs also claimed that their roofs qualified as "manufactured products" under the statute even though a manufactured product is defined as a product manufactured completely offsite, which the roofs in question were not.

The trial court agreed with the defense and found that "a roof in and of itself is not a manufactured product because it is made up of components, where you have tiles or fabric, which are put together at the home." It also found that the plaintiffs failed to meet their burden of proving any past or current damage caused by the roofs.

Gerlach and Seals appealed the judgment in favor of the defense under the Act, but the California Court of Appeal, Fourth District affirmed the trial court and made two main findings:

In 2002, the Legislature passed Civil Code 896, et. seq. "SB 800," a law that reformed construction defect litigation for individual residential units. "The Act sets forth detailed statewide standards that the components of a dwelling must satisfy. It also establishes a prelitigation dispute resolution process that affords builders notice of alleged construction defects and the opportunity to cure such defects, while granting homeowners the right to sue for deficiencies." McMillin Albany LLC v. Superior Court, (2018) 4 Cal.5th 241, 246. The Act is the exclusive remedy for residential construction defect claims except in cases where personal injury, breach of contract, or fraud is alleged. In addition, the Court of Appeals affirmed that a manufactured product within the meaning of 896, subdivision(g)(3)(A) must be manufactured completely off-site.

Section 896 contains three provisions relating to roofs:

The trial court found that 896 (g)(3)(A) only applies to roofs that are "completely manufactured offsite." Although Plaintiffs assert that the roof was a manufactured product, they also acknowledge as true the fact that their roofs were not manufactured completely off-site. Therefore, the roofs in question did not qualify as manufactured products.

Alternatively, plaintiffs also argue that section 896(g)(3)(A) applies to the current set of facts because the concrete roof tiles are "manufactured products." They failed, however, to further support this argument with any legal authority that a portion of the roof being manufactured offsite was sufficient to deem the entire roof a manufactured product.

The plaintiffs asserted that they are entitled to recovery based on section 896, subdivisions(a)(4) and (g)(11). The trial court ruled that the plaintiffs must prove that water had already leaked beyond the moisture barrier and materials had already fallen through the roof in order to support a claim. Plaintiffs argue the statute intended these measures to be preventative and not merely to address a problem after the damage has occurred. Thus, the plaintiffs argued that they did not need to demonstrate a past or current violation regarding the roofs, but that "because the roofs were improperly constructed or installed, they were likely to leak or to produce falling material in the future."

The Court of Appeals disagreed with plaintiff's contention. The Court of Appeal held that nothing in the language of the statute communicates that a homeowner would be able to bring a claim before an incident occurs, or as a preventative measure. In fact, subdivision (a)(4) of section 896 states that “[r]oofs . . . shall not allow water to enter the structure or to pass beyond, around, or through the designed or actual moisture barriers.” Plaintiffs have not successfully demonstrated how this section was violated or brought any evidence to show that materials have fallen from the roof. Until material has actually fallen or a leak has occurred, there is no plausible method by which to show a violation. To rule otherwise would mean that plaintiff could recover on the mere possibility that a leak could happen or materials could fall. This reading of the statute runs contrary to the intended purpose, which was to reform construction defect litigation and eliminate common law negligence claims for construction defects. McMillian at 250. The Court of Appeal went on to state: "Until water has leaked or intruded beyond the barrier, the roof satisfies the standard."

The facts of this case illustrate exactly what the legislature was seeking to curtail in its passage of the SB800. The Court of Appeals reflected this in its ruling: “The facts of this case vividly illustrate the problem. Plaintiffs' roofs were more than 12 years old by the time of trial. There is no evidence that they have leaked or that material has fallen from them. But plaintiffs sought to introduce evidence that because the roofs were improperly constructed or installed, they were likely to leak or to produce falling material in the future. We agree with the trial court that this is precisely the kind of claim that the Act was intended to foreclose.”

Speculating that in the future damage may occur because of improper construction or installation is exactly the kind of claim that the SB 800 seeks to protect construction professionals against. The court here rejected the plaintiff's challenge to the trial court's decision and also determined that plaintiff should not be allowed to pursue their roof claims under 896, subdivisions (a)(4), (g)(3)(A) and (g)(3). The judgment of the trial court was affirmed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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