FAQ

Construction Defect FAQs

Q: What is a construction defect?
A:Almost any condition that reduces the value of a home, condominium, or common area can be legally recognized as a defect in design or workmanship, or a defect related to landslide settlement conditions. Courts throughout the United States have recognized two primary categories of defects for which damages are recoverable by the homeowner or homeowners' association.

Q: Defects in design, workmanship and materials
A:These include water intrusion and leaks; structural inadequacies or failure; dry rot; faulty drainage; improper landscaping and irrigation; termite infestation; improper materials; defective plumbing; faulty electrical wiring; inadequate environmental controls; defective lighting or security; insufficient insulation and poor sound protection; and inadequate fire walls or equipment.

Q: Landslide and earth settlement problems:
A:Examples are expansive soils; underground water percolation; ancient land slides; vertical settlement; horizontal movement; land sloughing or sliding; surficial failures; improper compaction; inadequate grading; and drainage. Structural failures and earth movement conditions can be catastrophic in nature and present both personal injury and substantial property damage exposure. Landslide and settlement conditions may result in collapse of roofs; cracks in slabs, walls, foundations, and ceilings; disturbance of public or private utilities; and sometimes a complete undermining of the structures.

Q: How do I prove that a defect exists?
A: In most cases, you will need to hire the services of an attorney and an expert. Experts are typically, engineers, architects, and construction consultants who have the necessary training, education and experience to give testimony in court as to the cause of a defect. For example, if your roof leaks, an expert architect who has designed effective roofs, evaluated other leaky roofs and knows how roofs should be built would be in a good position to testify on why your roof leaks. In more complicated construction defect matters, other experts may be needed to address a specific issue, for example a geotechnical engineer to evaluate soil subsidence. Experts are available in nearly every aspect of residential construction. An expert's services usually run from $125.00 to $250.00 or more per hour.

Q: What kinds of damages can I recover in a lawsuit, and can I recover attorney's fees?
A: California courts are clear in awarding homeowners the cost of repairing the defects. You can also recover whatever reasonable fees you have had to pay for your experts to investigate the cause of your defects and their costs in supervising the repairs. The costs of doing temporary repairs during and before the lawsuit to mitigate the damages are also recoverable. If repairs require owners to vacate their homes, these relocation costs may be included. Punitive damages, or damages awarded to punish the developer and to deter similar conduct in the future, may be awarded where the developer defendant has shown a "conscious disregard" for the rights of the buyer, or where fraud is proven. With few exceptions, attorney's fees are generally not recoverable.
Q: What should I do if the developer has agreed to make the necessary repairs?
A: It is wise to consult an experienced lawyer who can assist in locating an independent expert to evaluate the developer's investigation of the problem and his proposed repair. The same expert should oversee actual repairs. Once repairs are agreed upon, the attorney can draft a proper settlement agreement that does not absolve the developer of liability except for the limited and defined repairs being made, and then only after the repairs have proved effective. The developer typically demands a general release of all future liability in exchange for making repairs. Such a release may prohibit the homeowner from seeking recourse for later discovered defects, or in the case of a homeowners’ association, result in board of director liability should other defects appear during the time remaining on your statutes of limitation. For that reason such a release is rarely, if ever, recommended. In other words, insist on a specific limited release.

Q: How long do I have to file a lawsuit?
A: In California, the statutes of limitation depend on the type of construction and whether the defect was latent (hidden) or patent (noticed by the homeowner). For new residential mass-produced construction for example, a homeowner has 10 years from substantial completion of construction to bring a lawsuit for any defects that were not noticeable upon reasonable inspection. Code of Civil Procedure § 337.15. On the other hand, once a homeowner discovers a defect, there is generally a four-year time limit to bring a lawsuit. C.C.P. § 337.1. However, for other causes of action such as breach of contract or fraud there may be a two or possibly a one year statute of limitation. In terms of the date of discovery the defect must be of such a magnitude that a reasonable person should have discovered it. However, letters to the developer, surveys of homeowner's complaints, board of director's minutes, etc., may prove a defect has been discovered. As a practical concern, it has been common practice for builders to appease the homeowner with half-hearted repairs in an attempt to run the statue of limitation. Therefore, homeowners should be very cautious with builders’ attempts to repair defects, and upon discovery of the defect, they should take prompt, appropriate action to protect their rights.

Q: How much will a lawsuit cost?
A: The total cost of prosecuting a lawsuit will depend on a number of factors, including the nature and amount of damages, the number of parties, and the posturing of the parties. Some lawsuits are settled within a relatively short period of time, while others are not resolved until just before trial which can take two years or more. Lawsuits can be expensive, and close cooperation between the homeowners and attorney is necessary to reduce the costs as much as possible. One of the major costs is the cost of expert consultants; these costs are usually included in the lawsuit. Experts' costs will depend upon the nature and extent of defects and the size of the project. Attorneys generally either bill by the hour or take a percentage of any recovery. If the attorney charges by the hour, expect to pay between $200 and $300 or more per hour for one with experience. If the attorney works on a contingency basis, expect the fee to be between 33% and 45% of the gross recovery. These fees are always negotiable. Whatever the agreement, get it in writing.

Q: Where do I get the money to pay for a lawsuit?
A: First, you may be able to find a lawyer who will take your case on a contingency fee basis. This way you will not be forced to pay any costs up front. Secondly, if your home is a condominium or townhome with a homeowner's association, several ways exist to raise money for pursuing your legal rights. Your association's reserves are a good first option. California allows associations to borrow for reserves as long as it is paid pack in a limited amount of time. Another source is to increase your monthly assessments by the percentage allowed in your CC&Rs or pass a special assessment. Finally, certain lenders will finance the investigation.

Q: Can I sell or refinance my home during the litigation?
A: CYes. California law requires a homeowner to disclose to a potential buyer construction defects and litigation. Any such disclosure may have an impact on sales, however potential buyers can often step into the shoes of the current homeowner in the litigation and recover settlement monies for the defects. Due to fluctuating interest rates, many owners may want to refinance their homes. While in litigation, lenders are sometimes cautious about refinancing. However, there are several mortgage companies that specialize in refinancing homes involved in litigation.

Q: How do I recover if the builder/developer is out of business, cannot be located, or is bankrupt?
A: The builder’s most important asset is his insurance. Even if the developer cannot be located or is bankrupt, the insurance companies must defend and pay claims that are covered under the policy(ies).

Q: Am I required to make repairs while the lawsuit is pending, and can I recover those costs in the lawsuit?
A: Homeowners are required to mitigate the damage caused by construction defects if possible. An example of this would be thwarting water intrusion from a leaking window. Such costs are normally recoverable in the lawsuit. However, many temporary repairs are inadequate in the face of serious defects and can be delayed until the litigation is completed and permanent repairs can be made.

Construction Defect FAQs

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