In the landmark case Aas v. Superior Court, in which LGC partners Tom Lincoln and Chuck Egan served as trial counsel, the California Supreme Court held that a construction defect must cause property damage to be actionable under tort law. In response to Aas, the legislature enacted SB 800 (Civil Code §§ 895, et seq.), which established specific standards for residential construction and imposed liability on builders that fail to meet those standards, regardless of resultant damage.
Civil Code § 938 limits SB 800 to “new residential units where the purchase agreement with the buyer was signed by the seller on or after January 1, 2003.” Conversely, the ruling in Aas applies to all units sold prior to that date. A problem arises, however, when some units in a multi-unit project are sold before January 1, 2003, and some are sold after. SB 800 does not address this situation, and appellate courts likewise have not weighed in on this issue.
A handful of attorneys have argued that, in such a situation, SB 800 applies to units that were sold after January 1, 2003, but does not apply to units in the same project that were sold prior to that date. While potentially workable for individual unit claims, this theory is untenable for common area claims, because unit owners generally own an undivided fractional interest in the common area.
Other attorneys argue that if any units in the project were sold after January 1, 2003, then SB 800 applies to the entire project. This interpretation, however, can lead to results unexpected at the time of construction. If a 100-unit project was completed in 2001 and all but one of the units were sold before January 1, 2003, the entire project, which was originally subject to the ruling in Aas, would be shifted to the regulations of SB 800. The entire legal standard applicable to the project would change merely because one unit took longer to sell.
Finally, some attorneys argue that if any units in the project were sold prior to January 1, 2003, SB 800 does not apply to any part of the project. This interpretation would provide a clearer and more definitive operative date, but some unit owners who purchased after January 1, 2003, might take issue with being “deprived” of SB 800 protections otherwise applicable to them.
Of course, a fourth, Solomon-like option may exist. SB 800 could apply to projects where at least 51% of the units were sold after January 1, 2003, and not apply when at least 51% of the units were sold before that date. This would, however, leave in question projects with a 50% split of units sold before and after the effective date.
This issue is arising more frequently as projects from the 2002 and 2003 timeframe have entered litigation before the running of the 10-year statute of limitations. Until appellate courts address this issue, litigants will be left to argue this on a case-by-case basis, leading to differing results.