Division 2. PROPERTY
Part 4. ACQUISITION OF PROPERTY
Title 6. COMMON INTEREST DEVELOPMENTS
Chapter 9. CONSTRUCTION DEFECT LITIGATION
Current through the 2007 Regular Legislative Session
§ 1375.
(a) Before an association files a complaint for damages
against a builder, developer, or general contractor
("respondent") of a common interest development based upon a
claim for defects in the design or construction of the common interest
development, all of the requirements of this section shall be satisfied
with respect to the builder, developer, or general contractor.
(b) The association shall serve upon the respondent a
"Notice of Commencement of Legal Proceedings." The notice shall
be served by certified mail to the registered agent of the respondent, or
if there is no registered agent, then to any officer of the respondent. If
there are no current officers of the respondent, service shall be upon the
person or entity otherwise authorized by law to receive service of
process. Service upon the general contractor shall be sufficient to
initiate the process set forth in this section with regard to any builder
or developer, if the builder or developer is not amenable to service of
process by the foregoing methods. This notice shall toll all applicable
statutes of limitation and repose, whether contractual or statutory, by
and against all potentially responsible parties, regardless of whether
they were named in the notice, including claims for indemnity applicable
to the claim for the period set forth in subdivision (c). The notice
shall include all of the following:
(1) The name and location of the project.
(2) An initial list of defects sufficient to apprise the
respondent of the general nature of the defects at issue.
(3) A description of the results of the defects, if known.
(4) A summary of the results of a survey or questionnaire
distributed to homeowners to determine the nature and extent of defects,
if a survey has been conducted or a questionnaire has been distributed.
(5) Either a summary of the results of testing conducted to
determine the nature and extent of defects or the actual test results, if
that testing has been conducted.
(c) Service of the notice shall commence a period, not to
exceed 180 days, during which the association, the respondent, and all
other participating parties shall try to resolve the dispute through the
processes set forth in this section. This 180-day period may be extended
for one additional period, not to exceed 180 days, only upon the mutual
agreement of the association, the respondent, and any parties not deemed
peripheral pursuant to paragraph (3) of subdivision (e). Any extensions
beyond the first extension shall require the agreement of all
participating parties. Unless extended, the dispute resolution process
prescribed by this section shall be deemed completed. All extensions shall
continue the tolling period described in subdivision (b).

(d) Within 25 days of the date the association serves the
Notice of Commencement of Legal Proceedings, the respondent may request in
writing to meet and confer with the board of directors of the association.
Unless the respondent and the association otherwise agree, there shall be
not more than one meeting, which shall take place no later than 10 days from
the date of the respondent's written request, at a mutually agreeable time
and place. The meeting shall be subject to subdivision (b) of Section
1363.05. The discussions at the meeting are privileged communications and
are not admissible in evidence in any civil action, unless the association
and the respondent consent in writing to their admission.
(e) Upon receipt of the notice, the respondent shall, within 60
days, comply with the following:
(1) The respondent shall provide the association with access
to, for inspection and copying of, all plans and specifications,
subcontracts, and other construction files for the project that are
reasonably calculated to lead to the discovery of admissible evidence
regarding the defects claimed. The association shall provide the respondent
with access to, for inspection and copying of, all files reasonably
calculated to lead to the discovery of admissible evidence regarding the
defects claimed, including all reserve studies, maintenance records and any
survey questionnaires, or results of testing to determine the nature and
extent of defects. To the extent any of the above documents are withheld
based on privilege, a privilege log shall be prepared and submitted to all
other parties.
All other potentially responsible parties shall have the same
rights as the respondent regarding the production of documents upon receipt
of written notice of the claim, and shall produce all relevant documents
within 60 days of receipt of the notice of the claim.
(2) The respondent shall provide written notice by certified
mail to all subcontractors, design professionals, their insurers, and the
insurers of any additional insured whose identities are known to the
respondent or readily ascertainable by review of the project files or other
similar sources and whose potential responsibility appears on the face of
the notice. This notice to subcontractors, design professionals, and
insurers shall include a copy of the Notice of Commencement of Legal
Proceedings, and shall specify the date and manner by which the parties
shall meet and confer to select a dispute resolution facilitator pursuant to
paragraph (1) of subdivision (f), advise the recipient of its obligation to
participate in the meet and confer or serve a written acknowledgment of
receipt regarding this notice, advise the recipient that it will waive any
challenge to selection of the dispute resolution facilitator if it elects
not to participate in the meet and confer, advise the recipient that it may
be bound by any settlement reached pursuant to subdivision (d) of Section
1375.05, advise the recipient that it may be deemed to have waived rights to
conduct inspection and testing pursuant to subdivision (c) of Section
1375.05, advise the recipient that it may seek the assistance of an
attorney, and advise the recipient that it should contact its insurer, if
any. Any subcontractor or design professional, or insurer for that
subcontractor, design professional, or additional insured, who receives
written notice from the respondent regarding the meet and confer shall,
prior to the meet and confer, serve on the respondent a written
acknowledgment of receipt.
That subcontractor or design professional shall, within 10 days
of service of the written acknowledgment of receipt, provide to the
association and the respondent a Statement of Insurance that includes both
of the following:

(A) The
names, addresses, and contact persons, if known, of all insurance carriers,
whether primary or excess and regardless of whether a deductible or
self-insured retention applies, whose policies were in effect from the
commencement of construction of the subject project to the present and which
potentially cover the subject claims.
(B) The applicable policy numbers for each policy of insurance
provided.
(3) Any subcontractor or design professional, or insurer for
that subcontractor, design professional, or additional insured, who so
chooses, may, at any time, make a written request to the dispute resolution
facilitator for designation as a peripheral party. That request shall be
served contemporaneously on the association and the respondent. If no
objection to that designation is received within 15 days, or upon rejection
of that objection, the dispute resolution facilitator shall designate that
subcontractor or design professional as a peripheral party, and shall
thereafter seek to limit the attendance of that subcontractor or design
professional only to those dispute resolution sessions deemed peripheral
party sessions or to those sessions during which the dispute resolution
facilitator believes settlement as to peripheral parties may be finalized.
Nothing in this subdivision shall preclude a party who has been
designated a peripheral party from being reclassified as a nonperipheral
party, nor shall this subdivision preclude a party designated as a
nonperipheral party from being reclassified as a peripheral party after
notice to all parties and an opportunity to object. For purposes of this
subdivision, a peripheral party is a party having total claimed exposure of
less than twenty-five thousand dollars ($25,000).

(f) (1) Within 20 days of sending the notice set forth in
paragraph (2) of subdivision (e), the association, respondent,
subcontractors, design professionals, and their insurers who have been sent
a notice as described in paragraph (2) of subdivision (e) shall meet and
confer in an effort to select a dispute resolution facilitator to preside
over the mandatory dispute resolution process prescribed by this section.
Any subcontractor or design professional who has been given timely notice of
this meeting but who does not participate, waives any challenge he or she
may have as to the selection of the dispute resolution facilitator. The role
of the dispute resolution facilitator is to attempt to resolve the conflict
in a fair manner. The dispute resolution facilitator shall be sufficiently
knowledgeable in the subject matter and be able to devote sufficient time to
the case. The dispute resolution facilitator shall not be required to reside
in or have an office in the county in which the project is located. The
dispute resolution facilitator and the participating parties shall agree to
a date, time, and location to hold a case management meeting of all parties
and the dispute resolution facilitator, to discuss the claims being asserted
and the scheduling of events under this section. The case management meeting
with the dispute resolution facilitator shall be held within 100 days of
service of the Notice of Commencement of Legal Proceedings at a location in
the county where the project is located. Written notice of the case
management meeting with the dispute resolution facilitator shall be sent by
the respondent to the association, subcontractors and design professionals,
and their insurers who are known to the respondent to be on notice of the
claim, no later than 10 days prior to the case management meeting, and shall
specify its date, time, and location. The dispute resolution facilitator in
consultation with the respondent shall maintain a contact list of the
participating parties.
(2) No later than 10 days prior to the case management meeting,
the dispute resolution facilitator shall disclose to the parties all matters
that could cause a person aware of the facts to reasonably entertain a doubt
that the proposed dispute resolution facilitator would be able to resolve
the conflict in a fair manner. The facilitator's disclosure shall include
the existence of any ground specified in Section 170.1 of the Code of Civil
Procedure for disqualification of a judge, any attorney-client relationship
the facilitator has or had with any party or lawyer for a party to the
dispute resolution process, and any professional or significant personal
relationship the facilitator or his or her spouse or minor child living in
the household has or had with any party to the dispute resolution process.
The disclosure shall also be provided to any subsequently noticed
subcontractor or design professional within 10 days of the notice.
(3) A dispute resolution facilitator shall be disqualified by
the court if he or she fails to comply with this paragraph and any party to
the dispute resolution process serves a notice of disqualification prior to
the case management meeting. If the dispute resolution facilitator complies
with this paragraph, he or she shall be disqualified by the court on the
basis of the disclosure if any party to the dispute resolution process
serves a notice of disqualification prior to the case management meeting.
(4) If the parties cannot mutually agree to a dispute
resolution facilitator, then each party shall submit a list of three dispute
resolution facilitators. Each party may then strike one nominee from the
other parties' list, and petition the court, pursuant to the procedure
described in subdivisions (n) and (o), for final selection of the dispute
resolution facilitator. The court may issue an order for final selection of
the dispute resolution facilitator pursuant to this paragraph.
(5) Any subcontractor or design professional who receives
notice of the association's claim without having previously received timely
notice of the meet and confer to select the dispute resolution facilitator
shall be notified by the respondent regarding the name, address, and
telephone number of the dispute resolution facilitator.
Any such subcontractor or design professional may serve upon
the parties and the dispute resolution facilitator a written objection to
the dispute resolution facilitator within 15 days of receiving notice of the
claim. Within seven days after service of this objection, the subcontractor
or design professional may petition the superior court to replace the
dispute resolution facilitator. The court may replace the dispute resolution
facilitator only upon a showing of good cause, liberally construed. Failure
to satisfy the deadlines set forth in this subdivision shall constitute a
waiver of the right to challenge the dispute resolution facilitator.
(6) The costs of the dispute resolution facilitator shall be
apportioned in the following manner: one-third to be paid by the
association; one-third to be paid by the respondent; and one-third to be
paid by the subcontractors and design professionals, as allocated among them
by the dispute resolution facilitator. The costs of the dispute resolution
facilitator shall be recoverable by the prevailing party in any subsequent
litigation pursuant to Section 1032 of the Code of Civil Procedure, provided
however that any nonsettling party may, prior to the filing of the
complaint, petition the facilitator to reallocate the costs of the dispute
resolution facilitator as they apply to any nonsettling party. The
determination of the dispute resolution facilitator with respect to the
allocation of these costs shall be binding in any subsequent litigation. The
dispute resolution facilitator shall take into account all relevant factors
and equities between all parties in the dispute resolution process when
reallocating costs.

(7) In the event the dispute resolution facilitator is replaced
at any time, the case management statement created pursuant to subdivision
(h) shall remain in full force and effect.
(8) The dispute resolution facilitator shall be empowered to
enforce all provisions of this section.
(g) (1) No later than the case management meeting, the parties
shall begin to generate a data compilation showing the following information
regarding the alleged defects at issue:
(A) The scope of the work performed by each potentially
responsible subcontractor.
(B) The tract or phase number in which each subcontractor
provided goods or services, or both.
(C) The units, either by address, unit number, or lot number,
at which each subcontractor provided goods or services, or both.
(2) This data compilation shall be updated as needed to reflect
additional information. Each party attending the case management meeting,
and any subsequent meeting pursuant to this section, shall provide all
information available to that party relevant to this data compilation.
(h) At the case management meeting, the parties shall,
with the assistance of the dispute resolution facilitator, reach agreement
on a case management statement, which shall set forth all of the elements
set forth in paragraphs (1) to (8), inclusive, except that the parties may
dispense with one or more of these elements if they agree that it is
appropriate to do so. The case management statement shall provide that the
following elements shall take place in the following order:
(1) Establishment of a document depository, located in the
county where the project is located, for deposit of documents, defect lists,
demands, and other information provided for under this section. All
documents exchanged by the parties and all documents created pursuant to
this subdivision shall be deposited in the document depository, which shall
be available to all parties throughout the prefiling dispute resolution
process and in any subsequent litigation. When any document is deposited in
the document depository, the party depositing the document shall provide
written notice identifying the document to all other parties. The costs of
maintaining the document depository shall be apportioned among the parties
in the same manner as the costs of the dispute resolution facilitator.
(2) Provision of a more detailed list of defects by the
association to the respondent after the association completes a visual
inspection of the project. This list of defects shall provide sufficient
detail for the respondent to ensure that all potentially responsible
subcontractors and design professionals are provided with notice of the
dispute resolution process. If not already completed prior to the case
management meeting, the Notice of Commencement of Legal Proceedings shall be
served by the respondent on all additional subcontractors and design
professionals whose potential responsibility appears on the face of the more
detailed list of defects within seven days of receipt of the more detailed
list. The respondent shall serve a copy of the case management statement,
including the name, address, and telephone number of the dispute resolution
facilitator, to all the potentially responsible subcontractors and design
professionals at the same time.

(3)
Nonintrusive visual inspection of the project by the respondent,
subcontractors, and design professionals.
(4) Invasive testing conducted by the association, if the
association deems appropriate. All parties may observe and photograph any
testing conducted by the association pursuant to this paragraph, but may not
take samples or direct testing unless, by mutual agreement, costs of testing
are shared by the parties.
(5) Provision by the association of a comprehensive demand
which provides sufficient detail for the parties to engage in meaningful
dispute resolution as contemplated under this section.
(6) Invasive testing conducted by the respondent,
subcontractors, and design professionals, if they deem appropriate.
(7) Allowance for modification of the demand by the association
if new issues arise during the testing conducted by the respondent,
subcontractor, or design professionals.
(8) Facilitated dispute resolution of the claim, with all
parties, including peripheral parties, as appropriate, and insurers, if any,
present and having settlement authority. The dispute resolution facilitators
shall endeavor to set specific times for the attendance of specific parties
at dispute resolution sessions. If the dispute resolution facilitator does
not set specific times for the attendance of parties at dispute resolution
sessions, the dispute resolution facilitator shall permit those parties to
participate in dispute resolution sessions by telephone.
(i) In addition to the foregoing elements of the case
management statement described in subdivision (h), upon mutual agreement of
the parties, the dispute resolution facilitator may include any or all of
the following elements in a case management statement: the exchange of
consultant or expert photographs; expert presentations; expert meetings; or
any other mechanism deemed appropriate by the parties in the interest of
resolving the dispute.
(j) The dispute resolution facilitator, with the guidance of
the parties, shall at the time the case management statement is established,
set deadlines for the occurrence of each event set forth in the case
management statement, taking into account such factors as the size and
complexity of the case, and the requirement of this section that this
dispute resolution process not exceed 180 days absent agreement of the
parties to an extension of time.
(k) (1) (A) At a time to be determined by the dispute
resolution facilitator, the respondent may submit to the association all of
the following:
(i) A request to meet with the board to discuss a written
settlement offer.
(ii) A written settlement offer, and a concise explanation of
the reasons for the terms of the offer.
(iii) A statement that the respondent has access to sufficient
funds to satisfy the conditions of the settlement offer.
(iv) A summary of the results of testing conducted for the
purposes of determining the nature and extent of defects, if this testing
has been conducted, unless the association provided the respondent with
actual test results.

(B) If the respondent does not timely submit the items required
by this subdivision, the association shall be relieved of any further
obligation to satisfy the requirements of this subdivision only.
(C) No less than 10 days after the respondent submits the items
required by this paragraph, the respondent and the board of directors of the
association shall meet and confer about the respondent's settlement offer.
(D) If the association's board of directors rejects a
settlement offer presented at the meeting held pursuant to this subdivision,
the board shall hold a meeting open to each member of the association.
The meeting shall be held no less than 15 days before the association
commences an action for damages against the respondent.
(E) No less than 15 days before this meeting is held, a written
notice shall be sent to each member of the association specifying all of the
following:
(i) That a meeting will take place to discuss problems that may
lead to the filing of a civil action, and the time and place of this
meeting.
(ii) The options that are available to address the problems,
including the filing of a civil action and a statement of the various
alternatives that are reasonably foreseeable by the association to pay for
those options and whether these payments are expected to be made from the
use of reserve account funds or the imposition of regular or special
assessments, or emergency assessment increases.
(iii) The complete text of any written settlement offer, and a
concise explanation of the specific reasons for the terms of the offer
submitted to the board at the meeting held pursuant to subdivision (d) that
was received from the respondent.
(F) The respondent shall pay all expenses attributable to
sending the settlement offer to all members of the association. The
respondent shall also pay the expense of holding the meeting, not to exceed
three dollars ($3) per association member.
(G) The discussions at the meeting and the contents of the
notice and the items required to be specified in the notice pursuant to
paragraph (E) are privileged communications and are not admissible in
evidence in any civil action, unless the association consents to their
admission.
(H) No more than one request to meet and discuss a written
settlement offer may be made by the respondent pursuant to this subdivision.

(l) Except for the purpose of in camera review as provided in
subdivision (c) of Section 1375.05, all defect lists and demands,
communications, negotiations, and settlement offers made in the course of
the prelitigation dispute resolution process provided by this section shall
be inadmissible pursuant to Sections 1119 to 1124, inclusive, of the
Evidence Code and all applicable decisional law.
This inadmissibility shall not be extended to any other
documents or communications which would not otherwise be deemed
inadmissible.
(m) Any subcontractor or design professional may, at any time,
petition the dispute resolution facilitator to release that party from the
dispute resolution process upon a showing that the subcontractor or design
professional is not potentially responsible for the defect claims at issue.
The petition shall be served contemporaneously on all other parties, who
shall have 15 days from the date of service to object. If a subcontractor or
design professional is released, and it later appears to the dispute
resolution facilitator that it may be a responsible party in light of the
current defect list or demand, the respondent shall renotice the party as
provided by paragraph (2) of subdivision (e), provide a copy of the current
defect list or demand, and direct the party to attend a dispute resolution
session at a stated time and location. A party who subsequently appears
after having been released by the dispute resolution facilitator shall not
be prejudiced by its absence from the dispute resolution process as the
result of having been previously released by the dispute resolution
facilitator.
(n) Any party may, at any time, petition the superior court in
the county where the project is located, upon a showing of good cause, and
the court may issue an order, for any of the following, or for appointment
of a referee to resolve a dispute regarding any of the following:
(1) To take a deposition of any party to the process, or
subpoena a third party for deposition or production of documents, which is
necessary to further prelitigation resolution of the dispute.
(2) To resolve any disputes concerning inspection, testing,
production of documents, or exchange of information provided for under this
section.

(3) To
resolve any disagreements relative to the timing or contents of the case
management statement.
(4) To authorize internal extensions of timeframes set forth in
the case management statement.
(5) To seek a determination that a settlement is a good faith
settlement pursuant to Section 877.6 of the Code of Civil Procedure and all
related authorities. The page limitations and meet and confer requirements
specified in this section shall not apply to these motions, which may be
made on shortened notice. Instead, these motions shall be subject to other
applicable state law, rules of court, and local rules. A determination made
by the court pursuant to this motion shall have the same force and effect as
the determination of a postfiling application or motion for good faith
settlement.
(6) To ensure compliance, on shortened notice, with the
obligation to provide a Statement of Insurance pursuant to paragraph (2) of
subdivision (e).
(7) For any other relief appropriate to the enforcement of the
provisions of this section, including the ordering of parties, and insurers,
if any, to the dispute resolution process with settlement authority.
(o) (1) A petition filed pursuant to subdivision (n) shall be
filed in the superior court in the county in which the project is located.
The court shall hear and decide the petition within 10 days after filing.
The petitioning party shall serve the petition on all parties, including the
date, time, and location of the hearing no later than five business days
prior to the hearing. Any responsive papers shall be filed and served no
later than three business days prior to the hearing. Any petition or
response filed under this section shall be no more than three pages in
length.
(2) All parties shall meet with the dispute resolution
facilitator, if one has been appointed and confer in person or by the
telephone prior to the filing of that petition to attempt to resolve the
matter without requiring court intervention.
(p) As used in this section:
(1) "Association" shall have the same meaning as
defined in subdivision (a) of Section 1351.
(2) "Builder" means the declarant, as defined in
subdivision (g) of Section 1351.
(3) "Common interest development" shall have the same
meaning as in subdivision (c) of Section 1351, except that it shall not
include developments or projects with less than 20 units.
(q) The alternative dispute resolution process and procedures
described in this section shall have no application or legal effect other
than as described in this section.
(r) This section shall become operative on July 1, 2002,
however it shall not apply to any pending suit or claim for which notice has
previously been given.
(s) This section shall become inoperative on July 1, 2010, and
as of January 1, 2011, is repealed, unless a later enacted statute, that is
enacted before January 1, 2011, deletes or extends the dates on which it
becomes inoperative and is repealed.
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