Key facts
- California lawmakers will consider Assembly Bill 1903, a 'right-to-repair' bill for condo construction defects.
- Assembly Bill 1406 proposes increasing the liquidated-damages limit on new condo sales from 3% to 6%.
- Research indicates defect liability litigation and insurance costs add significant hard costs per unit.
- AB 1903 was amended to limit investigative costs and make dismissal motions discretionary.
- The California Association of Realtors has opposed AB 1406, fearing increased risk for buyers.
California lawmakers are poised to address condominium construction defect liability rules following their summer recess, with Assembly Bill 1903 aiming to establish a 'right-to-repair' process that allows developers to fix issues before litigation. Another bill, AB 1406, seeks to increase the liquidated-damages limit on new condo sales from 3% to 6% of the purchase price, a move proponents call 'condo deposit reform' to provide developers with more certainty.
Research from the Terner Center for Housing Innovation at UC Berkeley indicates a significant collapse in condo construction in Los Angeles since its 2005-06 peak, with defect liability litigation and insurance costs estimated to add between $8,100 and $18,300 per unit in hard costs. This has led many developers to shift towards building apartments instead.
AB 1903 has undergone amendments in the state Senate Judiciary Committee. Initially proposing a 'certified building' process with builder-controlled repair procedures, the author agreed to remove that framework. Further changes softened provisions, now limiting investigative costs unless builders receive 21 days' notice and a chance to attend testing. A proposed mandatory motion to dismiss for noncompliant claim notices became discretionary, and a requirement for claimants to prove a defect caused damage to another component was dropped in favor of revising defect performance standards on a forward-looking basis. Despite these changes, the bill still requires approval from another committee and the General Assembly.
Meanwhile, in the U.S. Congress, Representatives Debbie Wasserman Schultz and Maria Elvira Salazar have revived a bill offering low-interest loans for structural repairs, a measure linked to the anniversary of the Surfside, Florida condo tower collapse.