Key takeaways
- The Right to Repair Act (SB 800) is the exclusive remedy for construction defect claims involving new residential construction sold on or after January 1, 2003.
- Homeowners must comply with the Act's prelitigation notice-and-repair procedures, located at Civil Code section 910, before filing a lawsuit.
- Buyers cannot bypass the statutory process by pleading only common-law theories, even if the construction defect has already caused actual property damage.
- The California Supreme Court's unanimous decision resolves a split among the Courts of Appeal, expressly rejecting the prior holding in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC.
- Builders retain their bargained-for right to inspect and attempt repairs, provided they strictly adhere to the Act's specific statutory deadlines.
The Decision
On January 18, 2018, the California Supreme Court issued a unanimous decision fundamentally shaping residential construction defect litigation. In McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, the court held that the Right to Repair Act, Civil Code sections 895-945.5 (SB 800, 2002) serves as the exclusive remedy for construction defect claims involving new residential construction.
The litigation originated in Kern County, where Carl and Sandra Van Tassel, alongside dozens of other buyers, purchased 37 new single-family homes. The builder-developer of these homes was McMillin Albany. Sometime after taking possession of the properties, the buyers filed a lawsuit alleging that the homes were defective across virtually every component.
The plaintiffs' initial approach to the litigation shifted during the proceedings. The buyers dropped any statutory claim under the Act from their complaint. Instead, they pleaded only common-law theories of liability, such as negligence and strict liability. By restricting their complaint entirely to common-law causes of action, the plaintiffs argued they could skip the Act's mandatory prelitigation notice-and-repair procedures. They contended that because they were seeking recovery for actual property damage under common-law tort theories, the statutory framework did not constrain their lawsuit.
The builder-developer objected to this maneuver. McMillin Albany asserted that the statutory framework applied to the construction defect claims regardless of the specific legal labels the plaintiffs attached to them. The dispute centered on whether the statutory procedures could be bypassed through creative pleading. The California Supreme Court granted review and delivered a unanimous opinion holding that the Act's procedures apply regardless of how the complaint is pleaded. Homeowners must adhere to the statutory prelitigation process, even if they allege that the defects have already caused actual property damage.
Why It Matters
The ruling establishes a mandatory gatekeeping mechanism for residential construction defect litigation in California. By designating the Right to Repair Act as the exclusive remedy, the court prevents plaintiffs from using artful pleading to circumvent the builder's statutory right to inspect and repair alleged defects.
Before this decision, plaintiffs' attorneys frequently attempted to bypass the Act to immediately file lawsuits. Litigation generally offers plaintiffs greater bargaining power and avoids the statutory mechanisms that give builders an opportunity to fix problems without court intervention. If plaintiffs could simply draft complaints sounding only in common-law negligence or strict liability, the statutory framework would become entirely optional for any defect that had progressed to the point of causing physical damage.
The decision ensures that the legislative compromise enacted by the California Legislature functions as intended. Builders receive early notice of defects and an opportunity to cure them, which theoretically reduces the burden on the court system by resolving disputes before formal litigation commences. Homeowners, in turn, are bound by the statutory standards and procedures, standardizing the resolution of construction defect disputes across the state.
The ruling eliminates the dual-track system where some claims proceeded under the statute while others proceeded under common law. This unification creates a predictable framework for all new residential construction defect claims. The California Supreme Court recognized that permitting common-law claims to proceed parallel to the statutory scheme would defeat the primary purpose of the legislation, which was to reduce litigation and encourage repairs.
Who Should Care
For lawyers
Counsel representing residential builders and developers possess a definitive shield against premature litigation. When a plaintiff files a construction defect lawsuit involving a home sold on or after January 1, 2003, without first serving the written notice required by Civil Code section 910, defense counsel can move to stay the litigation until the plaintiff complies with the prelitigation procedures. Defense attorneys must ensure their clients are prepared to act swiftly when a notice is received, as specific deadlines apply to the inspection and repair process. When a stay is granted due to a plaintiff's failure to comply with the prelitigation procedures, the litigation is effectively paused. This pause allows the parties to engage in the statutory process without the immediate pressure and expense of discovery and motion practice. Builders must have systems in place to receive, track, and respond to notices. Failure to respond within the statutory timeframe constitutes a waiver of the right to repair, exposing the builder to immediate litigation.
Plaintiffs' counsel must incorporate the statutory notice-and-repair process into their litigation strategy from the outset. The decision mandates that attorneys evaluate the statutory construction standards and guide their clients through the builder's inspection and repair rights before drafting a complaint. Attempting to plead around the statute by alleging common-law property damage is no longer a viable tactic. Plaintiffs' attorneys must front-load their expert investigations to provide a comprehensive prelitigation notice, as the statute requires specific details regarding the claimed defects. Furthermore, attorneys must meticulously track the tolling of statutes of limitations, which are paused while the prelitigation procedures are actively underway.
For consumers/parties
Homeowners discovering defects in their newly constructed houses must follow specific steps before taking their builder to court. They cannot simply hire a lawyer and file a lawsuit immediately. Instead, they must provide the builder with written notice of the problems. The builder then has the legal right to inspect the property and offer a repair plan or a cash settlement. This process requires a degree of cooperation that can be frustrating for homeowners who have lost trust in the company that built their defective home. Only if the builder fails to respond, fails to make the repairs, or performs the repairs inadequately can the homeowner proceed with a formal lawsuit. This process is designed to fix homes faster, though it requires homeowners to cooperate with the builder they are accusing of poor workmanship. Buyers of new homes should maintain detailed records of any issues they discover to ensure they can provide adequate notice to the builder.
Legal Background
To understand the significance of the McMillin decision, one must trace the evolution of California construction defect law over the past two decades. The trajectory begins with the economic loss rule and its application to residential construction.
The economic loss rule is a foundational legal doctrine that generally precludes recovery in tort for purely economic losses. The economic loss rule serves to maintain the boundary between contract law and tort law. Contract law is designed to enforce the expectations of the parties, while tort law is designed to protect individuals and property from physical harm. By restricting recovery in tort to instances where physical harm has occurred, the economic loss rule prevents contract disputes from being transformed into tort claims. In the context of construction, this means that a plaintiff cannot sue in negligence for a defective product or component unless that defect has caused physical damage to other property or personal injury. If a component is merely installed incorrectly but has not yet failed in a way that damages the surrounding structure, the cost to repair or replace that component is considered an economic loss, recoverable only under contract or warranty theories, not tort.
In 2000, the California Supreme Court applied this doctrine strictly to residential construction defect claims in Aas v. Superior Court (2000) 24 Cal.4th 627. In that case, homeowners sought to recover in negligence for various construction defects that had not yet caused actual property damage or personal injury. The court held that under the economic loss rule, these claims were barred. A defect that was merely a defect—such as a poorly installed window that had not yet leaked, or a foundation lacking proper support that had not yet cracked—was an unrecoverable economic loss. Homeowners were forced to wait for the defect to cause physical damage to other property before they could sue in tort.
The Aas decision severely limited homeowners' ability to hold builders accountable for substandard construction. Consumer advocates argued that the ruling created perverse incentives, forcing homeowners to allow their homes to deteriorate before seeking legal recourse.
In direct response to the Aas decision, the California Legislature enacted the Right to Repair Act, Civil Code sections 895-945.5 (SB 800, 2002). The Act applies to new residential units sold on or after January 1, 2003. The legislative process resulting in the Right to Repair Act involved extensive negotiations between stakeholders. Consumer advocates sought to overturn Aas to protect homeowners from bearing the cost of repairing defective construction before it caused secondary damage. The building industry sought to control the escalating costs of construction defect litigation, which impacted the affordability of housing and the availability of insurance for builders. The resulting statute balanced these competing interests. The legislature created detailed, component-specific building standards that defined actionable defects. By doing so, the legislature removed the uncertainty of common-law negligence standards, providing clear benchmarks for both builders and homeowners.
For homeowners, the Act established specific residential construction standards. Crucially, it allowed homeowners to sue for violations of those standards without waiting for resulting damage, effectively abrogating the limitations imposed by the Aas decision. For builders, the Act provided a mandatory prelitigation right to inspect and repair alleged defects.
However, the statutory language left room for interpretation regarding its exclusivity. Did the Act entirely replace common-law claims, or did it merely supplement them?
The controversy peaked with the appellate court decision in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98. In 2013, the Court of Appeal examined a case where a defect had already caused severe property damage (a pipe burst, flooding a home). The Liberty Mutual court held that the Right to Repair Act was NOT the exclusive remedy where a defect had already caused property damage. The court reasoned that while the Act provided a remedy for defects that had not yet caused damage (addressing the Aas problem), plaintiffs (or their subrogated insurers) could still pursue common-law claims outside the Act if actual property damage had occurred.
This ruling created a split among the Courts of Appeal and established a dual-track system. Plaintiffs with actual property damage routinely bypassed the Act's prelitigation procedures by pleading only common-law claims, directly undermining the builder's statutory right to repair.
What the Court Did
The California Supreme Court granted review in McMillin to resolve the appellate split created by Liberty Mutual. The court conducted a comprehensive examination of the text, structure, and legislative history of the Right to Repair Act to determine whether the Legislature intended it to be the exclusive remedy for construction defect claims.
The court concluded that the Act was intended to comprehensively reform construction defect litigation. The Legislature designed the statute to govern any action seeking recovery of damages arising out of, or related to deficiencies in, residential construction. The court noted that the statutory text explicitly limits the causes of action a homeowner may bring, funneling all claims through the Act's procedures.
Crucially, the court noted that the Act contains specific provisions dictating how damages are calculated, including compensation for the reasonable value of repairing any damage caused by the repair efforts themselves, as well as relocation expenses. The inclusion of these damage categories strongly indicated that the Legislature anticipated the Act would cover situations where actual property damage had occurred. If the Act were only intended to cover mere defects without damage, as Liberty Mutual suggested, these statutory damage provisions would be superfluous.
By examining the legislative compromise, the court reasoned that the builder's right to repair was a fundamental component of the bargain. The Legislature granted homeowners the right to sue for defects before damage occurred, but in exchange, builders received the absolute right to attempt repairs before facing litigation. If homeowners could bypass the prelitigation procedures simply by alleging that a defect had caused actual damage, the builder's right to repair would be rendered illusory for the most serious defects.
The court found no textual support for the Liberty Mutual distinction between defects that have caused damage and those that have not. The statute defines actionable defects comprehensively, including those that result in actual property damage. The court reasoned that interpreting the Act to apply only to damage-free defects would contradict the plain language of the statute, which explicitly addresses damages resulting from the violation of construction standards.
Consequently, the court expressly disapproved of Liberty Mutual. The court held that the Right to Repair Act is the exclusive remedy for construction defect claims in new residential construction. The prelitigation notice-and-repair procedures apply universally, even when a homeowner pleads only common-law theories and even where the defect has already caused property damage. The plaintiffs in McMillin were therefore required to comply with the statutory procedures before proceeding with their lawsuit. The court emphasized that the Legislature intended to create a single, unified framework for resolving these disputes.
How It May Be Applied
The McMillin decision forces all new residential construction defect claims through the statutory funnel. Builders will routinely use the decision to stay litigation whenever a plaintiff fails to provide the required prelitigation notice. This procedural mechanism ensures that the statutory right to repair is enforced at the earliest stages of a dispute.
The ruling places a premium on strict compliance with the statutory timelines and procedures by both parties. The Act imposes specific deadlines on builders once a homeowner serves a notice under Civil Code section 910. Builders must acknowledge receipt of the claim within a short statutory window, conduct their initial inspections within a defined timeframe, and provide a formal offer to repair or a cash settlement. Because a short statutory window applies to the builder's response and inspection rights, defense counsel must establish protocols to ensure their clients do not inadvertently waive their statutory protections. If a builder fails to adhere to the statutory requirements, they lose the protections of the prelitigation process, and the homeowner may proceed directly to court.
Questions remain regarding the intersection of the Act with other legal theories. While the Act is the exclusive remedy for construction defects, disputes may arise over whether a specific claim constitutes a "construction defect" claim subject to the Act, or whether it sounds in fraud or breach of a separate contract. Courts will need to carefully analyze the underlying nature of the allegations to determine if they fall within the Act's exclusive scope. Plaintiffs may attempt to characterize their claims as something other than construction defects to avoid the statutory procedures.
Furthermore, the decision shifts the battleground from the pleadings to the repair process itself. Litigation will increasingly focus on whether the builder's repairs were adequate, whether the builder waived its right to repair through inaction, and whether the homeowner unreasonably interfered with the builder's repair efforts. If a builder elects to repair a defect, the homeowner must provide reasonable access to the property. Disputes frequently arise regarding the scope of the proposed repair, the methods to be used, and the timeline for completion. If the homeowner refuses access or rejects a reasonable repair offer, the builder may raise this as an affirmative defense in subsequent litigation. Conversely, if the builder's repair fails to correct the defect, the homeowner can proceed with a lawsuit, and the failed repair may serve as evidence of the builder's liability. The adequacy of a repair is likely to become a primary issue of contention, requiring expert testimony and detailed factual analysis.
Comparing the Legal Regimes
| Legal Era | Rule for Defects Without Damage | Rule for Defects With Actual Damage |
|---|---|---|
| Pre-SB 800 (The Aas Era) | No recovery allowed. Barred by the economic loss rule. | Common-law tort claims permitted. No mandatory prelitigation repair process. |
| Post-SB 800 (The Liberty Mutual Split) | Right to Repair Act applies. Prelitigation process mandatory. | Common-law claims permitted outside the Act. Prelitigation process could be bypassed. |
| Post-McMillin Albany (Current Law) | Right to Repair Act applies. Prelitigation process mandatory. | Right to Repair Act applies. Prelitigation process mandatory. |
Plain-English Callout
When you buy a brand-new house, the law provides a specific warranty system. If you find a problem—like a leaking roof or a cracked foundation—you might want to sue the builder immediately. The Right to Repair Act says you cannot do that. Instead, you must write a letter to the builder explaining the problem. This is called a prelitigation notice. Once the builder gets your letter, they have the legal right to come to your house, look at the problem, and try to fix it. The McMillin decision confirms that there are no loopholes to this rule. Even if the leak has already ruined your floors, you still have to give the builder the chance to fix the underlying defect before you can take them to court.
This article is general legal information and commentary about developments in California law. It is not legal advice, does not address your specific situation, and is not a substitute for advice from a licensed attorney. Reading this article and contacting us through this website do not create an attorney-client relationship.
Sources & authorities
- McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241 — source
- Right to Repair Act, Civil Code sections 895-945.5 (SB 800, 2002) — source
- Civil Code section 910 — source
- Aas v. Superior Court (2000) 24 Cal.4th 627 — source
- Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98 — source
Further reading
Additional perspectives (a link is not an endorsement):