AB 662 - Protecting Contractors that Provide Free Construction Services to Those Who Lost Their Homes During the October 2003 San Diego County Fire

Feldsott & Lee
A Law Corporation

In an effort to alleviate the devastation associated with the October 2003 San Diego County Fires, the legislature enacted Assembly Bill 662. (“AB 662”) AB 662 was characterized by the legislature as “urgency legislation” and as such took effect immediately upon approval. The purpose of AB 662 is to provide a reasonable litigation procedure pertaining to construction defect litigation that would encourage insurers and licensed contractors to rebuild homes for the families victimized by the Cedar Fire of October of 2003.”

In support of Assembly Bill 662, the legislature made the following findings:

“(a) California has a statewide housing crisis.
(b) Nationally, nine of the 10 least affordable housing markets are in California.
(c) Evidence indicates that there is increasing difficulty to obtain adequate insurance for the construction of single-family homes, as well as for multiple-family housing units.
(d) In October of 2003, Southern California experienced the most devastating wild land/urban interface fire disaster in history.
(e) According to the California Department of Forestry and Fire Protection, 3,631 homes were destroyed and many of these were situated in the County of San Diego.
(f) Many of these property owners who lost residential homes in the County of San Diego do not have, or are otherwise unable to obtain, adequate insurance to rebuild their lost homes.
(g) This urgency legislation would provide a reasonable litigation procedure pertaining to construction defect litigation that would encourage insurers and licensed contractors to rebuild homes for the families victimized by the Cedar Fire of October of 2003.”

The author of Assembly Bill 662, Assembly Member La Seur, further argued that:

“During the Southern California Firestorm of 2003, the Cedar Fire killed 13 people in my district and destroyed approximately 2,000 homes. Many of the people left homeless by the Cedar Fire were either under-insured or not insured as a result of the homes’ location. Contractors and subcontractors alike have volunteered to contribute the labor necessary to rebuild homes for these people. The one stumbling block is the potential for construction defect litigation to occur years after the homes have been rebuilt. Good Samaritans should not be placed in harm’s way. There is potentially hundreds of thousands of dollars worth of free home construction labor available to provide homes for those who lost their home in the fire and many remain homeless without the donated labor and materials. A 501(c)3 has been set up and has raised enough money to [provide building materials to] build 52 homes, 800 sq. ft., 900 sq. ft., and 1000 sq. ft.”

“AB 662 encourages contractors to provide services without compensation to reconstruct residential homes for persons who lost their homes during the Cedar Fire in San Diego in October of 2003 by providing [the option] of a more cost-efficient procedure to resolve any subsequent construction defect disputes.”

Specifically, AB 662 adds Section 946.5 to the Civil Code, which provides that:

“(a) Nothing in Title 7 (commencing with Section 895) shall be construed to prohibit an individual from voluntarily agreeing with a contractor to incorporate the rights and remedies of Title 7 (commencing with Section 895), or any provision of Title 7 (commencing with Section 895), in a contract for reconstruction of a dwelling unit or common area of a residence lost during the October 2003, Cedar Fire in the County of San Diego.

(b) For purposes of this title, ‘contractor’ means any subcontractor, design professional, or general contractor who, after the effective date of this act and on or before January 1, 2008, provides his or her services without compensation.

(c) This title shall remain in effect only until January 1, 2008, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2008, deletes or extends that date.”

As noted above, the purpose of this statute is to provide an incentive to construction professionals to provide their services, free of charge, to those families whose homes were destroyed by the October 2003 Cedar Fire. The rebuilding of the homes destroyed by the Cedar Fire would not be protected by provisions of Title 7 (commencing with Section 895 of the Civil Code) because those provisions only apply to new homes sold on or after January 1, 2003. As such, by the addition of Section 946.5, the legislature has allowed contractors to receive the same protections, both pre- and post litigation, that apply to contractors that have built new homes sold on or after January 1, 2003.

Some of the most significant of these protections appear in Civil Code §§ 910 through 938 and 941, which outline the pre-litigation procedures that must be followed prior to the actual filing of an action, including: having the claimant “provide written notice. . . of the claimant’s claim that the construction of his or her residence violates any of the standards set forth in Chapter 2 (commencing with Section 896)” (Civil Code § 910.); setting forth nonadversarial procedures for resolving the dispute (Civil Code § 914.); and giving the contractor an opportunity to repair the violation; (Civil Code § 917.) among other procedures. Further, Civil Code § 941 establishes a 10 year statute of limitations for claims brought under Title 7, (commencing with Civil Code Section 895.)

Finally, it is important to note several limitations on the applicability of the provisions of Section 945.6. First, in order for the protections within Title 7 (commencing with Civil Code Section 895) to apply, the contractor and the homeowner would have to agree to incorporate those protections into their contract for reconstruction. (Civil Code § 945.6[a].) Second, Section 945.6 only applies to the reconstruction of a residence lost during the October 2003 Cedar Fire in the County of San Diego and only to those homes within the County of San Diego. (Civil Code § 945.6[a].) Third, and perhaps most importantly, the word “contractor,” for purposes of this statute, is not given its ordinary meaning, but rather includes only those subcontractors, design professionals, or general contractors who, after the effective date of this act and on or before January 1, 2008, provides his or her services without compensation. Finally, Title 7, (commencing with Civil Code Section 895) “shall remain in effect only until January 1, 2008, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2008, deletes or extends that date.” (Civil Code § 945.6[c].)

It is likely that the adoption of Section 945.6 will at least provide some incentive to construction contractors to rebuild the homes lost in the Cedar Fire of October 2003; however, the adoption of Section 945.6 certainly does not make “Good Samaritan” contractors judgment proof. Therefore, it is very important that the reconstruction agreements between the contractors and the homeowners specifically incorporate the rights and remedies of Section 945.6, otherwise contractors will be exposing themselves to liability, despite the fact that they have provided their service free of charge.