Almost any condition that reduces the value of residential or commercial property can be a construction defect.

While some construction defects and their effects on the project are patent and obvious, others may remain latent or hidden. Even readily apparent damages may have several causes. For these reasons, experts specializing in specific aspects of construction are usually retained to identify the defects and damages, evaluate their cause, recommend the appropriate methods of repair, and to develop estimated costs to perform the repairs.

Diminution in Value: Another damage rule uses diminution in market value (the difference in market value before and after the injury). Generally California courts will award whichever is less; cost of repairs or diminution in value.

Cost of Repairs Allowed Where They Exceed Diminution: In certain cases California law allows owners to recover repair costs even where repair costs exceed the diminution in value. For example, if there is a personal reason to repair the property, such as the property is a personal residence, the cost of repair is the appropriate measure of damages.

Other Damages: In addition to cost of repairs and diminution, other recoverable damages include the loss of use of the property during the period of injury and repair, court and litigation costs, and attorney’s fees if provided for in an applicable contract or by statute. Personal injuries resulting from the defect may also be recoverable, and the courts have recently recognized the limited availability of emotional distress damages under certain circumstances.

In general, attorney fees are not recoverable absent a contract provision or statute. Contracts that may include attorney fee clauses include:

Attorney fees are provided by statute in inverse condemnation actions and in some counties under special statutes intended to promote settlements.

Patent Defects: For patent defects which are apparent by a reasonable inspection, the limitation period is 4 years after substantial completion.

Latent Defects: However, most construction defects are latent defects that are not apparent by reasonable inspection. For latent defects, the limitation period is 10 years after substantial completion.

Discovered Property Damage: However, once damage to property from the defect is discovered, the limitation period is 3 years after discovery. Even if you are within the 4 or 10 year limitation period, if you have discovered damage you must file the lawsuit within 3 years from your date of discovery.

Some of the experts fees for developing the repair plan and monitoring the reconstruction work may be recoverable as damages in the case.

Attorneys retained in construction defect cases generally either bill by the hour or are compensated by a percentage of the recovery. The form of retention will depend upon the client’s financial considerations. For homeowner associations, reserves may be available to investigate and perform repairs. Increased monthly assessments or special assessments may also be available to raise the funds necessary to pursue the litigation.

Typically, competent attorneys specializing in construction will bill at hourly rates from $175.00 per hour to $300.00 per hour or more.

Typically, standard contingent fees fall into the range of 30% to 40% of the gross recovery. Please remember that all attorney fees are negotiable and that all retainer agreements should be in writing.

Fast Track and Normal Civil Litigation Time: Most courts have adopted expedited litigation programs where the majority of cases can be concluded within 3 years. If you are not on an expedited "fast track program," litigation could take the full 5 years.

Case Management: Because of the large number of issues and parties in most construction defect cases, the court may order "case management" and set special dates and deadlines to fit the circumstances of the case. Great care should be taken in drafting workable Case Management Orders. The Los Angeles Daily Journal has cited the Castro office as innovators and developers of effective case management and case management orders. (Los Angeles Daily Journal, December 1, 1994)

Mediation: Construction defect cases are often resolved before trial through an alternative dispute resolution procedure called mediation. Mediation is a voluntary, non-binding series of meetings where the mediator works with the parties to reach a mutually agreed upon resolution. Mediation can substantially reduce the time and expense to reach a conclusion of the case.

Because of the different professionals and contractors involved on a construction project, in most cases experts are retained to:

Experts specializing in the forensic analysis of specific construction claims are necessary to assist the attorney in presenting your case in court.

Although some defects and damages may be apparent in a construction defect case, the extent of the defect and the full amount of damages may not be determined without testing. This testing may include an invasive investigation, where portions of walls, floors, and roofs may be removed. Soil samples, testing for mold and bacteria, and testing of building materials may also be performed. Also, the presence of one type of defect may signal an overall level of workmanship that indicates other defects may exist. A full investigation is a prudent step to determine the extent of all defects so that these claims can be brought within the required time limits.

For mass-produced residential housing, strict liability is available against the developer for all claims of defective design and construction. However, if the developer does not have sufficient money or available insurance to settle or satisfy a judgement, additional defendants including the design professionals, the general contractor and the subcontractors should also be considered.

Even if a builder or developer is out of business or bankrupt, their insurance companies continue to have an obligation to defend and/or indemnify construction defect claims for strict liability, negligence and breach of warranty. It may sometimes be necessary to appear in Federal Bankruptcy court and seek to lift the bankruptcy stay. If such a motion is filed, the Federal Bankruptcy courts normally require that plaintiffs limit their recovery to available insurance coverage. Even without the builder/developer, the case can proceed against the design professionals, the general contractor and the subcontractor.

A claim for damages from construction defects should be filed with your own insurance company in the event that some or all of the claims are covered. However, policy language varies and has become more restrictive in recent years and customarily excludes damages resulting from "third party or contractor negligence." Even if the defects and damages are found to be excluded under the policy, some expert fees or investigation costs may still be covered.

Owners of property with construction defects are not required to repair all defects and damages before proceeding with the lawsuit. However, failure to perform routine maintenance and reasonable repairs can cause or contribute to additional damages, which could be offset from the owners claim. Further, a homeowners association has the obligation to take reasonable steps to protect the property from additional damage. These repair costs are usually recoverable in the lawsuit. Failure to perform reasonable repairs, such as repairing a hole in a roof, may lead to the defense of "failure to mitigate damages."

There are several ways litigation costs can be reduced in construction defect cases. The investigation will identify the appropriate parties to the action. Costs of litigation increase substantially with additional parties, and some claims may be in an amount that does not justify the additional expenses. Expert fees are a major cost of litigation.

Before a Homeowners Association can bring a construction defect lawsuit against a developer, the Association must comply with the requirements of Civil Code section 1375, the Calderone Act.

Your attorney should report important developments to you and communicate with you at regular intervals. These reports can be written or verbal, and may be at agreed upon specific time intervals in the retainer agreement.

Most insurance companies participating in the case will require regular written reports which include a review of developments, an analysis of liability and damages, and the status of settlement opportunities.

You should receive copies of these reports and contact your attorney if you have any questions. It is important to note that communications between you and your attorney are protected by the attorney-client privilege.

The decision to switch law firms is a serious step that should be carefully considered. The reasons to switch attorneys may include inexperience or unavailability of counsel, ineffective communication between the client and the attorney, or other reasons. Always review the retainer agreement to determine what grounds exist for the termination or withdrawal of current counsel. The selection of a new law firm may also be part of a strategic plan to increase the strength of your position in the litigation or settlement.