Why Owner Knowledge Does Not Create a Contract — and Why Preliminary Notice Still Matters
A common misconception in California construction disputes is that a subcontractor can enforce contract rights or a mechanics lien against a property owner simply because the owner knew the subcontractor was working on the project. California law squarely rejects that idea.
Under the current statutory scheme, both contractual liability and mechanics lien rights depend on clearly defined legal relationships and strict compliance with notice requirements—not informal awareness or participation.
A Preliminary Notice Is Mandatory for Subcontractors
California’s mechanics lien statutes require subcontractors who do not have a direct contract with the owner to serve a preliminary notice as a condition precedent to enforcing lien rights.
This requirement is strictly enforced. Failure to properly serve a preliminary notice generally invalidates a mechanics lien, regardless of whether the owner knew about the work, benefited from it, or communicated with the subcontractor. The notice requirement is not a technicality—it is a statutory prerequisite.
There Is No “Actual Knowledge” Exception
Subcontractors sometimes argue that an owner’s actual knowledge of their work excuses the failure to serve a preliminary notice. California law does not recognize that exception.
Even where owners receive invoices, attend meetings, or otherwise know precisely who is performing the work, the absence of a properly served preliminary notice remains fatal to lien rights. Courts do not substitute informal notice or equitable considerations for statutory compliance.
Notices of Nonresponsibility Do Not Apply to Contracting Owners
Another common misunderstanding involves notices of nonresponsibility. That mechanism applies only where an owner did not contract for or authorize the work—most commonly in tenant-improvement situations.
When an owner hires a general contractor to perform construction, a notice of nonresponsibility is unavailable and legally ineffective. The owner’s inability to file such a notice does not create contractual liability, excuse notice failures, or convert subcontractors into direct contractors.
Equitable Theories Cannot Cure Notice Defects
California law expressly rejects equitable workarounds to the preliminary notice requirement. Claims based on waiver, estoppel, unjust enrichment, or fairness cannot override the statutory scheme.
If the required preliminary notice was not served, the lien fails. That result applies regardless of the quality of the work performed, the owner’s conduct, or the equities of the situation.
Key Takeaway
Mechanics lien rights in California are powerful but strictly conditioned. Owner knowledge does not create contractual privity, does not excuse preliminary notice requirements, and does not revive defective lien claims. Subcontractors must comply with the statute as written, and owners are entitled to rely on those statutory protections.
Can a Homeowner Reject a Builder’s Repair Offer Under California’s SB 800?
Under California’s SB 800 Right to Repair Act, homeowners who believe a builder’s proposed repair is inadequate often assume they can simply reject it and move forward with a lawsuit or hire their own contractors. In most cases, that assumption is incorrect.
SB 800 establishes a mandatory prelitigation process that strongly favors allowing the builder an opportunity to repair alleged construction defects before litigation may proceed. While the statute does provide limited exceptions, outright rejection of a repair offer is generally not one of them.
The Builder’s Statutory Right to Repair
California courts have repeatedly emphasized that the central feature of SB 800 is the builder’s right to attempt repairs before being sued. The process begins when a homeowner serves written notice of construction defect claims. Once notice is given, the builder has the right to inspect the property and, if it chooses, to offer repairs under the statute’s structured procedures.
The statute imposes strict timelines. Builders must acknowledge receipt of the notice within 14 days, complete inspections within 14 days after acknowledgment, and may offer repairs within 30 days of inspection. This framework reflects the Legislature’s intent to prioritize repair over litigation.
Limited Homeowner Options When a Repair Is Offered
When a builder makes a repair offer, the homeowner’s options are narrowly defined. Civil Code section 918 does not allow a homeowner to simply reject the offer because it appears inadequate. Instead, the homeowner must either authorize the builder to perform the repairs or request up to three alternative contractors who are not owned or controlled by the builder.
If alternative contractors are requested, the statute allows an additional inspection, requires the builder to present contractor options within specified timeframes, and then requires the homeowner to authorize either the builder or one of the selected contractors. Even if mediation is requested and fails, the statute expressly requires that the repair be allowed to proceed.
When Litigation Is Permitted Without Allowing Repair
Although SB 800 generally requires homeowners to allow repair attempts, the statute recognizes important exceptions.
First, if the builder fails to strictly comply with the statutory timelines—by failing to acknowledge notice, inspect, offer repairs, or complete repairs as required—the homeowner is released from the prelitigation process and may proceed directly to litigation. Courts have held that missed deadlines can have this effect even where the homeowner’s initial notice was imperfect.
Second, SB 800 allows builders to make a cash settlement offer instead of a repair offer. In that specific circumstance, the homeowner may accept the cash offer or reject it and immediately file suit. This is one of the few contexts in which outright rejection is expressly permitted.
Third, if repairs are completed but are inadequate or improperly performed, the homeowner may file an action for violation of SB 800 standards, inadequate repair, or both.
Post-Repair Rights and Available Damages
Allowing a repair does not mean the homeowner forfeits legal rights. SB 800 expressly prohibits builders from conditioning required repairs on a release or waiver of claims. After repairs are completed, homeowners may pursue litigation and recover a broad range of damages, including the reasonable cost of correcting defective or improper repairs, damages caused by repair efforts, investigative costs, and relocation expenses.
This damages framework is designed to ensure that homeowners are not economically harmed by being required to allow repairs that ultimately prove insufficient.
No General Right to Self-Repair During the Process
SB 800 does not authorize homeowners to bypass the statutory process and perform their own repairs simply because they believe the builder’s proposal is inadequate. The statute consistently channels homeowners through the builder repair process or the alternative contractor procedure.
While successful litigation can later recover the cost of proper repairs, unilateral self-repair during the prelitigation phase is not contemplated by the statute.
A Note on Emergency Situations
California courts have acknowledged that emergency conditions present difficult questions under SB 800, particularly where defects cause sudden or escalating damage and homeowners act reasonably to mitigate losses. However, the California Supreme Court has expressly declined to definitively resolve how SB 800 applies in true emergency scenarios. As a result, any emergency-based deviation from the statutory process remains narrow and fact-specific.
Key Takeaway
Under California’s SB 800 Right to Repair Act, homeowners generally may not reject a builder’s repair offer outright, even if it appears inadequate. The statute prioritizes repair, limits homeowner response options, and permits litigation only in defined circumstances—such as missed deadlines, cash settlement offers, or inadequate completed repairs. While SB 800 preserves meaningful post-repair remedies, navigating the process requires careful attention to the statute’s timelines and constraints.
Why a General Contractor Cannot Take a Single-Trade Job in California — and the Consequences of Doing So
In California, a common misconception is that a licensed general contractor may bid or perform any type of construction work. That assumption is wrong. For Class B general building contractors, the scope of permissible work is tightly regulated—and bidding or performing a single-trade project can render the contractor legally unlicensed, with severe consequences.
The Rule: A Class B Contractor Must Perform at Least Two Unrelated Trades
Business and Professions Code section 7057(b) governs the scope of work a Class B general contractor may perform as a prime contractor. The statute provides that a general contractor may not take a prime contract for a project involving trades other than framing or carpentry unless the prime contract requires at least two unrelated building trades, or the contractor holds the appropriate specialty license or subcontracts the work to a properly licensed specialty contractor.
Framing and carpentry do not count toward the two-trade requirement. As a result, a project involving only one specialty trade—such as roofing—cannot be taken by a Class B contractor unless the contractor holds the corresponding specialty license.
Why the Law Exists
This restriction was added in 1997 to overrule earlier case law that had allowed general contractors to take single-trade jobs. The Legislature made clear that the purpose of the change was consumer protection: to prevent contractors who lack demonstrated competence in a particular specialty from performing work that requires a specialty license, and to ensure that specialty work is performed by those properly qualified to do it.
In short, the law is designed to stop general contractors from functioning as de facto specialty contractors without the required licensing.
Licensing Is Determined Contract by Contract
Compliance with section 7057(b) is determined on a contract-by-contract basis. Each separate contract must independently satisfy the two unrelated trades requirement. Separate permits and scopes of work matter. A contractor cannot combine multiple projects or rely on work performed under a different permit to retroactively justify a single-trade contract.
If a contractor takes a separate contract for work involving only one specialty trade—and lacks the appropriate specialty license—that contractor is operating outside the scope of its Class B license.
The Consequence: “Unlicensed” Under Section 7031
When a contractor performs work outside its licensed classification, California law treats the contractor as unlicensed for that work—even if the contractor holds a valid license in another classification.
Under Business and Professions Code section 7031, an unlicensed contractor is barred from recovering compensation for that work. Even more significantly, section 7031 allows the customer to recover all compensation paid for the unlicensed work through disgorgement.
This is a strict liability statute. Intent, good faith, substantial performance, or the quality of the work do not matter. If the contractor was unlicensed for the specific work performed, compensation must be forfeited.
Practical Consequences
The practical repercussions are severe. A Class B contractor who improperly bids or performs a single-trade job may be required to disgorge all amounts paid for that work and is barred from enforcing contract claims related to it. In litigation, this often turns what appears to be a payment dispute into a one-sided remedy in favor of the property owner.
Key Takeaway
In California, a general contractor’s license is not a catch-all. A Class B contractor generally cannot bid or perform a single-trade job unless it involves at least two unrelated trades or the contractor holds the required specialty license. Violating this rule renders the contractor unlicensed for that work and exposes it to disgorgement and forfeiture under section 7031. The financial consequences can be far greater than the value of the work itself.
Forced Dual Agency in California Real Estate: Why It’s Illegal and What the Consequences Are
California law permits real estate agents to act as dual agents—representing both buyer and seller—but only under narrow conditions. When dual agency is imposed, concealed, or coerced, it crosses a bright legal line. Forced dual agency is illegal under California law and carries serious consequences for agents and brokers who engage in it.
This distinction is not technical. It reflects California’s longstanding policy that consumers must knowingly and voluntarily consent before being placed into a conflicted agency relationship.
The Heightened Fiduciary Duty of Dual Agents
California courts impose the highest fiduciary duties on real estate agents. Agents owe their principals duties of undivided loyalty, full disclosure, and good faith. When an agent acts as a dual agent, those duties are heightened, not relaxed.
A dual agent must disclose all material facts that could reasonably affect a party’s decision to consent to dual representation. Disclosure must be complete, accurate, and timely. Simply disclosing that dual agency exists is not enough; the agent must explain its implications so that any consent is informed and voluntary.
Why Forced Dual Agency Is Illegal
California law prohibits an agent from representing more than one party in a real estate transaction without the knowledge and consent of all parties. Consent cannot be meaningful where material facts are concealed, misrepresented, or predetermined.
Forced dual agency commonly arises when buyers are told—explicitly or implicitly—that accepting dual representation is a condition of purchasing a property, or where agency arrangements are fixed in advance by sellers or brokers in a way that eliminates genuine choice. In those circumstances, any purported consent is illusory.
Why Disclosure Forms Do Not Cure Coercion
Disclosure forms do not legitimize dual agency where consent is not truly voluntary. Courts have rejected the notion that the mere inclusion of statutory disclosure language satisfies an agent’s fiduciary obligations.
An agent must affirmatively disclose the nature of the dual agency, the conflicts it creates, and the alternatives available. Where dual agency is effectively imposed or concealed, paperwork cannot retroactively convert coercion into informed consent.
Legal Consequences of Forced Dual Agency
The consequences of forced dual agency are severe. Agents who breach their fiduciary duties through undisclosed or coerced dual representation face potential license discipline, including suspension or revocation. Courts routinely order forfeiture and disgorgement of commissions obtained through such conduct, even in the absence of intent to deceive or proof of actual damages. Because these violations constitute constructive fraud, courts may also impose equitable remedies such as constructive trusts, treating the agent as holding the commission for the benefit of the injured party.
Key Takeaway
Dual agency in California is lawful only when it is fully disclosed, voluntary, and knowingly accepted. Forced or coerced dual agency—whether through misrepresentation, concealment, or predetermined arrangements—is illegal. The law responds by stripping agents of compensation and imposing remedies designed to deter conflicted representation and protect consumers.
A Final Note
If you—or someone you know—believes they were pressured into dual agency, denied a meaningful choice of representation, or only later discovered that an agent was representing both sides, it is worth having the situation reviewed. These issues are highly fact-specific, and early legal guidance can help determine whether the agency relationship was lawful and what remedies may be available.
Indemnity vs. Limitation of Liability in California Construction Contracts: What’s Allowed and What’s Void
In California, the rules governing indemnity clauses and limitation-of-liability clauses are especially strict in the context of construction contracts. While these provisions appear in many types of agreements, the analysis described here applies specifically to contracts that fall within California’s construction-contract statutes.
That distinction matters, because California law imposes public-policy limits on how risk can be shifted in construction-related agreements—limits that do not necessarily apply in other commercial contexts.
Limitation-of-Liability Clauses in Construction Contracts
A limitation-of-liability clause caps or restricts the damages one contracting party may recover from another. It limits exposure rather than shifting responsibility. These clauses are common in construction-related professional services agreements, where the risk profile may far exceed the fee involved.
California law generally permits limitation-of-liability provisions in construction contracts where the parties have negotiated and expressly agreed to them. Civil Code section 2782.5 expressly allows parties to allocate, limit, or cap liability by agreement, including liability arising from design-related services.
Importantly, a limitation-of-liability clause does not require one party to defend or indemnify another. It simply defines the maximum liability between the parties to the contract.
Indemnity Clauses in Construction Contracts
Indemnity clauses operate very differently. They impose an affirmative obligation on one party to protect another from claims, damages, or liabilities, often including third-party claims. Rather than limiting liability, indemnity provisions shift it.
Because of their impact, indemnity clauses in construction contracts are strictly construed. California courts require that indemnity obligations be stated clearly, explicitly, and unequivocally. Courts will not infer an indemnity obligation from general language, indirect references, or strained interpretations of unrelated clauses.
When Indemnity Clauses Are Void in Construction Contracts
California law draws a firm line in construction contracts. Civil Code section 2782(a) renders void and unenforceable any provision that requires one party to indemnify another for the indemnitee’s sole negligence or willful misconduct.
This prohibition reflects a strong public policy: parties involved in construction may not contractually force others to bear responsibility for their own negligence. If an indemnity clause attempts to do so, it is not merely disfavored—it is void.
Why the Definition of “Construction Contract” Matters
These rules apply only if the agreement at issue qualifies as a construction contract. California law defines that term broadly, covering not only agreements for physical construction work but also contracts for services that are connected to or performed in support of construction activities.
As a result, agreements that might not intuitively be thought of as “construction contracts”—including certain professional or inspection services—may still fall within these statutory limits.
Key Takeaway
In California construction contracts, indemnity clauses and limitation-of-liability clauses are governed by very different rules. One shifts responsibility and is tightly regulated; the other limits exposure and is generally enforceable when properly negotiated. Because “construction contract” is defined broadly, these issues arise more often than parties expect—and careful drafting is essential to avoid provisions that are unenforceable from the start.
Triggering California’s SB 800 Right to Repair Act: Why the Notice of Claim Matters
California’s Right to Repair Act (Civil Code §§ 895–945.5), commonly known as SB 800, requires homeowners to follow a mandatory prelitigation process before filing construction defect lawsuits. That process begins with a written notice of claim.
Whether SB 800 applies at all often turns on whether the homeowner sent a legally sufficient notice under Civil Code section 910. That threshold issue can determine whether statutory timelines, inspection rights, and repair obligations are enforceable.
SB 800 Is Triggered by Notice, Not a Lawsuit
SB 800 is triggered when a homeowner serves a written notice of claim alleging construction defects. The statute gives this notice the same force and effect as the commencement of legal proceedings, even though no lawsuit has been filed. Once notice is properly served, the builder must acknowledge the claim, inspect the property if it elects to do so, and timely respond under the statute.
If the notice is insufficient, the builder may argue SB 800 was never triggered. If it is sufficient, the builder must strictly comply with the statute’s deadlines or risk losing its statutory protections.
Civil Code Section 910: Precise Requirements, Practical Application
Civil Code section 910 sets out what appear to be precise prerequisites for triggering the SB 800 prelitigation process. The statute requires a written notice, served by specified methods, identifying the claimant, alleging a violation of the Right to Repair Act, and describing the claimed defects in reasonable detail sufficient to determine their nature and location.
Standing alone, section 910 can read as demanding strict formal compliance, suggesting that deviations in format, labeling, or specificity could defeat a homeowner’s ability to invoke SB 800. In practice, however, the statute’s precision is aimed at substance rather than ceremony. The listed requirements exist to ensure the builder receives meaningful notice and a fair opportunity to respond—not to elevate form over function.
This distinction becomes critical in disputes over whether SB 800 was properly triggered. While the elements of section 910 matter, courts focus on whether the notice accomplished its intended purpose.
Blanchette v. Superior Court: Imperfect Notices Still Count
In Blanchette v. Superior Court (2017) 8 Cal.App.5th 521, the Court of Appeal held that even a facially deficient notice can trigger SB 800 if it contains the basic statutory elements. A builder who believes a notice lacks detail may not ignore it. Instead, the builder must acknowledge receipt and raise any concerns within the statutory timeframe.
Blanchette makes clear that SB 800 favors prompt engagement over technical gamesmanship. Builders who fail to respond risk forfeiting the statute’s protections.
Why Triggering SB 800 Matters
Properly triggering SB 800 starts the clock on the builder’s obligations and limits delay. If a builder fails to timely acknowledge the claim, inspect, offer repairs, or complete repairs, the homeowner may be released from the prelitigation process and proceed directly to litigation.
A Practical Note on Getting It Right
Because SB 800 notice triggers strict timelines and significant legal consequences, small missteps at the outset can create problems later. While the law allows some flexibility in form, disputes over sufficiency, service, and timing are common and often aggressively litigated. In practice, involving experienced counsel early can help ensure the notice is properly drafted, served, and documented, and can reduce the risk that procedural issues overshadow the merits of the defect claims themselves.
Key Takeaway
SB 800 notice disputes are common, but courts focus on substance, not labels. As Blanchette demonstrates, imperfect notices can still be legally effective, and builders ignore them at their own risk. Given the procedural complexity and stakes, careful handling of the notice stage is often critical to protecting a homeowner’s rights.
California’s New Retention Law: What Multi-Family Developers and Contractors Need to Know
Effective January 1, 2026, California Civil Code section 8811 fundamentally changes retention practices on private construction projects. For the first time, California law imposes a statutory cap on retention—while carving out a significant exception for certain multi-family residential developments.
The General Rule: 5% Cap on Private Projects
Section 8811 limits retention on private works of improvement to 5% of each payment, with total retention also capped at 5% of the contract price. This limitation applies at every level of the contracting chain and prevents higher retention percentages from being imposed on subcontractors than those applied to the prime contractor.
This represents a major shift from prior practice. Before section 8811, California had no statutory limits on retention for private projects, and 10% retainage was common.
The Residential Project Exception
The 5% cap does not apply to a residential project that is not mixed-use and does not exceed four stories. If both conditions are met, there is no statutory maximum retention, and parties may negotiate retention terms freely.
If a project includes commercial uses or exceeds four stories, the exception does not apply, and the 5% cap governs.
Impact on Multi-Family Housing
For multi-family developments, the distinction is critical. Purely residential projects of four stories or less are exempt from the retention cap, while mixed-use or taller developments are subject to the 5% limit. The law preserves flexibility for smaller residential projects while imposing uniform limits on larger or more complex developments.
Performance Bond Exception
Section 8811 also allows higher retention where a subcontractor fails to provide a required performance and payment bond after receiving advance written notice that bonding would be required.
Enforcement and Attorney’s Fees
The statute includes a mandatory attorney’s fee award for the prevailing party in any action to enforce its provisions, giving the retention limits real teeth.
Key Takeaway
Civil Code section 8811 marks a significant change in California construction law. For multi-family projects, whether retention is capped at 5% will often turn on two questions: is the project mixed-use, and does it exceed four stories? Answering those questions early is essential to structuring compliant contracts once the law takes effect in 2026.
How California’s Right to Repair Act Applies to HOAs
Understanding SB 800 in the HOA Context
California’s Right to Repair Act (SB 800) doesn’t just protect individual homeowners — it also applies to homeowners’ associations (HOAs) responsible for managing common areas in newly built communities.
For HOAs, this law is one of the most powerful tools available to address defects in new construction, including problems with roofs, balconies, siding, waterproofing, drainage, and other shared systems.
What the Law Covers
Under Civil Code §§ 895–945.5, the Right to Repair Act establishes specific building performance standards that developers must meet.
For example:
Roofs and exterior walls must be waterproof and weather-resistant.
Plumbing, electrical, and mechanical systems must operate properly.
Structural components must be free from significant movement or failure.
Common areas must drain properly and prevent water intrusion.
When these standards are violated — even before damage occurs — the HOA has the right to demand that the builder repair the defects.
How an HOA Brings a Claim Under SB 800
Here’s how the process works for associations:
Notice of Claim – The HOA, through its attorney, sends a written notice to the builder or developer identifying the defects.
Builder Response – The builder has 14 days to acknowledge the claim and may request access for inspections.
Inspection and Repair Offer – The builder can inspect the affected areas and either offer to make repairs or reject the claim with an explanation.
Repairs and Mediation – If repairs are offered, they must be completed within a reasonable time. The parties may also mediate before any lawsuit is filed.
Litigation (if necessary) – If the builder fails to respond, refuses to repair, or performs inadequate repairs, the HOA can file a lawsuit to recover repair costs and damages.
This process is mandatory — meaning that an HOA generally must comply with SB 800’s pre-litigation procedures before filing suit.
Common Areas and HOA Standing
Under Civil Code §5980, the HOA has the right (“standing”) to bring claims for defects in:
Common areas (roofs, walls, garages, hallways, elevators, etc.),
Portions of individual units that the HOA is responsible to maintain, and
Any defects that affect multiple owners.
Individual homeowners may also have their own claims for interior or unit-specific issues, but SB 800 allows the HOA to address community-wide construction problems on behalf of the membership.
Deadlines and Time Limits
Just like individual homeowners, HOAs must bring their SB 800 claims within the statute of repose periods specified in the law:
Fit and finish (paint, flooring, cabinets, etc.) - 1 year
Plumbing, electrical, mechanical systems - 2 years
Water intrusion and building envelope - 4 years (for drainage issues) to 10 years (for major waterproofing failures)
Structural and load-bearing components - 10 years
Because many of these time limits begin when the project is completed or turned over, it’s critical for HOAs to act quickly after transition from developer control.
Why the HOA’s Attorney Must Lead the Process
All SB 800 notices, inspections, and expert evaluations should be coordinated through the HOA’s legal counsel.
When the attorney retains engineers and consultants to inspect and prepare reports, those materials are protected under the attorney work product privilege. If the property manager or board hires experts directly, those reports can become discoverable by the builder — jeopardizing the HOA’s case.
By engaging counsel early, the HOA ensures that the entire process — from initial inspection to potential litigation — is handled strategically and confidentially.
Practical Tips for HOA Boards
Act early after turnover. Don’t assume minor leaks or cracks are “normal.” They may signal bigger issues.
Engage experienced legal counsel. Construction defect law is specialized — the right attorney will coordinate the expert investigation.
Document everything. Keep maintenance records, owner complaints, and repair histories.
Preserve evidence. Don’t make major repairs before consulting legal counsel; doing so can destroy critical evidence.
Bottom Line - The Right to Repair Act gives HOAs a clear, structured way to pursue construction defect claims — but only if they act within the statute’s timeframes and follow its procedures carefully.
By hiring an experienced construction defect attorney early, the HOA can coordinate expert inspections, protect privileged communications, and preserve the association’s right to recover repair costs.
The Developer Turnover — Why HOAs Should Act Early to Protect Their Rights
The Critical Moment: Transition from Developer to Homeowners
When a new condominium or planned community is completed, the developer typically controls the HOA during the early phase of the project. As homes sell and a majority of units or lots transfer to owners, control of the association shifts from the developer’s appointees to the homeowner-elected board.
This “transition period” is one of the most important — and risky — times for an HOA. It’s the first opportunity for the board to act independently to review how the project was built and whether any construction defects or maintenance issues exist.
Common Issues That Surface After Turnover
The following problems often emerge soon after the developer hands over control:
Water intrusion from balconies, windows, or roofs
Cracking in stucco, concrete, or foundations
Improper drainage causing standing water or erosion
Mechanical system failures (plumbing, HVAC, electrical)
Incomplete or missing maintenance records
Deferred repairs that were never properly funded by the developer
These issues may be early warnings of deeper defects — but without proper investigation and legal guidance, an HOA may miss the opportunity to pursue the responsible parties before statutes of limitation expire.
Why the New Board Needs Independent Legal Counsel
If any of the early warning signs exist, the new board should promptly retain independent legal counsel experienced in construction defect and HOA law — not the law firm that represented the developer during setup.
Here’s why:
The developer’s counsel and consultants owe duties to the developer, not the association.
There may be conflicts of interest when evaluating construction quality or warranties.
Legal counsel can help the new board review records, retain experts, and preserve critical deadlines for defect claims under the Right to Repair Act (SB 800) or other laws.
Having the right attorney early ensures that the HOA is acting in the best interests of the homeowners — not relying on information prepared by those responsible for the project’s construction.
What the Attorney Will Do During Transition
An experienced construction defect attorney will:
Review Developer Records: Examine contracts, warranties, maintenance manuals, and turnover documentation to identify missing or incomplete records.
Coordinate Expert Inspections: Retain engineers, architects, and other specialists to inspect common areas and building systems — under the attorney’s direction to preserve the work product privilege.
Evaluate Potential Defects: Determine whether observed issues may stem from design or construction defects.
Preserve Evidence and Deadlines: Ensure that statutory notice and claim procedures (like SB 800) are followed before time runs out.
Advise the Board: Help the HOA make informed decisions about warranty claims, repairs, and communication with the developer.
By engaging counsel right away, the association can begin building a confidential and privileged record of its investigation — something that cannot be done if the manager or board hires consultants directly.
Why Acting Quickly Matters
Under California law, deadlines for construction defect claims begin running when defects are discovered — and they can expire in as little as one to ten years depending on the type of defect.
If the HOA waits to act, it may lose its ability to recover repair costs from the developer, builders, or insurers.
Bottom Line – The developer turnover period is the HOA’s first — and best — chance to protect homeowners’ investment. If there are signs of potential construction defects, by hiring experienced construction defect counsel early, the association can conduct a privileged investigation, identify potential issues, and preserve all available claims before it’s too late.
Why HOAs Should Hire an Attorney — Not the HOA Manager — to Investigate Construction Defects
When Red Flags Turn into Action
In a prior post, we discussed warning signs that may indicate construction defects — things like leaks, cracks, drainage issues, or mechanical failures. Once those red flags appear, the next step is crucial: don’t start hiring engineers or contractors yourself.
Instead, the homeowners’ association should first consult an attorney experienced in construction defect law.
Why? Because the way you handle the initial investigation can make or break the HOA’s ability to bring a claim later — especially when it comes to preserving confidentiality and the attorney work product privilege.
Why the Attorney — Not the Property Manager — Must Hire the Experts
When a property manager or board hires an expert (like an engineer or contractor) directly, anything that expert writes can be discoverable if a lawsuit is later filed. That means the developer or builder can demand to see those early reports – even if they’re unfavorable or preliminary.
By contrast, when the attorney retains the experts, those same communications and reports are protected as attorney work product.
This distinction is not just technical — it’s critical. Under California law:
Reports prepared at an attorney’s request, for purposes of evaluating potential claims or litigation, are privileged and confidential.
Reports prepared by or for the property manager or HOA (without counsel) are not privileged and can be used by the builder or developer later.
That’s why it’s essential that the attorney hires the experts directly and manages the entire investigation.
How the Process Typically Works
Here’s how a proper construction defect investigation should unfold:
Attorney Engagement: The HOA board retains a construction defect attorney.
Preliminary Review: The attorney reviews project documents, warranties, and maintenance records.
Expert Retention: The attorney – not the manager – retains qualified experts (engineers, architects, or general construction specialists).
Site Inspections: The experts perform inspections under the attorney’s direction and prepare confidential reports for legal review.
Strategy and Communication: The attorney uses those findings to advise the board on next steps — such as sending statutory notices under the Right to Repair Act (SB 800) or preparing a formal claim.
By channeling all work through counsel, the HOA preserves both attorney-client privilege and work product protection – meaning the builder cannot demand those materials later if litigation arises.
The Role of the Property Manager
The property manager still plays an important role. Managers are often the first to observe issues, coordinate with homeowners, and maintain records of complaints.
However, once defects are suspected:
The manager should stop hiring outside consultants or contractors to “inspect” the problem.
Instead, the manager should report the issue to the HOA board and help the board engage legal counsel.
This protects the HOA’s rights while allowing a coordinated, professional investigation led by the attorney.
What Can Go Wrong If You Don’t Involve Counsel Early
HOAs that skip this step often face costly consequences:
Loss of privilege: Early expert reports become discoverable by the builder.
Conflicting findings: Multiple contractors or consultants produce inconsistent reports that weaken the HOA’s credibility.
Statute of limitations issues: Without legal guidance, deadlines to file a claim under SB 800 or other laws may expire.
Increased costs: Repeating investigations later under attorney supervision wastes time and money.
Bringing in counsel early avoids all of these pitfalls – and positions the HOA to pursue repairs or recovery efficiently.
Bottom Line – When construction problems arise, property managers should not act alone. The HOA’s first call should be to a qualified construction defect attorney who can retain the right experts under the protection of the attorney work product privilege.
This simple procedural step can preserve confidentiality, protect the association’s legal position, and ensure that any investigation is done properly from the start.
Red Flags for Property Managers — Spotting Potential Construction Defects Early
Why Early Detection Matters
For property managers and homeowners’ associations (HOAs), identifying potential construction defects early can make the difference between a manageable repair and a multimillion-dollar lawsuit.
Under California law – including the Right to Repair Act (SB 800) – HOAs often have rights to pursue claims for construction defects affecting common areas and individual units. But those rights can expire if problems aren’t recognized and documented in time.
Here are some of the most common red flags that property managers should watch for during routine inspections and homeowner reports.
1. Water Intrusion or Moisture Stains
Water is the number one enemy of any building. Early signs of leaks or water damage are often the first indicators of more serious underlying defects.
Watch for:
Water stains on ceilings or walls
Damp or musty odors in units or common areas
Efflorescence (white mineral deposits) on concrete or stucco
Warping or delamination of flooring or baseboards
Leaks around windows, doors, or roof penetrations
Possible causes: Defective flashing, improper waterproofing, roof installation errors, window or deck detailing failures, or faulty exterior stucco systems.
If you notice recurring leaks in multiple locations, it’s often not an isolated problem — it’s a sign of systemic building-envelope defects.
2. Cracking in Stucco, Foundations, or Concrete
Cracks are not always structural failures — but they can be clues to serious issues.
Look for:
Horizontal or diagonal cracks in stucco, especially near windows or floor lines
Large cracks in concrete slabs, driveways, or retaining walls
Uneven floor levels or doors that don’t close properly
Possible causes: Soil movement, inadequate compaction, poor structural design, or improper curing and reinforcement of concrete.
Consistent cracking patterns throughout a building or complex often point to design or construction deficiencies, not simple settling.
3. Roofing or Deck Failures
Flat roofs, podium decks, and balconies are among the most defect-prone elements in multifamily construction.
Warning signs include:
Ponding water or clogged drains
Cracked or blistered roofing membranes
Soft or spongy deck surfaces
Rusting metal guardrails or flashing
Leaks below balconies or walkways
Because roofs and decks are major waterproofing systems, any breakdown can quickly lead to widespread damage if not addressed.
4. Drainage and Site Grading Problems
Improper drainage is a hidden but costly defect. Water that isn’t diverted correctly can undermine foundations, damage landscaping, and cause flooding or erosion.
Red flags include:
Standing water near foundations or common walkways
Erosion around slopes or retaining walls
Water flowing toward, rather than away from, buildings
Persistent dampness in garages or crawl spaces
Often, drainage problems trace back to poor site grading, inadequate waterproofing, or missing subsurface drainage systems.
5. HVAC, Plumbing, and Electrical System Failures
Mechanical and utility systems in new developments should function reliably for years. Early failures often indicate design or installation defects.
Watch for:
Repeated plumbing leaks or slab leaks
Inconsistent hot/cold water pressure
Frequent tripping of breakers or flickering lights
Poor HVAC performance or condensation issues
Sometimes these issues stem from improper venting, undersized systems, or defective materials.
6. Persistent Owner Complaints Across Multiple Units
Property managers often hear isolated complaints. But if multiple owners report similar problems – such as leaks, cracks, or HVAC failures – it’s time to investigate more deeply.
Consistent, widespread complaints are often the first sign of systemic construction issues. Keeping detailed records of these reports can be critical later if an HOA decides to pursue a defect claim.
7. Premature Deterioration of Building Materials
New construction should last for decades before major replacement is needed. When exterior finishes, roofing, paint, or waterproofing systems begin failing prematurely — within just a few years — it’s a sign that something went wrong during design or construction.
Common examples include:
Stucco discoloration or delamination
Rusting balcony railings or hardware
Paint or coating failures
Window seal failures or fogging between panes
Bottom Line - Property managers are on the front lines of identifying potential construction defects. Early detection and documentation can protect homeowners, preserve property values, and preserve the HOA’s legal rights.
When in doubt, don’t assume a leak or crack is “normal.” In many cases, these are early warnings of underlying construction defects that may justify legal action under California law.
Warranties under California’s Right to Repair Act (SB 800)
California’s Right to Repair Act, SB 800 (Civil Code §§ 895–945.5), sets out minimum “performance standards” that new-home builders must meet. If those standards are violated, homeowners may have claims under the Act. Some of the key categories include:
Fit and Finish / Workmanship & Materials
Interior finishes, cosmetic work, trim, flooring, paint, cabinetry, doors/windows, etc., must meet “industry standards” and be free from defects in workmanship and materials.
1 year from the close of escrow (or other date defined by statute) for those defects.
Plumbing, Electrical, Mechanical Systems
Plumbing, electrical, mechanical systems must be installed properly, function as intended, not materially impair habitability, and comply with building standards.
2 years for defects in systems (plumbing, electrical, mechanical) under SB 800’s standards.
Exterior Components / Water Intrusion / Moisture Barrier
Components intended to resist water intrusion (roofing, flashing, exterior walls, windows, moisture barriers) must remain weathertight; the so-called “moisture barrier” systems must prevent unintended water penetration.
5 years (for paint, surface coatings) or longer for major envelope or moisture barrier defects depending on the part of structure and the timing rules under the statute.
Structural / Major Structural Defects
The structural components of the home must perform for at least 10 years. “Structural defect” means a defect in the load-bearing portions, such that they fail to provide reasonable structural support and safety.
10 years after the date of “substantial completion.”
Other Building Standards
SB 800 provides many more performance standards in Civil Code § 896 (for example, requirements for site drainage, foundation, framing, sloping grade, separation of incompatible materials). Homeowners can assert claims for defects that violate those standards.
10 years for most standards not covered by shorter warranties, subject to statute of limitations provisions.
Why These Warranties Matter
These warranty obligations under SB 800 are a central part of the “right to repair” scheme. They:
Define which defects the builder must address under the pre-litigation and repair processes;
Fix the maximum time periods that homeowners can rely on the statutory warranty; and
Serve as a benchmark against which homeowners and builders measure repair obligations and disputes.
If a defect arises outside those time windows, a homeowner who tries to claim it under SB 800 may be barred – even if the defect is real.
Understanding California’s Right to Repair Act (SB 800)
1. What Is the Right to Repair Act?
California’s Right to Repair Act, also known as Senate Bill 800 (SB 800), is a law that gives homeowners in new residential developments certain rights when they discover construction defects.
It applies to new homes sold by builders or developers after January 1, 2003, and it sets out both building standards and a mandatory process for handling defect claims.
The goal of the Act is to reduce litigation by requiring homeowners and developers to try to resolve defect claims through a structured repair process before going to court.
2. How the Process Works
Here’s a simplified overview of the Right to Repair Act procedures:
Notice of Claim – The homeowner must send the builder a written notice describing the defects.
Builder’s Response – The builder has a short window (usually 14 days) to acknowledge receipt and can request an inspection.
Inspection and Offer to Repair – The builder can inspect the property and must either offer to repair the defects or reject the claim with an explanation.
Repair Process – If repairs are offered, the builder must make them within a reasonable time, following the statute’s timelines and standards.
Mediation Option – The law also allows for mediation before litigation begins.
These steps are mandatory – meaning the homeowner generally can’t file a lawsuit for construction defects until the repair process is completed or the builder fails to comply with the law’s deadlines.
3. What If the Developer Doesn’t Fix the Problems?
If the builder or developer fails to respond, refuses to repair, or doesn’t complete repairs properly or on time, the homeowner can then file a lawsuit for violation of the Right to Repair Act and other claims, such as negligence or breach of warranty.
Importantly, once the builder fails to follow the SB 800 process, the homeowner is released from the pre-litigation requirements and can pursue damages for:
The cost of repairs,
Relocation expenses,
Diminished value of the home, and
Other economic losses related to the defects.
4. What the Right to Repair Act Doesn’t Cover
The Right to Repair Act only applies to new residential construction sold by a builder or developer.
It does not apply to:
Custom homes built by a general contractor for an individual homeowner;
Remodels, additions, or renovations to existing homes; or
Commercial or mixed-use buildings.
If your contractor built or remodeled a home specifically for you – rather than selling you a completed home in a development — your rights and remedies are governed by traditional contract and tort law, not SB 800.
5. How SB 800 Changed the Law After Aas v. Superior Court
Before SB 800, California’s landmark case Aas v. Superior Court (2000) 24 Cal.4th 627 applied the economic loss rule to bar homeowners from recovering money for construction defects that had not yet caused property damage or personal injury.
Under Aas, homeowners could not sue under a negligence theory for purely defective or substandard construction — only for defects that resulted in actual property damage or bodily injury.
SB 800 was the Legislature’s direct response to Aas. It overturned the effect of the economic loss rule in residential construction cases covered by the Right to Repair Act (i.e., new construction sold by a developer to the public) by creating a statutory right of action for violations of building standards, even when the defect hasn’t yet caused physical damage.
In other words, under SB 800, homeowners in covered developments can now:
Bring claims for defects that violate specific performance standards (Civil Code § 896 et seq.), even if those defects have not yet caused damage.
Recover the cost to repair the defective conditions before they lead to further damage or safety issues.
However, this change applies only where SB 800 applies — namely, to new homes sold by builders or developers. For custom homes or remodels, the old Aas economic loss rule still governs, meaning homeowners may be limited to contractual remedies unless actual property damage occurs.
Bottom Line – The Right to Repair Act gives new-home buyers a clear, structured process for getting construction defects repaired – but it doesn’t protect everyone. Before assuming SB 800 applies to your situation, it’s important to know whether your home qualifies and whether your builder followed the law’s strict timelines.
Insurance Coverage in Construction Defect Cases — What’s Covered, and What’s Not
The Basics: What a CGL Policy Is Meant to Cover
Most California contractors carry a Commercial General Liability (CGL) policy – typically the standard ISO form. It’s meant to protect contractors against liability for accidents that cause bodily injury or property damage to others.
Under the standard ISO policy, the insurer agrees to pay “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies,” but only if the injury or damage was caused by an “occurrence.”
An “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” So, in most construction defect cases, the critical question is whether the alleged damage was the result of an accident — as opposed to faulty workmanship alone
The Key Point: Defective Work Itself Is Not “Property Damage”
California courts generally hold that the cost to repair or replace the contractor’s own defective work is not covered. The CGL policy is not a performance bond — it doesn’t insure against the contractor’s failure to do the job right.
As one court put it, the purpose of these exclusions is to “make the contractor stand its own replacement and repair losses while the insurer takes the risk of injury to the property of others.” (Western Employers Ins. Co. v. Arciero & Sons, Inc. (1983) 146 Cal.App.3d 1027, 1031)
Common Exclusions Insurers Rely On
Here are the most commonly invoked exclusions in defective construction cases:
1. Damage to “That Particular Part” of Property (j)(5)
No coverage for property damage to “that particular part” of real property the insured or its subcontractors are actively working on.
Applies to damage during construction, not after.
Does not apply if defective work causes damage to other portions of the project. (Armstrong World Industries, Inc. v. Aetna Cas. & Sur. Co. (1996) 45 Cal.App.4th 1)
2. Faulty Workmanship (j)(6)
Bars coverage for property damage to “that particular part” that must be repaired because the insured’s work was done incorrectly.
Applies during construction.
The exclusion doesn’t apply to damage covered under the “products-completed operations hazard” (i.e., damage discovered after completion).
For a general contractor, “your work” usually means the entire project. (George F. Hillenbrand, Inc. v. Ins. Co. of N.A. (2002) 104 Cal.App.4th 784)
3. The “Your Work” Exclusion (l)
Bars coverage for damage to the insured’s own completed work — but not if the damage was caused by a subcontractor’s work.
This is often called the “subcontractor exception.”
It’s why general contractors sometimes have coverage for post-completion property damage caused by their subs. (Maryland Cas. Co. v. Imperial Contracting Co. (1989) 212 Cal.App.3d 712)
4. The “Your Product” Exclusion (k)
Bars coverage for damage to goods or products made or sold by the insured. In most construction contexts, homes or buildings are not considered “products.” (Maryland Cas. Co. v. Reeder (1990) 221 Cal.App.3d 961)
5. “Impaired Property” Exclusion (m)
Eliminates coverage for property that’s not physically damaged but is less useful because it incorporates defective work.
No coverage for mere loss of use when the problem can be fixed.
But coverage exists when there’s physical injury to other property. (Watts Industries, Inc. v. Zurich American Ins. Co. (2004) 121 Cal.App.4th 1029)
When Coverage Does Exist
Despite these exclusions, many construction defect claims are still covered — especially when:
A subcontractor’s defective work causes property damage to other parts of the project after completion.
The insured purchased a “broad form” endorsement, expanding coverage for subcontractor-caused damage.
The claim involves accidental consequential damage (e.g., water intrusion or fire) rather than the cost to redo the defective work itself.
This is where the Products-Completed Operations Hazard coverage applies — covering bodily injury and property damage that occur after the project is finished, as long as the damage arises out of the contractor’s or its subcontractor’s work and not uncompleted operations
Practical Takeaway
CGL insurance provides vital protection, but its limits are often misunderstood. Contractors should:
Review their policies carefully — especially the “your work” and “subcontractor” provisions.
Work with knowledgeable brokers to ensure they have Products-Completed Operations coverage and subcontractor exceptions.
Notify their carrier promptly if a defect claim arises — coverage often turns on timing and how the claim is presented.
Homeowners and property owners should also recognize that CGL policies are not warranties — they don’t guarantee perfect work, but they can provide important protection when defective work causes real damage.
When a Contractor Loses Their License Without Realizing It - The Hidden Trap of Lacking Workers’ Comp Coverage
In California, every licensed contractor who has employees is required by law to carry workers’ compensation insurance. What many contractors don’t realize is that if they’re required to have workers’ comp insurance but don’t, their contractor’s license is automatically suspended by operation of law—no notice from the Contractors State License Board (CSLB) required.
This rule comes from Business and Professions Code section 7125.2, which says that a license “is automatically suspended” during any period when the licensee is required to have but fails to maintain workers’ compensation insurance.
The California Court of Appeal confirmed this in Wright v. Issak (2007) 149 Cal.App.4th 1116, where a contractor lost his right to payment because his workers’ comp coverage had lapsed. The court held that the lack of insurance meant the contractor was not licensed during the job, even if he had been properly licensed before and after.
The Consequences - No Pay and Possible Disgorgement
If a contractor performs work while unlicensed—even unknowingly—the consequences are harsh. Under Business and Professions Code section 7031, the contractor:
Cannot recover any compensation for work performed while unlicensed; and
May have to disgorge (return) all money paid for that work if the client sues to recover it.
That means a contractor who lets their workers’ comp insurance lapse, even briefly, could find themselves forced to refund every penny they were paid on the project.
Bottom Line - Maintaining workers’ compensation coverage isn’t just about protecting employees—it’s essential to keeping your license valid. A short lapse can silently suspend your license and lead to devastating financial consequences.
The Harsh Reality of Working Without a Contractor’s License
It all begins with an idea.
California’s contractor license laws exist to protect the public from unqualified or dishonest contractors. Because of that, the penalties for working without a valid license are among the harshest in the nation.
California Business and Professions Code section 7031 is both a sword and a shield: it allows property owners to recover all money paid to unlicensed contractors while also barring those contractors from suing for payment. This harsh statute is designed to deter unlicensed construction work by making the loss of compensation absolute.
The Shield - No License, No Right to Compensation
Under Business and Professions Code section 7031(a), an unlicensed contractor cannot recover any compensation for work performed while unlicensed — even if the work was done perfectly and the owner knew about the lack of a license.
That means if a contractor was unlicensed for even one day during a job, they lose their right to be paid for all of it. Courts describe this as a “harsh rule,” but it’s meant to deter unlicensed contracting altogether.
The Sword - Disgorgement: Returning All Money Paid
Under Business and Professions Code section 7031(b), a property owner can sue to recover all money paid to an unlicensed contractor — known as disgorgement.
This strict penalty reflects California’s policy of protecting consumers over contractors’ financial losses. Courts have repeatedly upheld this as a necessary deterrent.
Note, however, that in Eisenberg Village of the Los Angeles Jewish Home for the Aging v. Suffolk Construction Co., Inc. (2020) 53 Cal.App.5th 1209, the court held that the statute of limitations for disgorgement under section 7031(b) is one year from completion or cessation of work. Property owners must act quickly if they wish to pursue the disgorgement remedy.
Bottom Line - California’s licensing laws are intentionally unforgiving. For contractors, the message is simple: stay licensed at all times. For property owners, verify licensing before and during your project — and act quickly if you discover a lapse.
California’s Often Ignored Rules for Home Improvement Contracts
It all begins with an idea.
What California Law Requires in a Home Improvement Contract
Home improvement contracts in California are strictly regulated under Business and Professions Code sections 7159 and 7159.5. These rules protect homeowners by requiring clear, written contracts that spell out the work, price, payment schedule, and key consumer rights.
The Main Requirements
Fixed Contract Price – The total price must be stated in writing. Time and material contracts are not allowed.
Down Payment – The down payment can’t exceed $1,000 or 10%, whichever is less.
Progress Schedule Required – The contract must include a clear payment schedule that shows when each payment is due and what work will be done before that payment is made. In other words, the homeowner should never pay ahead.
No Billing Before Work Completed – A contractor cannot collect payment for work not yet completed — except for the initial down payment, which is limited to the lesser of 10% of the contract price or $1,000. Each payment must match the value of the work actually completed or materials delivered.
Written Change Orders – Any change in price or work must be in writing and signed by both parties.
Start and Completion Dates – The contract must list approximate start and finish dates.
Right to Cancel Notice – Homeowners get three business days to cancel.
CSLB and Insurance Information – The contractor’s license number, workers’ comp status, and CSLB contact info must be disclosed.
CSLB Consequences
The Contractors State License Board (CSLB) may impose serious penalties for violating section 7159, including license suspension or revocation and civil fines.
Red Flags and Practical Experience
In my experience, contractors who ignore the home improvement contract requirements often ignore other laws too — hiring unlicensed subcontractors, not obtaining workers’ comp coverage, or performing poor-quality work. A bad contract – or no contract at all – is often a warning sign of bigger problems.
Bottom Line
A compliant home improvement contract protects both sides, but especially the homeowner. If your contractor does not have a compliant home improvement contract, they could face CSLB discipline, and it may be a red flag for potential other laws and details the contractor may later ignore.
Even a Licensed Contractor Can Lose It all if They Hire an Unlicensed Subcontractor
It all begins with an idea.
Many licensed general contractors assume they’re safe from California’s harsh penalties for unlicensed work – but that’s not always true. In Kim v. TWA Construction, Inc. (2022) 78 Cal.App.5th 808, the Court of Appeal confirmed that even a properly licensed general contractor can face the same “no compensation” and disgorgement penalties if they hire an unlicensed subcontractor.
The Rule Under Business and Professions Code Section 7031
Business and Professions Code section 7031(a) makes it clear: a contractor who is not “duly licensed” at all times during performance may not recover any compensation for the work performed. Subsection (b) goes further — allowing the property owner to sue for disgorgement, forcing the contractor to refund all money paid for the work.
The Kim court held that a general contractor cannot escape these penalties simply by claiming their own license was valid. If the general hires an unlicensed sub, the general is considered to have performed the unlicensed work — and loses the right to compensation for that portion of the project.
The Court’s Reasoning
In Kim, the homeowner sued for disgorgement after learning that the general contractor’s subcontractor was unlicensed. The court sided with the homeowner, finding that section 7031 applies to the entire “construction enterprise,” not just the individual who signs the contract.
The Court explained that allowing generals to benefit from unlicensed subs would defeat the purpose of California’s strict licensing laws, which are intended to protect the public from unqualified contractors and ensure accountability at every level.
The Consequences Are Severe
Even a short period of unlicensed subcontracting can trigger:
Loss of the right to payment for the affected work;
Disgorgement of money already paid under section 7031(b); and
Potential disciplinary action by the CSLB for aiding or abetting unlicensed activity.
Practical Takeaway
For general contractors, the message is clear: verify every subcontractor’s license before work begins — and monitor it throughout the project. A lapse by your sub can put your entire payment at risk.
For property owners, the Kim case reinforces that California’s licensing laws offer strong protection. If your contractor used unlicensed subs, you may have a right to recover what you paid.
Thinking About Firing Your Contractor? Read This First.
It all begins with an idea.
When a home construction project goes sideways, many homeowners’ first instinct is to fire the general contractor. But in California, that can be a costly mistake. Many construction contracts require that before an owner can terminate the contractor, the owner must first provide a written notice of default and a reasonable opportunity to cure the problem.
Failing to follow that procedure can turn the tables — instead of holding the contractor liable, the owner may be found to have wrongfully terminated the contract and breached it themselves
The Law: Strict Compliance Required
California courts strictly enforce contractual termination provisions. As the court explained in Clark v. Tide Water Associated Oil Co. (1950) 98 Cal.App.2d 488, failing to provide a written notice of default and an opportunity to cure is “fatal” to a claim for damages.
Similarly, Hansen v. Fresno Jersey Farm Dairy Co. (1934) 220 Cal. 402 held that when a contract requires written notice, an oral warning doesn’t count. The California Supreme Court in American-Hawaiian Engineering & Construction Co. v. Butler (1913) 165 Cal. 497 went further, holding that the notice must “fairly and fully advise the contractor of what the owner demands, and what the owner will do in the event of noncompliance.”
In short: if your contract says the contractor must get a written notice and time to fix the problem before being terminated, you must follow that procedure to the letter. Otherwise, the termination is ineffective, and you may lose your right to recover damages
Why the “Opportunity to Cure” Matters
California Civil Code §1511 provides that a party’s performance is excused if it is prevented by the act of the other party. That means if a homeowner fires a contractor without allowing them a chance to repair or complete the work, the contractor’s obligations are excused — and the homeowner can’t recover for alleged defects.
The purpose of this rule is practical: it prevents unnecessary litigation and gives contractors the chance to fix issues before the relationship is terminated. Courts view it as a matter of fairness and efficiency — both parties get the opportunity to make things right
Wrongful Termination = No Recovery
If an owner terminates a contractor without following the required notice and cure process, the owner’s claims for breach of contract and damages may fail entirely. Courts have consistently held that such terminations are “ineffectual and vain.”
In those situations, the owner not only risks losing their damage claims, but could also be liable for the contractor’s damages arising from the wrongful termination — including lost profits and unpaid balances
Practical Takeaway for Homeowners
Before you terminate your contractor:
Review your contract carefully. Look for any clause about “notice,” “default,” or “opportunity to cure.”
Put everything in writing. Oral complaints don’t count.
Give the contractor a fair chance to fix the problem. Courts require strict compliance with cure periods.
Consult an attorney before acting. A quick conversation with a construction lawyer can prevent expensive mistakes.
Terminating a contractor feels like taking control — but done the wrong way, it can cost you the right to recover anything at all.