Construction Defect Bill Dies Slow Procedural Death in Senate Judiciary Committee.

Colorado Sen. Jessie Ulibarri (D-Commerce City) introduced SB 220 to address Colorado’s condominium shortage.  However, SB 220 died earlier this month in the Senate Judiciary Committee when it failed to convene on the last day of the legislative session. 

Beginning in 2005 and continuing through the great recession, many builders and developers ceased Colorado multifamily construction entirely.  The Colorado real estate market has rebounded in recent years.  But, multifamily construction remains slow.

One reason for the shortage is builders’ unwillingness to face the almost certain construction defect claims that follow any multifamily construction project.  The motto for multifamily construction in Colorado: If you build it, they will sue.

SB 220 sought to revitalize the condo market by preserving mandatory arbitration provisions in condominium declarations and requiring disclosures to homeowners before commencement of a construction defect claim.

With the demise of SB 220, Colorado’s condo market will remain DOA – at least until next year.

Lower Restraints on New Building Projects Address San Francisco Housing Shortage

Pursuant to San Francisco Mayor Ed Lee’s executive directive 13-01, a working group comprised of individuals from the SF Public Utilities Commission, City Attorney’s Office, Planning Commission and Building Inspection, SF Apartment Association, Rent Board, Small Property Owners, and the Housing Rights Committee, among others, collaborated to address what, to many San Franciscans, is the most pressing problem plaguing the city today – affordable housing, or perhaps more accurately, the lack thereof.CON BLOG_SF Ashbury

San Francisco is no stranger to the spotlight, and recently media all over the country has focused on the effects of the lack of available affordable housing.  Headlines such as “Backlash by the Bay: Tech Riches Alter a City” in The New York Times indicate the nation is watching.  Lee took notice and commissioned the working group to put together a plan with the goal of creating 30,000 new and rehabilitated homes by 2020.

To accomplish this goal in the next six years, the working group recommends the following measures:

  • prioritize development on projects based on the amount of affordable housing proposed;
  • reduce the loss of housing – legal or otherwise – by requiring a Planning Commission hearing when such housing is proposed to be eliminated;
  • coordinate the city’s permitting and asset-holding agencies to gain efficiencies in housing productions; and
  • improve public information and transparency related to the city’s development procedures and pipeline housing project.

This idea of “priority processing” is perhaps most interesting to developers of property in San Francisco.  The working group proposed revising the Planning Department and Permit Processing’s agenda to prioritize 100 percent affordable housing, followed by projects with at least 20 percent on-site or 30 percent off-site affordable housing.  To help expedite the planning and construction of these projects, the plan also proposes concurrent review to ensure that city agencies (Planning, DPW, MoD, DBI, Fire) review applications simultaneously and that developers arrange pre-application meetings with city agencies before permits are filed.  The vision is that developers of projects prioritizing at least 20 percent on-site affordable housing can expedite their pre-building plan review and permit process. Currently this process can take years as many local developers know.

The second task addressed in the plan is the protection or emphasis on reducing the loss of existing housing units. The working group cites the “exceptional and extraordinary circumstances created by the affordability crises” as its motivation to mandate review for loss of any current dwelling units, legal or not.  Any permit to remove an unpermitted unit where there is a feasible path to legalize the unit will be denied. Whether this means your neighbors will soon convert their carport into an official apartment remains to be seen. This is an interesting issue that should be closely monitored moving forward.

Image courtesy of Flickr by Ashleigh Nushawg

Homeowners Maintain Right to Bring Common Law Claims for Construction Defects Causing Property Damage

On Feb. 19,  in Burch v. Superior Court (Premier Homes LLC) B248830, the California Court of Appeal, Second Appellate District, held that the Right to Repair Act (Cal. Civ. Code § 895 et seq.) does not provide the exclusive remedy for a homeowner seeking damages for construction defects that resulted in property damage.  This ruling comes less than a year after the Court of Appeal – in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 1194, 1212 – reached the same conclusion.

CON BLOG_palm treesIn Burch, the plaintiff sued the developer and general contractor of a single-family residence in the Pacific Palisades area of Los Angeles, alleging that construction defects caused property damage.  Since the plaintiff asserted only common law claims, the defendants argued the California Right to Repair Act established the exclusive remedy for a violation of the construction standards set forth.

The Court of Appeal concluded that while the Right to Repair Act provides a remedy for particular residential construction defects that cause no property damage, the act does not limit or preclude common law claims for damages for construction defects that have caused property damage – affirming a finding it made in 2013, when it issued Liberty Mutual.

The Burch case is a reminder that homeowner plaintiffs are not restricted by the Right to Repair Act, and can assert claims for construction defects under the act and common law.  In addition, the Burch case seems to expand the potential liability exposure for general contractors (and possibly subcontractors) to a homeowner plaintiff, in the absence of privity, in instances when they construct a home knowing that it will be marketed to the general public.  The implications of Burch, however, are limited by the ability of a person to recover under the Right to Repair Act.

In turn, see the next blog post on KB Home Greater Los Angeles, Inc. v. The Superior Court of Los Angeles B246769, for an instance when that plaintiff (Allstate Insurance Co.) could have relied on Burch to pursue its claims for damages under a negligence theory despite violating the notice provision under the Right to Repair Act.

Image courtesy of Flickr by Clinton Steeds

To Test or Not to Test, That Is the Question …

By John Keen and Christine Kroupa

In November 2012, voters in Colorado and Washington state approved separate initiatives – Colorado Amendment 64 and Washington Initiative 502 – making it legal for anyone over the age of 21 to possess small amounts of marijuana for recreational use.  Following the legalization of recreational marijuana use in Colorado and Washington, employers have been left to wonder what, if any, impact Amendment 64 and Initiative 502 will have on their ability to test and take employment action against employees for use of marijuana.  This is especially true in the construction industry, where safety concerns are paramount.

Difficulty Testing for Marijuana Use

CON BLOG_drugtestTo understand the complications presented by the legalization of marijuana use, employers must understand the problems associated with reliable testing for marijuana use.  The active ingredient in marijuana, tetrahydrocannabinol (THC), enters the body’s bloodstream rapidly and is detectible in the blood for a short time, usually a matter of hours.  THC is then rapidly metabolized into molecules known as metabolites, which are stored in body fat.

This process creates complications for employers testing for marijuana use.  The problem is shared by law enforcement in Colorado and Washington who are attempting to determine how to test impaired drivers for levels of marijuana intoxication.  Blood or saliva tests can demonstrate current intoxication but not the level of intoxication or impairment.  The types of urine tests typically used by employers only demonstrate whether an individual has recently used marijuana, not intoxication or impairment.  Because of the overriding safety concerns in the construction industry, many employers have zero tolerance for drug use and utilize a urine test to detect any recent use of drugs.

Given the Change in State Law, May Employers Test?

Although marijuana is legal at the state level in Colorado and Washington, it is still outlawed at the federal level.  On Aug. 29, 2013, U.S. Attorney General Eric Holder stated that his office would not interfere with the legalization efforts in Colorado and Washington, however marijuana remains a Schedule 1 drug, the highest classification under the Controlled Substances Act of 1970.  The Department of Justice also clarified that it is not waiving the law, but rather is leaving enforcement up to prosecutorial discretion.  Employers can and should lean on the fact that marijuana is still illegal at the federal level when considering revisions to their drug policy.

Employers can also rely on the fact that the state laws and recent court decisions in Colorado and Washington favor employers in the area of drug testing.  Colorado’s Amendment 64 expressly states that the amendment is not intended “to affect the ability of employers to have policies restricting the use of marijuana by employees.”  Initiative 502 does not address drug testing policies, however state court rulings have been supportive of testing.

The Washington Supreme Court ruling in Roe v. TeleTech Customer Care Mgmt. (Colo.) LLC, 171 Wn.2d 736 (Wash. 2011) provides guidance for employers seeking to set testing policies in Washington.  In Roe, the court ruled that Washington’s Medical Use of Marijuana Act (MUMA) does not protect medical marijuana users from adverse hiring or disciplinary decisions based on an employer’s drug test policy.  The Supreme Court held that MUMA provides an affirmative defense to state criminal prosecutions of qualified medical marijuana users, but “does not provide a private cause of action for discharge of an employee who uses medical marijuana, either expressly or impliedly, nor does MUMA create a clear public policy that would support a claim for wrongful discharge in violation of such a policy.”  This holding applies regardless of whether the employee’s marijuana use was while working or while off-site during nonwork time.  The court also noted that marijuana use is illegal under federal law and that Washington patients have no legal right to use marijuana under federal law.

In Colorado, the Court of Appeals recently ruled the use of medical marijuana is not a lawful activity under § 24-34-402.5 C.R.S. 2012, Colorado’s Lawful Activities Statute.  Coats v. Dish Network LLC, 2013 COA 62 (Colo. Ct. App. 2013) offers Colorado employers further guidance regarding an employer’s ability to maintain drug testing policies and, specifically, policies regarding the use of marijuana.

In Coats, the trial court granted the defendant’s motion to dismiss after determining the plaintiff’s medical marijuana use was not a “lawful activity” under Colorado law, specifically the medical marijuana law did not establish a state constitutional right to medical marijuana use, but rather created an affirmative defense from prosecution for such use. In upholding the trial court’s decision, the Colorado Court of Appeals analyzed the meaning of “lawful” and noted that activities conducted in Colorado, including medical marijuana use, are subject to both state and federal law. Therefore, for an activity to be “lawful” in Colorado, it must be permitted by, and not contrary to, state and federal law. Because the plaintiff’s state-licensed medical marijuana use at the time of his termination was subject to and prohibited by federal law, the court concluded it was not a “lawful activity” for the purposes of the Colorado Lawful Activity Statute.

Interestingly, the Colorado Supreme Court agreed to review the Court of Appeals’ decision for the following two issues:

  1. Whether the Colorado Lawful Activities Statute protects employees from discretionary discharge for lawful use of medical marijuana outside the job where the use does not affect the job performance; and,
  2. Whether the Medical Marijuana Amendment makes the use of medical marijuana “lawful” and confers a right to use medical marijuana to persons lawfully registered in the state of Colorado.

Employees and employers are anxiously awaiting a decision in the Coats case to provide guidance regarding Colorado’s Amendment 64.

Employers in the construction industry should feel more confident that a prohibition against, and testing policies for, all drugs that are illegal under state and federal laws will remain valid in Colorado and Washington despite the recent changes in state laws.  A well drafted testing policy is important to protect construction employers from potential challenges when the need arises.  It is advisable for every Colorado and Washington employer to have their employment policies reviewed by an attorney to ensure they do not get caught in a wave of litigation over the use and testing for marijuana in their respective states.

New California Law Protects Architects’ IP Rights for Work Product

California AB 630, which became law effective Jan. 1, 2014, under California Business & Professions Code 5536.4, ensures that an architect’s “instruments of service” (e.g., plans, drawings and schematics) are an architect’s protected intellectual property that cannot be used absent written permission. Buyers of architectural services often erroneously CON BLOG_blueprintbelieve they are entitled to the architect’s work product. After years of debate, abuse and extensive legal fees over the issue, architects finally get some legal recognition and protection for their work product.

The law clarifies for the public that they are paying for a service – not the IP – and that the architect’s written approval is required to use it for other purposes. In practice, this should give architects the upper hand in dealing with any project fee disputes. It also means, goodbye to the days where developers and homeowners sold an architect’s plans to third-party buyers (absent the architect’s written approval, of course) who then used or inappropriately revised them.

Image courtesy of Flickr by Cameron Degelia