Title 7 establishes detailed construction performance standards in California Civil Code Sections 896 and Civil Code Section 897 ("Performance Standards"). The breach of a Performance Standard is equivalent to a construction defect. The creation of statutory construction Performance Standards could have been a positive event if the Performance Standards were reasonable and if they were understandable. Unfortunately, the Performance Standards are often vague, sometimes overlapping and do not provide adequate guidance in many day-to-day practical situations. Some of the Performance Standards depend upon designer intent or manufacturer representations, such as requiring paint or stain to last for the length of time specified by the paint or stain manufacturer's representations, to a maximum of 5 years. Builders must comply with each and every one of the Performance Standards. A Builder may exceed the Performance Standards, but may not fall below the threshold level they establish. Accordingly, a Builder must either adopt these statutory standards as their company policy, adopt equivalent standards, or adopt standards that exceed the statutory Performance Standards. Builders must also take positive steps to ensure that all personnel adhere to the applicable Performance Standards, from subcontractors to customer service representatives.
Enhanced Protection Agreements: A Builder may "opt out" of Title 7's Performance Standards by providing the Buyer with an Enhanced Protection Agreement. An Enhanced Protection Agreement replaces the statutory Performance Standards with standards prepared by the Builder. However, a homeowner can challenge any standards a Builder establishes if they are not at least equivalent to the statutory Performance Standards. Further, an Enhanced Protection Agreement will be enforceable only if the Buyer is notified in writing before close of escrow of the Builder's decision to provide an Enhanced Protection Agreement in lieu of being subject to the Performance Standards. California Civil Code Section 903 provides: "If a Builder offers an enhanced protection agreement in place of the provisions set forth in Chapter 2 (commencing with Section 896), the election to do so shall be made in writing with the homeowner no later than the close of escrow. The Builder shall provide the homeowner with a complete copy of Chapter 2."
- Subcontractors: Builders are responsible to ensure that their subcontractors adhere to Title 7's Performance Standards and policies. It is not safe to assume that a subcontractor is following the manufacturer's specifications or recommendations. A Builder may have liability for a subcontractor's failure to follow the manufacturer's specifications or recommendations for installation. Builders need to institute proactive oversight programs.
- Warranty: Any warranty a Builder provides which is not expressly designed to be an Enhanced Protection Agreement, as that term is defined in California Civil Code Section 901, will not replace or modify Title 7's Performance Standards. In such circumstances, the Buyer will be able to either enforce the warranty or make a claim under Title 7's Performance Standards, whichever the Buyer prefers. For that reason, the use of a Limited Warranty program does not generally serve to limit Builder liability.