By Stella Raedeker
Attorney at law
Just after midnight on June 16, 2015, a fifth-floor balcony collapsed in Berkeley, California. Six young people were killed and another seven were injured. The tragedy sparked national interest in construction practices. Inspection revealed that joists supporting the balcony succumbed to dry rot — substandard, water-absorbent wood was to blame.[1] Litigation ensued; the apartment complex’s general contractor lost his license; and California passed SB 465, assembling a working group to determine what changes could be made the California Building Code (CBC) to prevent future collapses.[2]
The CBC has been updated to include increased minimum load requirements and new standards for ventilation, waterproofing, and drainage slopes for balconies and other load-bearing structures.[3] SB 721 and, more recently, SB 326 have been signed into law. Together, they create new and sometimes confusing requirements for the inspection and repair of balconies and other Elevated Exterior Elements (EEEs). SB 326 also invalidated the various “poison pen” provisions in CC&Rs that previously chilled construction defect litigation.[4]
HOAs, property managers, and owners of multifamily dwellings can be proactive by performing thorough and timely inspections. This article will cover highlights of the new requirements and explain a consumer-friendly development resulting from SB 326.
What are Elevated Exterior Elements?
EEEs are balconies, decks, porches, stairways, walkways, and entry structures that:
- Extend beyond exterior walls of the building;
- Have a walking surface that is elevated more than six feet above ground level;
- Are designed for human occupancy or use; and
- Rely in whole or in substantial part on wood or wood-based products for structural support or stability of the exterior elevated element.[5]
Included in the definition are railings and supports of the structures listed above, as well as their “associated waterproofing elements” (i.e., flashings, membranes, coatings, and sealants).[6]
This definition of EEEs applies to both SB 721 and SB 326,[7] but note that some jurisdictions, such as the City of Berkeley, define EEEs more broadly to include metal structures as well as wood.[8]
What Inspections are Required Under SB 721?
SB 721 applies to apartment buildings and other multifamily complexes of more than three units.[9] It does not apply to common interest developments, but does apply to apartment-condo conversions to be sold after January 1, 2019. The requirements are slightly different for apartment-condo conversions.[10]
An inspection of EEEs must be made before January 1, 2025 and every six years thereafter.[11] The inspection must be made by an architect, civil or structural engineer, or building inspector certified by a jurisdiction. Subject to additional experience requirements, a licensed contractor may also complete the inspection. However, the inspecting contractor is not permitted to make any subsequent repairs to the EEEs.[12]
The inspector must evaluate a sample of 15% of each type of EEE at the site. Industry experts recommend that a sample of greater than 15% be inspected, and that EEE type categories should be narrow to allow for more inspections.[13] The statutes do not clarify best practices for visual inspection. Even experienced contractors may have trouble detecting water damage if the soffit (area underneath the balcony) is given a fresh coat of paint.[14]
A report detailing the EEEs’ condition, expected useful life, and recommendations must be given to the owner. The inspector also needs to provide a local enforcement agency with a copy of the report within 15 days, if the report recommends immediate repairs or reveals an immediate threat to the safety of occupants.[15]
A local enforcement agency may assess daily penalties of $100-$500 if the recommended repairs are not made within 30 days after the agency gives notice.[16]
What Inspections are Required Under SB 326?
SB 326 applies to condo projects with three or more multifamily dwelling units. Like SB 721, it requires periodic inspections of EEEs, but many details differ. Unlike SB 721, which allows contractors or building inspectors to make inspections, SB 326 only permits a licensed structural engineer or architect to inspect.[17]
The first inspection may be coordinated with the existing triannual reserve study under Section 5550. It must be completed by January 1, 2025, and thereafter every nine years.[18]
The inspection begins with generating random samples of the EEEs within their respective type categories (unfortunately, there is not much guidance on how to categorize EEEs). Unlike with SB 721 inspections, no percentage of EEEs within a category is specified. Instead, a “statistically significant” sample is required. That is defined as a sample that provides a 95% confidence interval. The inspector prepares a report and makes recommendations. If there is an immediate threat to the safety of occupants, the inspector must send the report to the local enforcement agency within fifteen days of completion.[19]
How Will SB 326 Impact Construction Defect Litigation?
It makes sense that complying with these new requirements may help HOAs show that the standard of care for maintenance was adhered to, but the long-term impacts of SB 326 on construction defect litigation are largely unknown.
One thing is for sure: the “poison pen” provisions that formerly insulated developers and builders are a thing of the past. All restrictions and preconditions that prevent an HOA board from retaining counsel or otherwise pursuing a claim, civil action, arbitration, prelitigation process, or legal proceeding against a developer, declarant, or builder are now void. The classic example is a voting requirement in the CC&Rs requiring a majority vote of the ownership before the HOA may sue the developer or arbitrate a dispute. Before SB 326, the Branches case brought this issue to light. There, the court affirmed the arbitrator’s dismissal of the claim because the board did not get the required votes of the ownership — even though the owners, after commencement of arbitration, overwhelmingly ratified the decision to sue the developer.[20]
It is important to note that restrictions drafted solely by non-declarant-affiliated board members are still intact.[21] SB 326 targets restrictions drafted by developers and builders to protect themselves — not legitimate safeguards that allow homeowners vote before the HOA litigates construction defects.[22] The board must still give notice of meeting to owners under section 6150.[23]
Section 5986 applies retroactively, regardless of when the governing documents were recorded, “except if those claims have been resolved through an executed settlement, a final arbitration decision, or a final judicial decision on the merits.” However, the statute of limitations is not affected.[24] In one recent case, an association commenced arbitration against a developer without first obtaining the majority vote of the owners per the CC&Rs. As in Branches, the owners ratified the board’s decision to arbitrate, but the arbitrator still dismissed. The Court of Appeal reversed, finding that the developer’s voting restriction in the CC&Rs was void, and read section 5986 to mean that only a final arbitral decision on the merits could extinguish the claim. The arbitrator’s decision to dismiss was based on the CC&Rs voting restriction, and not on the merits. Therefore, the board could pursue arbitration, and the Branches decision was explicitly disavowed.[25]
Conclusion
The Berkeley balcony collapse prompted lawmakers and industry to seriously reevaluate how EEEs are constructed and maintained. The impact has been perhaps more far-reaching than expected, in that SB 326 has given builders and developers of residential condos less say on how and when construction defect litigation or ADR may be commenced in general.
The inspection, record-keeping, and reporting requirements for EEEs differs as between apartment buildings and condos. In either case, it is important to hire experienced inspectors who not only meet the statutory requirements, but are also familiar with the new laws, have a good grasp of statistics, and are able to detect the subtle signs of deterioration in EEEs.
This article has only covered a few key points on these issues, and new changes may be coming soon.
[1] Natalie Orenstein, Water-Absorbent Material Caused Fatal Balcony Collapse, State Says, Berkeley Side (June 2, 2017), https://www.berkeleyside.com/2017/06/02/water-absorbent-material-caused-fatal-balcony-collapse-state-says.
[2] Lonnie Haughton & David Field, California’s Legislative Response to the 2015 ‘Berkeley Balcony Collapse,’ RCI (Feb. 2019), https://iibec.org/wp-content/uploads/2019-02-haughton-field.pdf.
[3] Remi Kern, Future 2018 IBC Amendments Made Early Due to the Library Gardens Apartment Tragedy, Quality Built (Oct. 31, 2017), https://www.qualitybuilt.com/balcony-deck-code-changes-going-into-effect-2018/.
[4] Robert Ward, A Balcony Bill That Protects Community Associations AND Their Residents!, Community Associations Institute (Aug. 13, 2019), https://cai-channelislands.org/sb-326-a-balcony-bill-that-protects-community-associations-and-their-residents/.
[5] Health & Safety Code § 17973.
[6] Id.
[7] See Civil Code § 5551(a).
[8] Exterior Elevated Elements (E3) Inspection Program, City of Berkeley (last visited June 8, 2020), https://www.cityofberkeley.info/E3/.
[9] Health & Safety Code § 17973(a).
[10] Id. at § 17973(n)-(m).
[11] Id. at § 17973(d).
[12] Id. at § 17973(a), (g).
[13] Questions and Answers about SB 721 and SB 326 – California’s Balcony & Deck Inspection Laws, Xpera Group (last visited June 8, 2020), https://www.xperagroup.com/california-balcony-deck-inspection-faqs#What_are_Exterior_Elevated_Elements.
[14] Haughton, supra note 2.
[15] Health & Safety Code § 17973(c)-(d).
[16] Health & Safety Code § 17973(i).
[17] See Civil Code § 5551(b), (l).
[18] Id. at § 5551(i).
[19] Id. at § 5551(a)-(c), (g).
[20] Branches Neighborhood Corp. v. CalAtlantic Grp., Inc., 26 Cal. App. 5th 743, 758 (2018).
[21] Civil Code § 5986(c).
[22]See Senate Judiciary Committee document (Apr. 22, 2019), https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201920200SB326.
[23] Id. at § 6150.
[24] Civil Code § 5986(d)-(e).
[25] Aldea Dos Vientos v. CalAtlantic Grp., Inc., 44 Cal. App. 5th 1073 (2020).