In a decision that could lead to more affordable housing options in the Golden State, the California Supreme Court has held that home owners and their condominium associations cannot recover damages for construction defects that have not caused personal injury or property damage.

The ruling, said Sandra Stewart, a partner in the Los Angeles law firm of Cox, Castle & Nicholson, is "a major victory" for California's home builders, who for years have refused to build condominiums because the threat of litigation has made them too costly to produce and insure.

In most major housing markets, condos are a vital part of the housing stock. Often, they are the first step on the home ownership ladder. But in California, where condos once accounted for half the state's housing supply, they now represent less than 20 percent, and state's housing prices are the highest in the nation.

The decision in Aas v. Superior Court, said Steve Doyle of Brookfield Homes in San Diego County, "has the potential to slowly bring back the condo." And that's good, he added, because condos are needed for smart growth, for transit-oriented development, and to limit sprawl and protect the environment.

"All the court really did was prevent our already outrageously expensive and under- supplied housing market from getting worse," Doyle said.

Claiming building code violations, plaintiffs in the case argued they should be permitted to recover the cost to repair framing defects even though the defects had yet to cause injury or damage. That argument didn't hold water in California's Superior Court or the state's Appellate Court. And now the Supreme Court has held that none of the alleged defects actually pose a serious risk of harm.

Not every flaw "is sufficiently grave to pose a realistic risk of structural failure," the high court said.

While allowing claims for defects without damages would seem to support a policy of preventing future harm, the court said, such a ruling "is likely to increase the cost of housing by an unforeseeable amount if builders raised prices to cover the increased risk of liability." Such a ruling also is unnecessary because buyers may enforce their rights through other avenues, the court added. "Home buyers in California already enjoy protection under contract and warranty law for enforcement of builders' and sellers' obligations; under the law of negligence and strict liability for acts and omissions that cause property damage or personal injury;...and an exceptionally long 10-year statute of limitations for latent construction defects," it said.

But the California building community has long argued that was not about defective construction. Rather, it was about lining the pockets of litigation-happy plaintiff attorneys.

"Most of the time, even the home owners involved in this type of lawsuit suffer because the attorneys inflate the claims, exaggerate the defects, and, after they take their cut, leave the association and owners with insufficient funds to make any legitimate repairs," the Building Industry Association of San Diego County said in a letter to the editor of the San Diego Union- Tribune.

Published: January 8, 2001

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.