TL;DR — Key Takeaways
- When control of an association passes from the developer to an owner-elected board, the clock on latent construction defect claims has usually been running for years.
- California’s ten-year statute of repose runs from substantial completion of the project, not from turnover, and it is not extended by a developer’s promises to repair.
- California has no single turnover statute of the kind some other states have. Much of what a new board needs, it has to ask for.
- Developer-written CC&R provisions requiring a member vote before suing the developer are void under Civil Code section 5986.
- A properly served Calderon notice tolls the limitations and repose periods, which makes it one of the board’s most important early tools.
- Transition is a time to investigate, not automatically to sue. Many defects are resolved without litigation.
The period when control of a California HOA passes from the developer to an owner-elected board is when construction defect claims are most at risk. The ten-year statute of repose for latent defects runs from substantial completion of the project, so by the time owners control the board, a significant part of that period has usually passed. A new board that spends its first years learning the job, rather than investigating the building, can lose claims worth far more than the association’s reserves before it knows they exist.
Why the clock is already running
A developer controls the association from its creation until enough units have sold to shift voting control to the owners. In a large project that can take years.
The construction defect clock does not wait for that. Code of Civil Procedure section 337.15 bars actions for latent construction defects brought more than ten years after substantial completion. Substantial completion is defined by the statute and is typically the earliest of the final inspection by the building department, the recording of a notice of completion, the use or occupation of the improvement, or one year after work stops. It is a fixed date tied to the building, not to the board.
Three features make this dangerous:
It is a statute of repose, not a limitations period. It runs regardless of when the defect is discovered. A defect nobody knew about in year nine is still barred in year eleven.
It is not tolled by repair promises. The California Supreme Court has held that the ten-year period is not equitably extended by a developer’s promises or attempts to repair. A board that accepts a developer’s assurance that it will “take care of it” is not stopping the clock.
Shorter periods run inside it. Patent defects, those apparent on reasonable inspection, carry a four-year period from substantial completion. Claims for damage to real property carry their own limitations periods, and those can expire well before the ten years.
If your board recently took control from a developer and has not had the building evaluated, that is worth addressing now rather than at the next reserve study. Call Bay Legal at (650) 668-8000 in Northern California or (213) 668-8000 in Southern California.
Phased projects and the multiple-clock problem
Large developments are often built and sold in phases, and that multiplies the deadlines.
Because substantial completion is tied to the improvement, each phase may have its own substantial completion date, and so its own ten-year repose period. The first phase’s clock may be well advanced while a later phase’s has barely started. A common-area amenity finished after the residential buildings may have a different date again.
Phasing also means the developer may still control part of the project, or still hold unsold units, when owners take control of the board. That can create an awkward period in which the board is investigating defects in buildings the developer is still marketing, and where developer-affiliated directors may remain on the board.
The practical step is to build a deadline map early: every building and major common element, its substantial completion date, and the repose and limitations dates that follow from it. The earliest date on that map, not the date of turnover, governs how quickly the board has to act.
There is no single turnover statute
Some states have a detailed turnover statute that requires a developer to hand over specified documents, audits, and funds within a fixed period after owners take control. Content about HOA transition frequently describes those requirements as though they applied everywhere.
California does not have a single statute of that kind in the Davis-Stirling Act. Much of the developer period is governed instead by the project’s documents, its Department of Real Estate public report, and general Davis-Stirling duties. The practical consequence for a new board is that many of the records it needs, it has to identify and request rather than expect to receive automatically.
What a new board typically needs to obtain, as a matter of good practice:
- As-built plans and specifications, and any changes made during construction.
- Warranties from the developer, manufacturers, and subcontractors, including roofing, windows, waterproofing, and mechanical systems, with their expiration dates.
- The reserve study and the funding plan, and the assumptions behind them.
- Financial records for the developer-control period, including how assessments were set and whether the developer paid assessments on unsold units.
- Contracts the developer entered on the association’s behalf, including management, maintenance, and service agreements.
- Insurance policies and claims history.
- Maintenance records and any known defects or repairs.
A board that cannot get these records has a records-access question in its own right. HOA records and SB 410 covers what an association’s records must include.
The first things a new board should do
Investigate the building. An evaluation by a qualified professional of the major components, particularly the building envelope, waterproofing, roofing, balconies, and structural elements, is the foundation of every decision that follows. Without it, the board cannot know whether it has a claim.
Identify the substantial completion date. Every deadline runs from it. Where a project was completed in phases, each phase may have its own date.
Check the balcony inspection. Condominium associations with buildings of three or more units must have exterior elevated elements inspected, and the first inspection deadline under Civil Code section 5551 was January 1, 2025. A new board should confirm it was done and review the report. SB 326 balcony inspections covers the requirement.
Review the reserve study. A developer-period reserve study can understate the cost of components that are failing early, and a study that assumes a component will last twenty years when it is already deteriorating understates the association’s real position. Civil Code section 5550 requires a reserve study at least every three years.
Look at who is still on the board. Directors appointed by or affiliated with the developer sometimes remain after transition. A director with a financial relationship to the developer has a conflict of interest in any decision about claims against the developer, and California law treats that seriously. HOA board fiduciary duty and self-dealing covers it.
The tools that protect the claim
Section 5986. Developer-written CC&R provisions requiring a member vote, or developer consent, before the board pursues a defect claim are void, and the rule applies retroactively to documents recorded before 2020. A new board is not bound by them. Civil Code 5986 covers the statute and the 2021 decision that applied it.
The Calderon notice. For associations of 20 or more units, Civil Code section 6000 requires a pre-litigation process before suing the builder. Serving the notice that begins that process tolls the applicable limitations and repose periods. Where the repose date is approaching, this is frequently the step that preserves the claim.
Member notice. Civil Code section 6150 requires written notice to members and a meeting at least 30 days before filing suit against the developer, with an alternative where a limitations period would expire sooner.
Standing. Civil Code section 5980 allows the association to sue in its own name for damage to common areas and to separate interests it is obligated to maintain. Damage inside individual units raises different standing questions.
When transition does not mean litigation
It is worth being direct about this, because the stakes invite overreaction.
Many transitions surface defects that are resolved without a lawsuit. Warranty claims, manufacturer claims, insurance, and negotiated repairs with a developer who wants to protect its reputation can all produce results faster and more cheaply than litigation. A board that treats every defect as a lawsuit can spend reserves, trigger special assessments, depress owners’ ability to sell or refinance while litigation is pending, and still recover less than it spent.
What a new board should not do is nothing. The worst outcome is not a lawsuit that fails; it is a valid claim lost to the repose period because the board did not investigate in time. The work of transition is to find out what the association has, preserve the claims that are real, and make a considered decision about which ones are worth pursuing.
Bay Legal advises boards through developer transition, from the initial investigation through claim decisions. Reach us at (650) 668-8000, (213) 668-8000, or through baylegal.com/contact-us.
Frequently Asked Questions
When does the time to sue a developer for construction defects start running?
For latent defects, the ten-year statute of repose under Code of Civil Procedure section 337.15 runs from substantial completion of the project, not from when owners took control of the board or discovered the defect. Shorter periods apply to patent defects and to certain property damage claims, and they run inside the ten years.
Does a developer’s promise to repair stop the clock?
No. The California Supreme Court has held that the ten-year period is not equitably tolled by a developer’s promises or attempts to repair. What does toll it is a properly served Calderon notice under Civil Code section 6000, for associations of 20 or more units.
What documents should a developer hand over at transition?
California has no single turnover statute specifying a document list, so boards typically need to request records: as-built plans, warranties, the reserve study and funding plan, financial records for the developer period, contracts entered on the association’s behalf, insurance policies and claims history, and maintenance records.
Can the CC&Rs require a membership vote before the board sues the developer?
No. Civil Code section 5986 makes such provisions void, including provisions giving the developer veto authority, and applies retroactively to documents recorded before it took effect in 2020. The board must still give members written notice and hold a meeting before filing.
Should a new board always sue the developer?
No. Many defects are resolved through warranty claims, manufacturer claims, insurance, or negotiated repairs. Litigation is expensive and can affect owners’ ability to sell or refinance. The board’s obligation is to investigate, preserve valid claims before the deadlines run, and make a considered decision about which to pursue.
