Senator Hill to Introduce Bill Requiring Contractors to Report Construction Defect Settlements

December 21, 2017

For Immediate Release – Office of State Senator Jerry Hill – December 21, 2017
Media Contact: Leslie Guevarra, 415-298-3404 cell

Senator Jerry Hill to Introduce Bill Requiring Contractors to Report Settlements of Construction Defect Cases Involving Apartments, Condos and Home Owners Associations

Contractors State License Board Will Work with Senator to Craft Legislation in Response to Berkeley Balcony Tragedy

SACRAMENTO – State Senator Jerry Hill announced today that he will introduce a bill to require contractors to report settlements of construction defect cases involving multi-family housing units to the Contractors State License Board as part of the effort to increase oversight of the industry in response to the Berkeley balcony tragedy. Multi-family housing units would include rented or leased apartments and condominiums, and dwellings that are part of a building or complex overseen by a homeowners association.

“Working together we can take even stronger steps to protect the public by ensuring that this critically important data is accessible to the Contractors State License Board,” said Senator Hill, D-San Mateo and Santa Clara Counties.

“The Contractors State License Board looks forward to working with Senator Hill and other interested parties on legislation that will bolster our box of consumer protection tools even more,” said board member Agustin Beltran, who chairs the CSLB’s Legislative Committee.

Construction contractors and their regulation became the focus of sharp scrutiny in California and abroad after a fifth-story balcony at a Berkeley apartment complex collapsed on June 16, 2015, killing six people and seriously injuring seven of their friends. All were students of Irish descent and all but one were visiting the U.S. for the summer.

Investigative news reports soon revealed that the company that constructed the apartment complex, Segue Construction, had paid $26.5 million in construction defect lawsuit settlements in the three years before the Berkeley balcony gave way. But the state board that licenses contractors did not know about the cases because the law does not require contractors to report such settlements. At the time, the CSLB’s enforcement chief said that had the board known, “we would have absolutely taken action.” Such knowledge, he emphasized at a later hearing in the Capitol, would have triggered an investigation.

Efforts to Close the Information Gap

Senate Bill 465 by Senators Hill and Loni Hancock, who represented Berkeley, sought to close the regulatory gaps revealed by the balcony catastrophe. Signed by Governor Brown in 2016, SB 465 required the CSLB to study the settlement reporting issue and report its findings by January 1, 2018.

Specifically, the bill directed the CSLB to consult with licensees, consumers and other stakeholders in its study of judgments, arbitration awards and settlements that resulted from construction defect claims involving rental residential units. The goal was to determine whether the board’s ability to protect the public “would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims.”

Almost 54 percent of contractors surveyed, nearly 96 percent of consumers surveyed and about 63 percent of insurers surveyed said such regulations would help the board protect consumers, according to the CSLB’s report to the Legislature.

Having the data would “be a good tool in our toolbox,” board member Beltran said at the CSLB’s meeting on December 7. He urged his colleagues to concur and direct staff to finalize the board’s report on the study, submit it to the Legislature and to work with Senator Hill to craft reporting requirement legislation.

North Bay Mother Speaks Out for Victims and Families

Jackie Donohoe of Rohnert Park, whose 22-year-old daughter, Ashley, and 21-year-old niece, Olivia Burke of Ireland, died in the balcony collapse, attended the CSLB meeting and called on the board to collect settlement information. She also reminded board members of the agency’s response when Segue’s settlement history surfaced. “As you said already, ‘If you would have known about it, you have done something,’ ” she said. “How can the CSLB do their job and protect the public if they don’t have the right tools?”

John Callaghan, vice consul of the Consulate General of Ireland for the western United States, told the board that “the consulate and the government of Ireland are following this process very closely…we will continue to see the process through to completion.” He also expressed his government’s strong support for Mrs. Donohoe, her statements and her efforts.

Since the death of her daughter and niece, Mrs. Donohoe has testified in numerous hearings in the Capitol and in communities to demand stricter oversight of contractors and tougher building codes for balconies and other exterior elevated elements – which include outside stairs, decks and walkways – at multi-family rental units. Her message to lawmakers and regulators on behalf of the Berkeley balcony victims and their families has not wavered.

“Make this happen and do the right thing so no family has to go through the hell that we’ve been through in the last 2½ years,” she told the CSLB.

The board voted 13-1 on Beltran’s motion. Work on details of the prospective settlement reporting bill will begin after January 3, when the Legislature reconvenes.

CSLB staff noted during the board’s meeting that similar reporting is required by the state licensing boards for architects, engineers and medical professions. The CSLB’s legal counsel and legislative chief also emphasized that settlement information reported to the board would be treated with the same discretion afforded to complaints made to the board about a licensee.

A complaint does not become public unless it results in a citation or an accusation filed against the licensee, or it results in a referral for further investigation after enforcement staff determines that probable violation occurred, that the alleged violation, if proven, poses a risk of harm to the public, and that the alleged violation, if proven, would be appropriate for license suspension or revocation.

More Steps Toward Change

  • December 11, 2017: Three weeks before the deadline imposed by SB 465, the California Building Standards Commission submitted its report to the Legislature summarizing the efforts of the commission and a working group it formed to study failures of elevated exterior elements in response to the balcony collapse in Berkeley. The work included the commission’s adoption on January 27, 2017, of emergency regulations that enhanced building standards for construction of elevated exterior elements – including balconies and other surfaces that people can stand or walk upon – at hotels, motels, apartment buildings, state-owned buildings and public schools.
  • December 12, 2017: The Building Standards Commission voted to permanently approve the emergency regulation for elevated exterior elements and certified that the commission, the state Department of Housing and Community Development and the Division of the State Architect are in compliance with new rules.
  • Further legislation: In addition to developing settlement reporting legislation, Senator Hill plans to resume work in January 2018 on Senate Bill 721, which he introduced in early 2017 to require periodic inspections of balconies, stairwells and other exterior elevated walking surfaces at existing apartment and condominium buildings. It’s up to each city to decide whether existing multi-family residential structures are inspected for maintenance, safety and compliance with building codes; current law does not require local governments to do so.

SB 721 is partially modeled after stricter inspection rules Berkeley adopted in 2015 within weeks of the balcony tragedy and the structural failure of a staircase at a Folsom apartment building. Barely a month after the balcony collapse, a Cal Poly master’s student visiting a friend was killed at a Folsom apartment building on July 3, 2015, when two flights of an exterior staircase gave way. Dry rot resulting from poor maintenance were blamed in the death of Shun Xiang Yuan, 26.

 

Resources:

Video of Contractors State License Board Meeting, December 7, 2017:
https://www.youtube.com/watch?v=ONNaVcJYGG8

Contractors State License Board Report to the Legislature re SB 465:
http://www.cslb.ca.gov/Resources/Reports/SB_465_Report.pdf

Video of California Building Standards Commission Meeting, December 12, 2017
https://www.youtube.com/watch?v=lDzztvgnX-c&t=83s

California Building Standards Commission Report :
https://www.documents.dgs.ca.gov/bsc/EEEs-SB465/SB465Report-Web.pdf

2016 News Release on Governor Signing SB 465:
http://sd13.senate.ca.gov/news/2016-09-15-bill-step-oversight-building-contractors-signed-governor-brown