For two years, developers and insurance companies have been negotiating for a revision in the current construction defect law, saying that lawyers often solicit homeowners associations to sue developers before the 10-year statute of limitations expires. Developers say that this has caused a decline of nearly 85% in condominiums and townhouses built in the last decade. Insurers also have become reluctant to insure condominium projects or have raised their rates to cover the higher risk.

Assemblywoman Elaine Alquist, D-Santa Clara, one of the bill's authors, says the new law will provide California with its first set of uniform residential building standards and impose a procedure that a homeowner must follow before bringing suit against a builder by laying out a process for dealing with defects. The bill also further defines what a defect is and gives homeowners the right to sue the initial owners of the building and any subsequent owners in the 10-year window.