In the past two months, California has seen a series of changes to its laws that may dramatically affect the construction industry in that state. On January 15, 2019, Governor Gavin Newsom announced a series of proposals to tackle housing affordability. This included a budget proposal of $1.75 billion dollars to spur housing development and to promote economic growth. The budget would allocate $500 million for incentives for localities that create new housing and $250 million to provide technical assistance to cities and localities to responsibly ramp up zoning and permitting processes. The budget also includes $500 million for tax credits and $500 million for home construction to help the middle class find affordable housing near their jobs.

The week before the budget was announced, the California Building and Standards Commission voted unanimously to give its final approval to a new housing rule, which requires solar panels on new homes. The new rules are the first of their kind in the United States and will take effect at the beginning of 2020. Environmentalists have been cheering these new rules as historic and hope that these rules will result in the reduction of the consumption of fossil fuels with replacement of solar power. Some housing advocates, however, are concerned about the estimated cost of $10,000 that will be added to the cost of building a single family home, in a state where home ownership is out of reach for many residents.

Regardless of one’s political opinion on these issues, contractors need to carefully consider the legal ramifications of these new developments and have counsel include provisions in their contractual agreements to protect them. For example, it is important that all contractor agreements should be drafted to clearly set out the parties’ respective obligations and responsibilities, especially with respect to the operation and maintenance of the solar panels. Agreements should also be drafted to protect contractors especially in situations involving multifamily buildings that will be required to have solar panels installed when a property has three or fewer stories. It is important that all parties understand who is liable for maintaining the building’s roof.