Wednesday, March 01, 2017

Construction Defects in Community Associations

Construction Defects in Community Associations:

CAI has a report out on proposed state laws to make it harder for HOAs and condo associations to sue developers for construction defects. They say that, "As of February 28, legislation has been introduced in Arizona, Colorado, Florida, Massachusetts, Maryland, Minnesota, New Jersey, Oregon, Texas, Utah and Washington." Developers and contractors have political influence and often can persuade lawmakers that CD litigation raises the price of housing. Really? If building correctly is too much of a burden, maybe they should find another livelihood. Because if they build it right in the first place, there shouldn't be a CD lawsuit--or at least, not a legitimate one. There have been some fraudulent CD cases, such as the ones filed in the Las Vegas HOA fraud ring led (or fronted, depending on who you believe) by contractor Leon Benzer. But most CD suits are legitimate, and often the owners have no real alternative but litigation because the damages may not be covered by insurance and they can't afford to pay millions to fix the defective construction out of their own pockets. So I think state legislatures should tread carefully here. If defects go unrepaired, there are adverse consequences for the owners and maybe the whole neighborhood.

1 comment:

IC_deLight said...

Hi Evan,
For years developers have inserted language into restrictive covenants intended to deny the HOA corporation as well as the homeowners from being able to pursue the developer/declarant for construction defects, contractual breaches, and torts. More recently I've been seeing restrictive covenants that purport to eliminate all liability for management companies and bar homeowners from pursuing the HOA corp or its board for the actions of the management company. Of course these entities can and do get insurance which is typically paid for by the homeowners whereas there is no comparable insurance for homeowners. At some point blind obedience to "rules" and written restrictions must be recognized as simply bad public policy.