Friday, February 02, 2018

Insurance Law Report: January 2018 - Phelps Dunbar LLP

Insurance Law Report: January 2018 - Phelps Dunbar LLP:

Thanks to Fred Pilot for this link. He notes that it seems like the condo construction defect suit will always be with us. Why are there so many of these suits? I would say it flows from the dynamics and incentives of the real estate development industry.

1.The developers and general contractors all want to maximize profits, which means they all want to minimize costs. So there is always a temptation to cut corners on materials and workmanship. The same goes for the subcontractors in all the trades. Not everybody does this to the same degree, but that practice increases the risk of defects in original construction.

2. And then a great deal of the housing stock is, by definition, constructed during boom periods, when the supply of skilled labor is exhausted in the places where the most housing is going up. Relatively unskilled and inexperienced workers can find work easily.

3. Many of the people who build condos are thinking in terms of immediate profits from quick sales. Contrast this with somebody who builds an apartment complex and intends to draw income from it long-term.

4. There are condos at various ends of the price spectrum. The higher you go, the greater the expectation of quality. During the last housing boom, when the financing was so easy to get, there was a lot of condo housing constructed for people of low to moderate income. Some of that wasn't particularly well-built.

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