guest blog by Deborah Goonan
Does your HOA have problems with shoddy construction or defects in common areas such as roads, storm water drainage, street lighting? Did your developer fail to deliver what was promised at the time of sale?
If so, you’re not alone. Check out the video reports linked below. Hidden Lake Estates HOA in Sherwood, Arkansas, has issues with poor drainage, causing owners’ yards to flood every time it rains. At Stone Hill Estates HOA in Durham, North Carolina, the Developer has left roads, sidewalks and storm water drainage systems unfinished for several years.
Owners from both HOAs have appealed to city leaders to help resolve these issues. In both cases, the Cities initially balked at getting involved. However, one council member from Sherwood has called for an investigation into storm flooding at Hidden Lake, and a judge in Durham recently ruled that the City help pay for unfinished work at Stone Hill. Protracted battles will likely continue. These are just two examples, but this is becoming a common problem all over the country.
Who’s responsible, and who should pay?
During the building boom of the last decade, plenty of planned developments and condominiums were hastily approved and built to keep up with growing buyer demand. Additional contractors were hired, and some of them lacked sufficient skills. When the dust settled, problems began to appear.
It’s clear that architects, design engineers, and developers ultimately bear responsibility for the quality of their work and that done by their construction crews, but the obvious unasked question is:
What is government’s role in development of HOAs and prevention of poor construction?
Local development and planning commissions have responsibility for issuance of construction permits, establishment of building codes, inspection of work at various phases in the project, and issuance of occupancy permits upon successful completion. In many cases, additional state and local agencies, such as the Department of Environmental Protection also play a role in ensuring development meets health and safety standards.
As taxpayers, we expect our local government agencies to ensure that our homes and major infrastructure of our communities are built to a standard of safety and reasonably sound quality. Unfortunately, as evidenced by thousands of construction defect claims in the past decade, local planners and inspectors quite often fail to do due diligence before, during, and following construction.
Why? Perhaps it is because city or county staff does not have to maintain HOA infrastructure or Condominium buildings. Therefore they are not overly concerned about quality of design and construction, and ease of maintenance.
Worse than that, sometimes our local elected officials undermine quality control policies.
Take the Lakewood City Council of Colorado, for example. (see link) The Council wants to enact an ordinance that would make it easier for Developers to avoid litigation of construction defect claims with HOAs. If passed, the ordinance would reduce rights that currently exist under state law, making it more difficult for HOAs to sue.
Supporters of the City ordinance claim that current state law makes it too easy for owners to sue Developers, drives up the cost of insurance, and makes it unfeasible to construct additional entry-level condominiums for millennial buyers.
So let me get this straight: Lakewood City Council wants to make it easier for developers to avoid liability for shoddy construction, in order for the Mayor and Council to entice Developers to build more Condos (with HOAs). No doubt, the city government’s goal is to increase its tax revenue base, with minimal impact to the city budget. But at what cost to taxpayers and consumers?
In all fairness to Lakewood City, local government politicians in cities and towns all across the nation have adopted a similarly misguided stance.
Dare I say, depending on the politics of local government, committees that vote to approve new construction projects can have cozy family or business ties to real estate developers and to investors?
Attorneys representing all sides of ensuing controversies – developers, engineers, construction companies, HOAs, owner groups in HOAs – are the only clear winners when local government fails to prevent shoddy or unsafe construction in the first place. Owners of HOA properties often find themselves stuck with unresolved problems, damages to personal property, uncooperative Boards, special assessments to cover fees for attorneys, and possibly even higher property taxes.
In HOAs, owner financial responsibility for common areas often leads to common headaches.
(link to video of defective drainage in Sherwood, AR HOA)
(link to video of unfinished development, Stone Hill HOA, Durham)
(link to article on proposed Lakewood, CO ordinance)
My HOA is a perfect example of absence of local government oversight. Of course, it was approved for construction and later occupancy and from there it was nothing more than a cash cow in the form of tax dollars.
In 2006 when I contacted the city codes enforcement to inquire as to why the entire neighborhood was eaten up with rotten siding I was told I would need to turn in the addresses and the city would send an inspector out. Being new to the HOA, and not really understanding the big picture of HOAs at that time, I said I didn’t want to make my neighbors angry by turning in their addresses. I hung up thinking…hummm, this is interesting that it’s against city code for all this wood rot to exist and all my neighbors and I are paying taxes for the city to have this department but in order for them to come out I must turn my neighbors in. Really? Why wouldn’t the city just come do an annual drive by to be sure everything is being maintained? By 2008 more homeowners were involved and concerned about the well-being of the entire neighborhood. A few people made it their mission to start calling these rotten houses into the city codes enforcement office on a daily basis. (I was not one of those people but I was blamed for it by my neighbors.) Eventually, the city had such a long list of addresses they had no option but to call a special meeting with the homeowners and explain their plan. We were assured they were giving the HOA two years to get this mess cleaned up. That calculates out to everything being pristine and curb-appealing by 2010. 2015 is now less than 90 days away and we still have rotten houses. The board decided to borrow a million dollars to buy paint and some replacement siding and take care of some frame damage here and there in 2011. (they agreed to give the CAI property manager the first $100K of it for a “finder’s fee” or some nonsense) It won’t be long before the repairs and painting of yesterday will become the newest signs of dilapidation of tomorrow and the cycle will start again.
In my way of thinking it seems “an ounce of prevention is worth a pound of cure” as Ben Franklin said. Had the city codes enforcers just driven through this PUD every year and invested an hour of labor they could have nipped the massive wood rot problem in the bud. We wouldn’t have stucco applied over rotten siding, or the massive frame damage on the units, or the depreciation of property values to the degree it is now, and last but not least we wouldn’t have had all these lawsuits where homeowners had to sue the HOA for breach of contract causing the HOA to lose their insurance coverage twice in three years. Additionally, the ten million dollars that is unaccounted for most likely would have been spent on repairing the houses and the million dollar loan could have been avoided.
I think of it just like going to the dental hygienist every six months. Small decay, if any, is caught and taken care of right away at minimal costs. Neglecting to make those visits twice a year can result in ten of thousands of dollars in dentistry simply because the preventative maintenance was ignored.
For the tax dollars an HOA the size of mine generates I don’t think an hour per year for a drive through is asking too much for the city to do!