Builders, Professionals seek to avoid liability for Construction Defects, with support from local and state government

guest blog by Deborah Goonan

Colorado has been making news on HOA websites lately. In direct contradiction to Colorado state law, Lakewood city officials have recently passed an ordinance that prevents condo owners from suing developers for construction defects.

There are two sides to the issue of construction defects. Builders want to avoid litigation in lieu of binding arbitration, with the opportunity to correct defects. They maintain that defects are often minor, or that defects are a result of poor maintenance by the HOA, rather than shoddy construction.

Homeowners, wary of uncooperative Builders that may drag their feet taking corrective action, or may balk at making necessary repairs, are reluctant to give up their legal rights to sue in the courts.

But Builders have an ally in the form of the Colorado Metro Mayor’s Caucus, pushing for statewide legislation that reduces builder liability for construction defects. You see, the Mayors believe that reducing liability for construction defects will reduce building costs, and convince Developers to build new affordable housing in the form of condominiums.

Instead of working in the best interests of constituents, writing legislation with balanced legal protections for condo owners, proposals aim to gut existing statutory rights to file a lawsuit, requiring mandatory arbitration instead. Anyone who has been involved in arbitration knows that the filing costs are substantial, with results usually slanted in favor of Big Business.

Avoidance of liability for construction defects is a hot button issue, so much so that Colorado attorneys are actually encouraging developers and general contractors to include mandatory arbitration clauses in the Condo and HOA governing documents. Attorneys also recommend requiring Developer approval to amend (or remove) that arbitration requirement following turnover to an owner-controlled Board. (See link below)

Critics in Colorado point out that affordability is probably more affected by factors such as student loan debt and stagnant wages, rather than higher building costs involved with obtaining construction insurance.

Meanwhile, on the east coast, there are similar ongoing battles in my home state of Florida.

In Florida, the controversy centers on whether or not developers, general contractors, and design professionals should be liable for construction defects affecting common area infrastructure – roads, storm water drainage systems and structures, street lighting, and other essential elements – that affect the habitability of homes a the subdivision.

In response to Maronda Homes vs. Lakeview Reserve, where Lakeview HOA sought to sue Maronda for defects that resulted in storm water flooding and deterioration of roadways, Developers and construction firms sought to avoid liability for defects to common areas that are “unattached” to the homes, or that do not result in direct damage to individual homes. In 2012, the Florida Legislature passed, and Governor Scott enacted, FL Statute 553.835, preventing HOAs from filing suit to recover damages from construction defects to common area infrastructure. Attorneys and homeowners alike opposed this consumer-unfriendly legislation, but real estate development interests lobbied for its passage, and most state Legislators voted in favor of the amendment. The law basically states that homeowners are stuck with the cost of making repairs to defectively constructed roads, storm water ponds, swales, underground drainage, and the like.

“Too bad – Buyer Beware!”

However, in 2013, the Florida Supreme Court found that 553.835 shall not be applied retroactively in the case of Maronda v. Lakeview. The Court also left the door open for a constitutional challenge in defect suits brought after July 1, 2012, when the law became effective. The statute still stands, awaiting that challenge.

In the meantime, design professionals (architects, engineers, designers, surveyors, etc.) successfully lobbied for passage of their own protective legislation, FL Statute 558.0035, limiting individual liability for professional negligence claims.

Notice that nobody seems to lobby for quality construction, and protection of owners’ health, safety, or financial interests. Instead, Legislative focus is on reducing construction and legal costs for builders and related professionals. While it makes sense to inhibit frivolous defect lawsuits or fraudulent claims, it makes no sense at all to eliminate accountability of Developers and others who designed and created HOA subdivisions for personal profit.

Furthermore, it is outrageous that legislators continue to circumvent the judicial process by passing laws that limit the rights of constituents.

Florida references:

Florida Supreme Court rules that a homebuilder’s implied warranties apply to subdivision improvements that provide “essential services” to homeowners

http://www.lexology.com/library/detail.aspx?g=7c45caa0-800b-4874-b394-b8957310cb50&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+Other+states+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2013-07-24&utm_term=

Florida Condominium Law Protects Condo Owners from Construction Defects

http://www.floridacondohoalawblog.com/2012/05/articles/construction-issues-contractual-disputes/florida-condominium-law-protects-condo-owners-from-construction-defects/

FL Statute 553.835 Implied warranties (effective July 1, 2012)

http://www.flsenate.gov/Laws/Statutes/2012/553.835

Florida Statute 558.0035: Limiting Design Professional Negligence – See more at:

http://www.jimersoncobb.com/blawg/2013/06/florida-statute-558-0035-limiting-design-professional-negligence/#sthash.4j7R4QnE.dpuf (effective July 1, 2013)

Colorado References:

Building lawsuits could be reformed

http://durangoherald.com/article/20141130/NEWS01/141139971/-1/taxonomy/Lawsuits-in-building-defects-may-be-reformed—

How to guarantee the HOA can’t litigate condo construction defect claims

http://www.lexology.com/library/detail.aspx?g=b768d3c2-c021-4701-83eb-59bdc1998b87

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About

Ward Lucas is a longtime investigative journalist and television news anchor. He has won more than 70 national and regional awards for Excellence in Journalism, Creative Writing and community involvement. His new book, "Neighbors At War: the Creepy Case Against Your Homeowners Association," is now available for purchase. In it, he discusses the American homeowners association movement, from its racist origins, to its transformation into a lucrative money machine for the nation's legal industry. From scams to outright violence to foreclosures and neighborhood collapses across the country, the reader will find this book enormously compelling and a necessary read for every homeowner. Knowledge is self-defense. No homeowner contemplating life in an HOA should neglect reading this book. No HOA board officer should overlook this examination of the pitfalls in HOA management. And no lawyer representing either side in an HOA dispute should gloss over what homeowners are saying or believing about the lawsuit industry.

1 thought on “Builders, Professionals seek to avoid liability for Construction Defects, with support from local and state government

  1. Tom Dee

    i believe that HOAs need to advise owners of defects. Across the street is a house that suffered a leak in a plastic line that led to the cooking island. The family got sick especially the kids. It was apparently from mold from the leak. The house went to the bank as medical bills destroyed one of the best families in the nation. The house then went to another young couple with little kids. Less than two years later they packed up and were gone. The first owner was in a fight with the HOA and developer who still basically owned the HOA.
    I feel there should be a legal requirement with special punishment for organizations which cover up a horror of black mold. Some kids who could suffer harm for all their lives.
    One other case in our development is the back door was installed with the bottom plate reverse red so rain water was direct into to door wood. This lead to rot. Our door was replaced at over $500. The HOA knew of this defect and has allowed the doors to fail rather than tell the members.

    As I stated the HOA director should have special punishment for such conduct

    Reply

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