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
