Construction Defects & HOAs: Part II

In a previous post the HOA Detective lamented about the cause and effect relationship between HOAs, attorneys who specialize in litigating construction defect cases; the technical consultants who are hired by HOAs to support their legal claims and the remediation contractors who seem to be the only building contractors that are capable of constructing a building that does not leak water:

It was asserted by yours truly that the situation bordered on the classic definition of insanity by virtue of the fact that the participants in this game of cat and mouse continue to repeat the same behavior again and again, perhaps expecting a different result but perhaps not; depending on whether it is the commercial interests who generate a considerable recurring revenue stream from these cases or whether it is the HOA that is typically involved in only one construction defect lawsuit during its lifetime.

In the case of a typical HOA that finds itself with defective buildings, the owners are indeed victims of circumstance. After all, if you purchase a condo or townhouse in a development where construction defects do in fact exist, then you are certainly within your rights to seek restitution from the offending parties in order to remedy the situation.

The recurring problem that borders on lunacy is that after several decades of “investigating” these cases to establish the nature and extent of the defects; countless successful construction defect lawsuits; millions upon millions of dollars in damages being paid and the successful remediation of these defects, we continue to allow architects, engineers and builders to design and construct buildings that contain the same defects!

To understand why this absurd situation continues to fester at near epidemic levels we have to look at the construction defect “industry” that has evolved as higher density, attached housing has become the predominant form of residential development in many urban areas of the country. In states like Oregon, the statute of limitations has been stretched to the limit by consumer protection legislation which has extended the time-frame for bringing a civil action against a builder/developer of an attached housing development to as much as ten years.

This situation clearly serves the interests of litigators and their army of consultants as much as it does consumers who find themselves living in defect-riddled buildings. This does not mean that construction defect litigation does not occur in states with less generous statutes. It simply means that the hired guns have to be quicker on the draw in order to lodge a complaint before the statutory period for bringing a claim expires.

The timeline for a typical construction defect case will generally follow a similar path as a result of the concerted efforts of the close-knit cabal of attorneys, technical consultants and remediation contractors who profit from these cases and the HOA management companies that provide a conduit for accessing HOA decision-makers.

For the most part management companies are concerned with limiting their own liability and with serving the interests of their HOA clients. Hence, they are generally the first to lobby the Board of Directors of a newly constructed HOA by encouraging the Board to speak with an attorney in an effort to protect the  Association’s rights with respect to legal claims they may be entitled to bring against the builders and/or developers of the project.

Since there are often warranty considerations and confusing legal verbiage that must be interpreted, it is obviously prudent for any Board to at least engage an attorney in an initial dialogue as part of its due diligence effort to protect the legal interests of the Association. Of course these attorneys are  more than willing to speak with the novice Board at the invitation of a willing manager, in an effort to establish a dialogue with a potential client; often times agreeing to attend a Board meeting at no charge to the Association.

Once this initial chain of communications between the attorney and a prospective client has been established, the ensuing chain of events tends to follow a highly predictable path, with the ultimate outcome all to often being that yet another complaint is filed against as many defendants as there are insurance policies to pay a successful claim.

Since a high percentage of these claims involve defective construction that leads to water intrusion into the building, we will examine the mechanics of a typical water intrusion related construction defect lawsuit in our next installment of this series.