Oops! The Developer Did It Again! Can A Developer's Shoddy Work Get An Association In Trouble?

Elina B. Gilbert | Monday, March 10, 2014 | Community Associations Miscellaneous

Imagine renting the HOA club house for a family reunion.  As the reunion is winding down, the attendees decide to have a photograph taken of the family.  After all, who knows when all these relatives will be in the same place again?  As the family members gather on the upper deck of the clubhouse and the children cross their legs and get comfortable up front, the deck collapses and all the family members go falling and sliding to the concrete surface below.  Well, this is exactly what happened at the Wolf Lake Homeowners Association.   

What happened in this case?  As one might expect, the deck was not constructed properly—the exterior rimboard was attached only by nails when it should have been notched into the supporting posts and held by lag bolts.  At first glance, this appears to be a construction defect issue to be taken up with the developer/builder, but in this case the pending lawsuit also names the Association.  On what grounds is the Association brought in?  On the grounds that it was negligent and failed to conduct a routine inspection that plaintiffs claim would have immediately spotted the problem.  

Although this legal action is in its early stages of litigation, what might this mean for associations?  Do associations have a legal obligation to have all common areas inspected at the time of turnover?  Is this something that needs to be part of the transition process from developer to owner control?  What do you think the judge should do in this particular case?

Comments

I will enjoy hearing the outcome. If indeed the HOA is held accountable, what about the original lawyers and original Management company who failed to advise their client to have the property inspected at turnover?

This is a very tricky subject, at first thought, in this case I would say that the developer should be responsible for ensuring that there is a final inspection by a certified company prior to handing over the complex, much like a building inspector does before releasing a certificate of occupancy. This way, there is a company on record who certified the project as meeing all current building and construction codes. Once the project is turned over, then there should be some sort of warranty peiord that is offered by the developer to address any issues. Once the warranty period is over, then the association assumes the responsibility of having annual inspections done of the same parts and pieces as was originally inspected on behalf of the developer. I think that the judge should determine if there was any inspection and certification done prior to turnover. If there was and there was no subsequent inspections done by the association, then the judge should consider the association at fault for failing to inspect common area grounds.

Based on experience with our COA, if there had been an inspection of all construction by an independent inspector it would have saved future litigation against the developer, contractor and architect. And as noted in this piece possible litigation again the association. Perhaps the State of Colorado should require this of all new construction and should require it of those already built for potential problems that need to be fixed (don't meet code). In this way all (current and potentially new homeowners) would know what fixes from poor construction are needed (and the cost) they would not be suprised of any non-routine maintenance and fixes that might need to be made. Adjustment in dues would need to be addressed. Statutes of limitation may unfairly protect the developer/builder. If the State sets a standard it would be clearer as to who is responsible. In this case, the judge may only be able to go rule against the COA if the statutes of limitations are in force..

Yes, it is necessary to have a walk of the property and a checksheet for the developer transition along with acceptance of the common elements by the Association. These formal steps create a timeline for acceptance should something take place at a later date that requires going back to the developer. The judge should ask the association if the common elements were ever accepted by the association. If they were not, then shame on both the developer and the association... After acceptance, a routine inspection verifies the condition of the property at that time and could aid in reducing the number of incidences like this.

The association may indeed have been negligent, but proceeds will be paid by the developer's and the association's carriers, once a settlement is reached. Conventional wisdom says "sue everybody" and reach into the deepest pocket. But I think this should apply only in cases of obvious defects. The association cannot otherwise be expected to be liable for the developer's failures. Even though the city's inspection prior to issuance of a certificate of occupancy cannot be taken as a guarantee of compliance, my experience has been that city inspectors usually go over common facilities with a fine-tooth comb, and should have caught this issue. In only-one case that I have been involved in as a homeowner has this inspection process been followed. Back in the '80s, we (the board) inspected all the buildings in each phase before we allowed it to be annexed into the association. It was a tedious and time-consuming process, but we caught many deficiencies, and the developer either repaired them or gave us cash to repair them, so I would say this process works fine. The cost to the association was $0, since the board is comprised of volunteers, but I doubt if, today, you'd find directors willing to devote that kind of time and effort to such an undertaking. Also, The "phasing-in" process doesn't seem to be utilized as much these days. I would not be in favor of any additional legislation, unless it is accompanied by a penalty process for failure to comply. Otherwise, it's just more empty promises, just like CCIOA.

I notice that everyone above states that the Association should have walked through and inspected the deck after completion, but where was the municipality in this? The town, city, or county should have had a final inspection of this deck prior to a CO being issued, same as with a homeowner who wants to build a deck on their home. Additionally, as a member of the Board of Directors for my HOA, there is NO WAY that I'm inspecting this construction for defects, as it's not a discipline in which I would consider myself a professional.

After I wrote my first comment I realized that city inspectors are supposed to inspect and approve the work. However, as it turns out they did not do an adequate inspection so they can't be relied upon. It would be nice but they either couldn't or wouldn't do a reliable/complete inspection. Unfortunately, I don't think they legally can be held accountable which leaves homeowners and HOAs in a sad situation since many, if not all, are new to being homeowners and are not professionals. Also, I am concerned that management companies really know much and maybe they should. I still shake my head as to the many problems still arising from our development built in 1999. I believe this was during a building boom and so may explain that due to the rush to get things built there was poor construction and inadequate inspections. From time to time over the years, too many times we would discover a problem, e.g. a pipe bursting, and then the repair person would notice shoddy construction. But it was supposedly past the statute of limitations. We did have million dollar settlement that was after the limitations which was fortunate. The lawyer we hired brought out expert construction defects engineers to assess the buildings and they found way more than we imagined (and were shocked). However, the lawyer did not want to go after the developer, builder and architect for everything since he was concerned that if we ended up going to court we might end up getting even less than the 1 million. So we still have defects that will need to be addressed eventually (plumbing, wood deck supports below the grade...in the ground), and paid for out of our pockets. Maybe the statutes of limitation should be made greater.

Would definitely like to see what the outcome is on this. I'm imagining a settlement by the association. You should write a follow-up post!

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