HOA Responsibilities in Construction Defect Claims
March 29, 2009
The Board of Directors of a homeowners association (HOA) has a legal duty to its members to act in a reasonable and responsible manner to represent and protect the association’s interests. By and large this is not difficult to do while managing the association’s routine business.
When construction defect claims arise, however, nothing can be considered routine. Any misstep by the Board in pursuing what could be a one-time multimillion dollar claim could result in major financial loses to every homeowner in the association, and potential liability for the Board. Therefore, if a homeowner reports a potential construction defect, the Board should take several important steps promptly.
Time is of the Essence
Statutes of limitations legally bar recovery of damages from the builder for construction defects once a certain time has passed after completion of construction. In some states and with regard to specific building subsystems, this time period can be as little as two years. If the Board were to drag its feet and miss the statute of limitations deadline by a week, you can be certain that the homeowners stuck paying for expensive repairs out of their own pockets will be rightfully looking for someone on the Board to blame.
Defects in Exclusive-Use Areas
If the problem is in the private area maintained by the homeowner, inquire among other homeowners whether they are experiencing similar problems. If only one homeowner is affected, that owner will need to pursue the builder on his own.
If other owners are reporting similar problems in their units, the number of units affected together with state laws and association regulations will determine if the HOA has a right or a duty to act on their behalf. If the HOA does not have a duty to act, then the homeowners can pursue legal claims against the builder individually or jointly as they see fit.
Under some circumstances, even if the defect is only in exclusive-use areas, if it involves a certain number of homeowners or has some other bearing on the common interests, the HOA might have the right or the duty to act on their behalf. When this is determined, the HOA should act promptly and reasonably.
Defects in Common Areas
When defects occur in the common areas maintained by the association, then it is the HOA’s duty to pursue the builder for appropriate repairs to protect the association members from paying for those repairs themselves or from experiencing a decrease in property value due to the defective condition.
Contacting the Builder
In what effectively amounts to warranty repairs, the common procedure is to notify the builder concerning the condition requiring repair and establish a time when the repair will be made. This may be appropriate for minor repairs, but if the problems are numerous or major, it may be better to consult with a construction defects attorney with HOA experience first, because:
- The builder may know when the statute of limitations expires and appear cooperative just long enough for your time to run out.
- The builder may make temporary repairs that only appear to solve the problem and then have you sign documents accepting the repairs as satisfactory, effectively shielding him from any further liability.
- The builder may have the opportunity to conceal other, more serious problems before they are discovered.
Inspection to Determine Scope of Defects
For anything other than isolated minor repairs, the Board is advised to have a professional private building inspector investigate the problem to determine its scope, potential causes, appropriate remediation, and an estimate of repair costs. If it’s determined the problem is serious, then the Board will need to find an experienced attorney to be certain the matter is resolved in the best interests of the membership.
If the problem is obviously serious even without having it looked at by an inspector, the Board may want to skip the inspection step temporarily and discuss the matter first with a qualified attorney.
Involve an Attorney
It’s extremely important for the Board to be certain that the law firm they choose to represent the HOA has extensive experiencing representing HOAs in construction defect matters. There have been cases where less experienced attorneys have made serious mistakes resulting in their clients not receiving all the damages they were due.
Also, many states have adopted strict pre-litigation laws requiring HOAs to take very specifically defined steps in construction defect cases that must all be completed as defined by statute before the builder can be sued in court. Not knowing these requirements or not performing them correctly could jeopardize the HOAs ability to recover from the builder. An experienced law firm will know all the statutes that apply to your case.
Once an experienced law firm is engaged, the attorneys involved will guide the Board in executing all of its legal responsibilities. Almost all firms will work on a contingency basis, and some are even able to offer financing when the association is legally required to make emergency repairs to prevent property damage or injury.
If you need assistance finding an attorney, please contact us using the form on the right.
Related Articles
- What is a Construction Defect?
- Mediation vs. Arbitration in Construction Defect Cases
- What Does Contractor Liability Insurance Cover?
Got something to say?