The Overlooked Risks in Avoiding Construction Litigation
Litigation is bad, but avoiding litigation can be worse.
For many associations, the three-word combination—construction defect
litigation—is a scary one. The idea of experts, inspections, depositions
and court appearances would give most people some anxiety, including board
and association members. Even more nerve-racking is the thought of having
to disclose the litigation to potential purchasers of units within the
association. So naturally, boards are reluctant to pursue construction
litigation, even when it appears necessary.
Most would agree that entering into construction defect litigation presents
some obstacles to the smooth operation of the association. What most homeowners
do not understand is the significant negative consequences the association
can face if it avoids litigation when it becomes necessary.
Takes this scenario as an example: an association repeatedly receives complaints
from homeowners about plumbing issues in their unit (or window leaks and
fogging, stucco cracks, etc.). The board hires an expert to inspect to
problem, and the experts concludes the buildings suffers from construction
defects. The board is hesitant to enter litigation and chooses not to
pursue legal action. Two years later, the statute of limitations has run,
but the problem has gotten worse. Legal action is no longer an option,
but the plumbing (windows or stucco) are still malfunctioning. As the
complaints stack up, the Board obtains a proposal to repair the plumbing
system in the building. The cost is significant, and the association lacks
to funds. So, it imposes a
special assessment on each and every unit-owner--$10,000 per unit.
The homeowners are upset, and for good reasons. They are now responsible
for a large special assessment they did not anticipate. If they want to
sell their units, they have to disclose (1) that defects exist in the
association, and (2) that a special assessment has been imposed on the
membership. They look to the board for its negligence and failure to deal
with the construction defects when litigation was still an option. The
tables have turned, and the legal action is now directed at the board.
This story may be hypothetical, but stories similar to this one are not
uncommon. Construction defect litigation often scares boards into ignoring
real issues in their development. These issues end up costing the associations
thousands of dollars in special assessments. Boards must not only be aware
of the consequences of litigation, but also of the consequences of avoiding
Sure, construction litigation creates some issues, but those issues can
be overcome. Silldorf Law, LLP provides hands-on representation during
the construction defect litigation. We utilize the pre-litigation procedures
effectively to obtain resolution for the association without initiating
litigation in the first place. We control the experts and minimize inspections
and interference with the owners’ ability to enjoy their community.
We support the association during membership meetings and participate
in town-hall meetings to educate and encourage the members that the association
is doing the right thing. We undertake the responsibility to address the
concerns of sellers, potential buyers, and their respective agents, and
we provide those individuals with information about lenders who specialize
in lending during litigation.