What is a construction defect and what should an association do if one is discovered? “A construction defect is a condition of a constructed item that exists in deviation from the applicable architectural drawings, applicable building codes, and/or applicable industry standards (manufacturer specifications),” said attorney David J. Byrne.
The first thing an association should do if a construction defect is found is engage an expert to evaluate the concern and to determine if it is in fact a defect, Byrne said. Once it is determined that there is a defect, the next step would be to determine the nature of the deviation, the cost associated with its repair, and whether any consequential damages exist or will accrue because of it, he added.
When is a defect the concern of individual unit owners instead of the association? “If the defective item is something over which the owner has exclusive ownership (i.e. it’s part of the defined unit), then the association may not even have standing to make a claim regarding the item or even to remedy it,” Byrne noted.
How can an association complete necessary repairs quickly while still pursuing any claims that have been made against the sponsor? “An association has a fiduciary duty to maintain, repair and protect the common elements, whether they’re built correctly or not,” Byrne commented. “The association has to be able to recover the dollars from the responsible parties and yet not allow defects to get worse, thereby increasing the amount of damages that are to be recovered,” he added.
Should contractors doing the repair work document everything? “If the association is ever going to look to recover dollars equal to what it spent to repair the defect, the association needs to give prior notice to the contractors and/or the declarant,” said Byrne. He added that the purpose of this is to allow them to come to the site to witness an item before it is fixed, not necessarily to make repairs itself. Byrne also noted that an association can pay its expert to photograph the item in order to provide more in-depth and accurate reports; otherwise, the contractor should be required to provide these items.
When and how should an association notify a sponsor of a problem? “If the association believes the sponsor can cure the problem in some way, and that a sponsor fix is in the community’s interest, notice can be provided to give the sponsor the chance to fix it,” said Byrne. However, he explained, if there is a larger problem, and it is one the sponsor cannot fix, the association will probably have to file suit or make the repairs.
In addition, Byrne noted that, if the sponsor claims that a warranty created by statute has expired, it may not be determinative of anything. He also said that the board likely has total authority to make changes to the rules and regulations adopted by the declarant-controlled board.
According to Byrne, some state laws provides for mandatory arbitration with respect to construction defect claims. Some state laws may allow for voluntary arbitration and/or some other form of alternative dispute resolution. In some states, a developer might be able to force an association to subject these claims to alternative dispute resolutions. Though Martin limits an association’s direct rights vis a vis concerns connected with an offering plan, it does not condition other rights with any ADR-related rule.