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 developer? “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 developer,” 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 developer of a problem? “If the association believes the developer can cure the problem in some way, and that a developer fix is in the community’s interest, notice can be provided to give the developer the chance to fix it,” said Byrne. However, he explained, if there is a larger problem, and it is one the developer cannot fix, the association will probably have to file suit or make the repairs.
In addition, Byrne noted that, if the developer claims a warranty has expired, it is usually not determinative of anything. He also said that the board has total authority to make changes to the rules and regulations adopted by the developer-controlled board.
According to Byrne, there is no mandatory arbitration in construction defect claims in New Jersey. He noted that arbitration is allowed if the parties involved in the defect claim agree to arbitration. Byrne explained that the arbitration process runs similar to that of a court proceeding, but without a jury.