Can Community Associations, high rise, condominiums, and townhomes pursue claims for construction defects?

Generally, yes, if the building was constructed or rebuilt within the time period specified by law, and your claim is within other time limits. A complete answer depends on a legal analysis of the specific documents and factors concerning the project and the Declaration of Condominium Regime. (‘Governing Documents’).

Who is legally responsible for defective construction?

Depending on the facts, contract and warranty documents the developer, the general contractor, design professionals and engineers, relevant subcontractors, and material suppliers can all be liable, and usually they are insured, on either individual or project specific insurance policies.

What claims can I pursue?

Community Associations and owners of high rise, condominiums and townhomes may pursue claims to enforce their Governing Documents and to recover damages due to defective construction in the (1) common areas, (2) “separate interests” property damaged by defects in the common areas, defects “integrally related” to common areas, and defects that the Association is responsible to maintain or repair pursuant to the Declaration of Condominium Regime. (‘Governing Documents’). The definitions and provisions in Governing Documents can be convoluted and confusing. We recommend that owners discuss the scope of property interests for which the association may have responsibility with a qualified legal professional with experience in community association law. The law in most states provides that builders and developers have a basic duty to construct a building in a sound and workmanlike condition. The duty or warranty is either expressly provided in contract, by statue or implied in the law. If that duty is breached, the owner has potential claims for construction defects. The builder must follow the building plans, applicable building codes, installation requirements of the manufacturers of the products used and industry standards. Failure to meet any of these requirements can be a construction defect.

Are there any special procedures which must be followed prior to filing a lawsuit?

Yes. The Association’s Governing Documents generally provide for special procedures that must be followed per pursuing legal actions for defective construction. Hawaii Law imposes a statutory requirement of notice to a developer/general contractor of the claim and provides them an opportunity to make an offer to repair. These procedures may include requirements of providing notice to the membership, a vote of the membership authorizing the bringing of a claim, and potentially alternative dispute resolution procedures such as mediation and arbitration. You should review requirements of your Governing Documents and discuss them with qualified legal professionals prior to commencing any legal action.

What kind of damages can I recover?

Typically in a construction defect action, you can recover the cost of repair, or the value of the reduction in value of the property, whichever is less, subject to certain factors that may increase your recovery. Because a Community Association is generally required by its Governing Documents to maintain and repair common areas, the typical measure of damages is the cost to repair. Other potentially recoverable damages include the cost of investigation, relocation and storage, and other costs recoverable by contract or statute. Punitive damages may be available in cases in which fraudulent misrepresentation or fraudulent concealment is found.

At any time during construction defect litigation, do members have to move out of the building?

No. Generally inspections and testing can take place while the units are occupied.

How do I differentiate between a construction defect and a maintenance issue?

Typically, an expert consultant is retained to analyze the conditions, and a determination is made as to whether the condition is one of deficient design, improper construction, or inadequate maintenance. Often, problems people consider to be maintenance issues are created by defects in the original construction.

How much does construction defect litigation cost and how do I pay for it?

There are a variety of ways to structure the fee arrangement, from paying for professional services based on time worked and costs incurred, to a contingent fee agreement. In a contingent fee agreement, you do not pay legal fees unless and until there is a recovery. Other costs of litigation may be charged to the client but may also be advanced by the law firm and recovered from proceeds of case resolution. Some of the investigation and analysis expenses can also be recovered at trial if the case reaches that stage. Your Governing Documents may also provide that you can recover attorney fees in addition to the damages.