The Importance of Effective Communication During a Construction Defect Claim in the New Normal!

Effective communication within a homeowners’ association is always important. However, during a construction defect action by an association, communication and cooperation among the Board, Community Association Manager, Owners and the Construction Defect Attorney become essential. With the outbreak of Covid-19, how we communicate and do business in the future will most likely all be different.

While all decisions must be made by the Board as required by Hawaii law, and the applicable Association governing documents, unit Owners certainly have a stake in the outcome of the litigation. It is the unit Owners who are anxious to have the defects fixed in their homes and placed in a code compliant and safe condition. Clear communication is the key.

If the building is still within the applicable period within which to pursue a construction defect claim, generally ten (10) years from the substantial completion of the building, Owners want to know if the Board is meeting their fiduciary responsibilities by retaining independent 3rd party professionals to properly assess and investigate the condition of the common areas, and determine if defects exist before the time frame to bring a claim is extinguished. Keeping unit Owners informed is the most appropriate course of action between Board members, Owners, and the Community Manager. This helps to avoid confrontations at Board meetings and may reduce the chances of a lawsuit by an Owner for a breach of fiduciary duty claim.

Often the “Declaration of Covenants, Conditions and Restrictions (sometimes also referred to as Declaration of Condominium Property Regime).” requires unit Owner consent to the commencement of Construction Defect claims by the Association.  Frequent, honest and direct communication with Owners facilitates obtaining the necessary vote. This should be done in a series of clearly written informative letters, often followed by a “Homeowner Forum” where further information can be presented and discussed.

Once the Action is initiated, the Construction Defect Attorney will develop an inspection schedule for the community and send out a representative from the Attorney’s office to guide and monitor the investigators. The Attorney will share the schedule with the Board and Manager who can provide feedback on the schedule and share the schedule with Owners as appropriate.

During the pendency, the Owners should be regularly updated as to the status of the claims via periodic letters, or attendance at open sessions of Board meetings. At this time the Construction Defect Attorney can present a concise and factual discussion as to the nature of the investigation and claims process, followed by a brief question and answer session. If properly conducted at this meeting the attorney-client privilege can be established with the understanding that it is primarily the Association, not the members, who are the client.

In addition to regular Board meetings, as the claim develops, such as the formal filing of an arbitration or litigation, or as significant events occur, supplemental disclosure statements should be issued.  Transparency is the key for the Board and its management company to work together with the Owners towards a common objective, making the building safe.

The unanswered questions are still being developed. How will we best communicate with Boards and Members in this new normal? Will it all be via video conferencing? What precautions will we need to take to keep members safe as experts for both the association and the defense conduct inspections and testing. Our world has changed with Covid-19, but the new normal will just become that, and we will adapt, but with the same goal to maintain the most effective communication between the Board, the Owners and the Construction Defect Attorney!

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Ken Kasdan is considered one of the nation’s leading construction defect authorities. He regularly speaks at national conventions of attorneys, insurers and claims professionals. He has practiced law for over forty years. He is the Senior Partner with Kasdan LippSmith LLLC, a fully staffed firm with its primary office in Oahu.

Ritchie Lipson is Executive Director of Client Relations for Kasdan LippSmith LLLC. For the past 21 years, Mr. Lipson has worked with Commercial investors, Municipalities, School Districts, Homeowner Associations and Residential Property Owners. He and his Director of Hawaii Business Development, Louisa Percudani can be reached at (808)369-8393. Kllawhawaii.com