Following are Frequently Asked Questions about Construction Defects along with their answers:

 

What is defective construction?

Defective construction includes defects in design, in construction, in the,choice of materials or defects in the materials themselves. A defect exists if a particular building component differs from the developer's intended result or differs from apparently identical construction. The buyer's reasonable expectations upon purchase are important in this regard, along with any representations as to the condition or quality of the property that were made by the builder. Obvious defects are known as patent defects and those which are not reasonably observable, but are later discovered,are known as latent defects.

 

What are material deficiencies?

Material deficiencies exist when materials used in construction fail or do not perform as they should. Common material deficiencies can include, window and door frames, building paper used for waterproofing, inadequate roof flashing, plumbing systems, asphalt, and concrete.

 

Can a developer's failure to follow the building specifications established by the building architect be considered a construction defect?

Possibly but not always. Some substitutions may be equal or better than what the architect specified and some may be inferior.

 

I am on the board of a new community association in Riverside. The slopes consisting of common area are starting to fail. Are landslides and slope failures considered construction defects? The developer turned the association over to the membership less than one year ago. We now have several homes in extreme danger.

Yes, you should contact us for a no-cost consultation before more damage takes place.

 

When are developers of properties that are governed by a homeowner association required to start paying assessments to the association on units or lots that are not yet sold?

Generally, developers are required to pay assessments on all units or lots they own after these things take place: (1) The CC&Rs are recorded , and (2) The first unit or lot is sold, and closes escrow. There are rare exceptions, so you should check your association's CC&Rs. See: Non-Payment of Assessments by Developer Equals Fraud = Attomey Fees and Developer to Homeowner Transition Services.

 

When you represent a homeowner association in a construction defect case, do you check to see if the developer has paid all the assessments on units owned by the developer while the developer is or was in control of the board?

Absolutely. Developers do not always pay the assessments owing on units. They sometimes think that they can get away with it since they control the board and the accounting process up to the time control is passed on to the owners. See: Non-Payment of Assessments by Developer Equals Fraud = Attorney Fees.

 

What geographical area does your firm cover?

We can represent clients in all 58 counties of the state.

 

Does your firm represent homeowner associations that were apartments converted to condominiums?

Absolutely. See: California Condominium Conversions - Construction Defects for additional information and contact us for a no-cost initial consultation.

 

Is a builder liable for damages even if the project was inspected, and approved by the City or County building inspector?

Yes. If the project is defective, the builder may be liable even if the project meets all applicable local codes, has been approved by the building inspectors and has been built according to the standards of the local community. In addition to liability/or negligent construction, or construction not meeting the standards of the community, builders and sellers of mass-produced housing are held to an implied warranty of fitness and are held strictly liable for construction defects without a showing of negligence or fault. Recent court cases have made it absolutely clear that strict liability applies to builders of multi-unit condominium projects. All that must be proven in court is that defects exist and what appropriate correction is required. The measure of the damage is the cost of repairing the defects, together with the value of the loss of use of the property during the period of injury.

 

Why do developers usually get three votes for units or lots that they own and buyers receive only one vote for each unit of lot they own?

The California State Legislature has permitted the California Department of Real Estate to approve CC&Rs for new housing developments with homeowner associations to provide developers with three votes per unit or lot owned. Consequently, nearly every new housing development in California takes advantage of this law, It allows developers to maintain control of the board of directors and the association for a longer period of time than if they only got one vote like everyone else. Sometimes CC&Rs place a limit on how long the developer can exercise the three-vote rule.

 

What monetary damages can I recover in a lawsuit and can I recover attorney's fees?

California courts are clear in awarding homeowners and community associations the cost of repairing the defects. You can also recover whatever reasonable fees you have had to pay for your experts to investigate the cause of the defects and their costs in supervising the repairs. The costs of doing temporary repairs during and before the lawsuit to mitigate the damages are also recoverable. If repairs require owners to vacate their homes, reasonable relocation costs are included. Punitive damages, or damages awarded to punish the builder and to deter similar conduct in the future, may be awarded where the builder defendant has shown a "conscious disregard" for the rights of the buyer, such as where there has been a fraudulent concealment by the builder. In some cases, attorney's fees are recoverable but not always. In appropriate cases, it may be possible to obtain compensation for loss in market value.

 

Is a homeowner association required to make repairs during construction defect litigation?

Every party to the lawsuit (including the developer) has the duty to lessen or mitigate their damages where reasonably possible. In this regard, the home owner or association should make reasonable repairs, assuming that sufficient reserves or funds exist to do so, at least on a temporary basis so as to prevent the property from being damaged to a greater extent.

 

What should I do if the builder has agreed to make the necessary repairs?

It is prudent to consult a lawyer who can assist in locating an independent expert to evaluate the builder's investigation of the problem and his proposed repairs. The same expert should oversee actual repairs. Once repairs are agreed upon, the lawyer can draft a proper settlement agreement that does not absolve the builder of liability except for the limited and defined repairs being made, and then only after the repairs have proved effective. The builder will typically demand a broad form general release of all future liability in. exchange for making repairs. Such a release may result in board of director liability should other defects appear during the time remaining before-the expiration of the various statutes of limitation. For that reason, such a release is rarely, if ever, recommended. In short, insist on a specific limited release.

 

What is a tolling agreement?

A tolling agreement is a contract between parties that temporarily suspends or pauses the running of a statute of limitations, allowing more time for potential legal cla ims to be pursued without being time-barred. Parties often agree to a toll ing agreement to permit time for negotiations, settlement discussions, or to gather additional information before it becomes necessary to file a lawsuit. Tolling agreements are common in construction defect claims where there are multiple statutes of limitation, some being short. A tolling agreement should always be drafted by an attorney.

 

How do we recover if the builder is out of business, cannot be located, or is bankrupt?

The most important asset is the builder's insurance policy as well as the policies of the various subcontractors. Even if the builder cannot be located or is bankrupt, the various insurance companies must defend and pay claims that are covered under the policies. Builders almost always have insurance coverage because it is almost impossible to obtain construction financing without it. Likewise subcontractors are rarely hired unless they have insurance.

 

Who normally files suit against the builder?

An association has the legal capacity or standing to bring a lawsuit for damages to the common areas, damages to the separate interests which the association is required to maintain or repair, and damages to the separate interests arising out of or related to damage to the common areas that the association is required to maintain or repair. As such, the association is the proper party to bring an action for construction defects. Individual homeowners may also file suit if required and appropriate.

 

What is the Calderon Act?

The Calderon Act was enacted in California in 1995. It requires dispute resolution before a common interest development with twenty or more units can file a suit against a developer for construction defects. The requirements are found in the California Civil Code.

 

How do I prove that a defect exists?

In most cases, it will be necessary to hire the services of experts. Experts are professionals who have the necessary training, education and experience to give testimony in court as to the cause of a defect as well as the cost to properly cure the defect. For example, if your roof leaks, an expert who has designed roofs, evaluated other
leaky roofs and knows how roofs should be constructed is in an excellent position to testify as to the reasons your roof leaks. Your lawyer cannot, in most cases, prove his case against the builder unless he has qualified experts. Experts are available, for every aspect of residential construction. Expert's services usually run from $200.00 to $300.00 or more per hour.

 

How long does a construction defect case take from start to completion?

It is extremely difficult to answer this question because so many factors must be evaluated. The short answer is at least one year. We can provide you with an estimate when we know more about your situation.

 

What monetary damages can I recover in a lawsuit and can I recover attorney's fees?

California courts are clear in awarding homeowners and community associations the cost of repairing the defects. You can also recover whatever reasonable fees you have had to pay for your experts to investigate the cause of the defects and their costs in supervising the repairs. The costs of 'doing temporary repairs during and before the lawsuit to mitigate the damages are also recoverable. If repairs require owners to vacate their homes, reasonable relocation costs are included. Punitive damages, or damages awarded to punish the builder and to deter similar conduct in the future, may be awarded where the builder defendant has shown a "conscious disregard" for the rights of the buyer, such as where there has been a fraudulent concealment by the builder. In some:cases, attorney's fees are recoverable but not always. In appropriate cases, it may be possible to obtain compensation for loss in market value.

 

Is the association required to make repairs during the litigation?

Every party to the lawsuit (including the developer) has the duty to lessen or mitigate their damages where reasonably possible. In this regard, the home owner or association should make reasonable repairs, assuming that sufficient reserves or funds exist to do so, at least on a temporary basis so as to prevent the property from being damaged to a greater extent.

 

Do HOA boards have a duty to disclose lawsuits to members of their homeowner association?

Boards have a general duty to disclose facts that materially affect the rights and interests of HOA members. Whether something is material depends on the facts of the situation and its possible impact on the association and its members. Lawsuits that are being defended by the association's insurance company are material. Routine collection lawsuits are not material.

 

As the owner of a condominium, what do I have to disclose to a potential buyer if our HOA has filed a construction defect lawsuit?

Regardless of whether a lawsuit has been filed , you must disclose any known construction defects to a potential buyer or lender. There is a box to check on the standard California Association of Realtors form when selling a property in California that has construction defects.

 

I recently purchased a condominium and subsequently discovered several material defects that were not disclosed by the seller, The property was sold "as is", Does this relieve the seller of liability?

Absolutely not. This is well settled law in California. It is not possible to write a contract that eliminates the seller's duty to disclose in California.

 

What should I do if the builder has agreed to make the necessary repairs?

It is prudent to consult a lawyer who can assist in locating an independent expert to evaluate the builder's investigation of the problem and his proposed repairs. The same expert should oversee actual repairs. Once repairs are agreed upon, the lawyer can draft a proper settlement agreement that does not absolve the builder of liability except for the limited and defined repairs being made, and then only after the repairs have proved effective. The builder will typically demand a broad form general release of all future liability in exchange for making repairs. Such a release may result in board of director liability should other defects appear during the time remaining before the expiration of the various statutes of limitation. For that reason, such a release is rarely, if ever recommended. In short, insist on a specific limited release.

 

How do we recover if the builder is out of business, cannot be located, or is bankrupt?

The most important asset is the builder's insurance policy as well as the policies of the various subcontractors. Even if the builder cannot be located or is bankrupt, the various insurance companies must defend and pay claims' that are covered under the policies. Builders almost always have insurance coverage because it is almost impossible to obtain construction financing without it. Likewise subcontractors are rarely hired unless they have insurance.

 

Who normally files suit against the builder?

An association has the legal capacity or standing to, bring a lawsuit for damages to the common areas, damages to the separate interests which the association, is required to maintain or repair, and damages to the separate interests arising out of, or related to damage to the common areas that the association is required to maintain or repair. As such, the association is the proper party to bring an action for construction defects. Individual homeowners may also file suit if required and appropriate.

 

How much will a lawsuit cost?

The total cost of prosecuting a lawsuit will depend on a number of factors, including the nature and amount of damages, the number of parties, and the attitude of the parties. If the builder is willing to resolve the matter reasonably and without the need to file a lawsuit, the expense will be much less than if the builder or its insurance company does not act responsively, forces the filing of a lawsuit or requires the case to proceed through the court system and potentially to trial. Some lawsuits are settled within a relatively short period of time, while others are not resolved until just before trial. Lawsuits can be expensive, and close cooperation between the association, property management company and attorney is necessary to reduce the costs as much as possible. One of the major costs is the cost of expert consultants. These costs will be included in the claim against the builder and are usually fully recoverable.

Legal fees depend upon the nature and extent of the defects and the size of the project. Attorneys generally either bill by the hour or perform their services for a percentage of any recovery. If the attorney charges by the hour, expect to pay between $250 and $350 per hour. If the attorney works on a contingency basis, expect the fee to be between 28% and 40% of the gross recovery depending on the size and complexity of the matter. Fees are always negotiable.

 

Why is your contingency fee based upon the number of hours you have invested into the case instead of a percentage of the recovery?

When it is time to settle a case in mediation, the opposing counsel will ask how many hours do you have invested in the case. Since the settlement will involve attorney fees, it's reasonable for them to ask for our billing records which includes our time invested and expenses paid. We will be entitled to attorney fees and the reimbursement of costs, but they must be fair and reasonable.

 

Will the association's insurance company cover damages caused by construction defects?

Probably not. Association insurance companies almost always exclude the types of coverage which provide benefits for construction defects. The policy will, however, be reviewed by your lawyer for possible coverage.

 

What is insurance bad faith?

In every insurance policy (contract) there is an implied covenant of good faith and fair dealing that must be honored by every insurance company. An insurance company commits an act of bad faith when it violates this implied covenant.

 

Where do we get the money to pay for a lawsuit?

Several ways exist to raise money for pursuing your legal rights. First, your association's reserves are a good source. California law allows associations to borrow from reserves as long as it is repaid within specified time limits. Another source is to increase your monthly assessments by the percentage allowed in your CC&Rs or to pass a special assessment. Also, certain banks provide financing for these types of matters on attractive terms. Lastly, a small number of law firms are able to advance all or some of the costs. Call us to discuss all options.

 

What happens if after settling our construction defect claim, or obtaining a judgment, our HOA is short of funds to complete 100% of the repairs needed?

While your association has many options, one option available to your HOA is to obtain a loan to cover any shortfall. Our firm is unique in being in a position to guarantee the availability of funds should the need arise. The terms of such a guarantee must be in writing. We would be pleased to discuss the details with you at any time.

 

Can I sell or refinance my home during the litigation?

Yes. The board of directors of a homeowner association has a fiduciary duty to investigate construction defects and timely pursue a claim against the builder to recover damages and to repair the problems. During this time, California law requires a homeowner to disclose to a potential buyer construction defects and litigation. Any such disclosure may have an impact on marketability. While in litigation, lenders are usually cautious about refinancing. However, there are mortgage companies that specialize in refinancing homes involved in litigation.

 

Can our association be compensated for the extra costs we will be: required to pay our management company due to construction defect litigation?

Possibly. This cost is usually part of the claim made against the builder., In addition, some law firms will reimburse the management company for certain extra costs incurred so that the association never gets billed for these costs.

 

How often does mold result from water intrusion into roof and wall areas?

It is very common. It can cause physical damage to the building as well as personal health problems.

 

In addition to having construction defects, the developer of our community association turned the association over to the home owners in a nearly bankrupt condition. Can you help us determine what happened to cause this situation?

Absolutely. Quite often when we file suit against a developer for construction defects, we seek an accounting to determine if the builder paid all assessments due, during the marketing phase. Sometimes the builder has not paid all assessments leaving the association short thousands of dollars. In addition, we may find that the !initial budget provided to the buyers was inadequate because the projected expenses were understated. In these situations, we seek damages from the developer as part of the lawsuit.

 

What does a builders warranty usually cover?

They are all different. Most will not address 80% to 90% of common construction defects. In addition, most developer warranties require the claimant to arbitrate and give up the claimant's right to sue in court where he or she is entitled to a jury trial.

 

Can the developer of a housing community be held liable for the improper installation of artificial turf or grass?

Yes. See: Artificial Turf or Grass for standards concerning the installation and maintenance of this product.

 

Can a developer claim that he or she is not liable for defective construction if the work was inspected, and approved by the local city or county building department?

Approval by a city or county building official is never a defense for defective construction. In addition, city and county building departments have legal immunity for negligence claims.

 

How will you keep the board informed about the progress of our construction defect case?

We will keep your board informed by doing the following : (1) We will send you copies of all important documents sent or received, (2) We will meet with your board via Zoom from time to time and when requested to provide updates and answer questions, and (3) We will be available by phone to answer questions that may arise from time to time. We want the board to be fully informed so you can make good decisions.

 

What is the difference between a statute of limitations and a statute of repose?

A statute of repose is a law that establishes a time limit from a specific event, such as the day of completion of a construction project, after which a lawsuit related to that event can no longer be filed , regardless of when the damage or injury took place. Statutes of limitation usually start running from the date of injury or discovery. See: Statute of Repose vs. Statute of Limitations. Always contact a construction defect attorney to discuss any applicable statutes that may apply to a construction defect claim.

 

What is equitable estoppel as it applies to construction defect claims against a developer?

Equitable estoppel is a legal doctrine that prevents a party to a dispute from asserting a claim or right that contradicts their previous actions or statements, especially if one of the parties has relied on those actions or statements to their detriment. Equitable estoppel is rooted in fairness and equity, aiming to prevent one party from taking advantage of another party in order to gain an unfair benefit. It effectively prevents someone from going back on their word. Equitable estoppel comes up fairly often in construction defect claims where a developer is attempting to unfairly rely on the statute of limitations as a defense. An example would be where a developer promises to make repairs and then makes inadequate repairs.

Promissory estoppel is similar but not exactly the same. Promissory estoppel is a legal doctrine that enforces a promise, even without formal consideration, if a party reasonably and detrimentally relied on a promise. Promissory estoppel is intended to prevent a party from going back on a promise if the other party has relied on the promise to his or her detriment.

 

After a construction defect case has been settled or resolved what must the association provide the owners in the way of information?

The attorney reprinting the association will be required to provide the owners with a Notice of Settlement.