This article (updated as of July 2023) explains how DC’s structural defect warranty works and how to make claims against a developer’s warranty security to fund construction defect repairs (a/k/a “bond claim”). The article incorporates amendments enacted by the Condominium Warranty Claims Clarification Amendment Act of 2022 [D.C. Law 24-262], effective February 23, 2023.

The District of Columbia Condominium Act contains a statutory warranty that protects condominium associations and their unit owner members from structural defects in newly constructed and newly converted condominiums. The warranty is known as the Washington DC condominium “Warranty Against Structural Defects.” The warranty is backed by a condominium developer’s bond, letter of credit, or other form of “warranty security” arrangement from which funds can be drawn upon if the developer fails to make warranty repairs.

THE DC CONDOMINIUM WARRANTY AGAINST STRUCTURAL DEFECTS

Condominium developers in Washington DC are required by statute to warrant against structural defects in residential condominiums. District of Columbia Condominium Act (“DC Condo Act”) § 42-1903.16(b). The warranty applies to both condominium common elements and each condominium unit. It requires a developer to repair structural defects, including any resulting damage to the condominium caused by a common element structural defect. DC Condo Act § 42-1903.16(a-1)(2).  The statute creating this warranty is called the “Warranty Against Structural Defects,” contained in the DC Condo Act § 42-1903.16.

“Structural Defects” Defined

The warranty applies to “structural defects,” which are very broadly defined to include many types of construction defects. Structural defects are not just limited to defects in the supporting structure of the building. Rather, a structural defect can be any condition that:

“(A) Reduces the stability or safety of unit or common elements below standards commonly accepted in the real estate market,” or

(B) Restricts the normally intended use of all or part of the common elements of a unit and which requires repair, renovation, restoration, or replacement to serve the purpose for which it was intended.”

DC Condo Act § 42-1903.16(j)(6).

In addition, a building code violation that is harmful to health or safety of unit owners or a situation where a developer allows persons to purchase and occupy unit before it is substantially completed or an occupancy certificate issued, are presumed to be a “structural defects.”  DC Condo Act § 42-1903.16(a-1)(1)(A) and (B).

The Structural Defect Warranty Period

The warranty period is the time within which a structural defect must exist for the District of Columbia Warranty Against Structural Defects to apply. The warranty period for structural defects in an individual unit is two years from the date the developer conveys the unit to the purchaser of the unit in question. DC Condo Act § 42-1903.16(b). The warranty period for structural defects in the common elements is also two years and will typically run from the later of: (1) the date the developer conveys the first unit in the entire condominium; or (2) the date of the completion of the common element in question. DC Condo Act § 42-1903.16(b). The date of conveyance of a deed for purposes of calculating the two-year warranty period is the date on which the deed is recorded with the District of Columbia Recorder of Deeds Office. DC Condo Act § 42-1903.16(j)(3).

Statute of Limitations on Structural Defect Warranty Claims

The statute of limitations is the time within which a legal claim must be brought in a court of law, or it will be forever barred. The District of Columbia Warranty Against Structural Defects has a five-year statute of limitations running from the commencement of the applicable warranty period in question. DC Condo Act § 42-1903.17. The warranty is breached whenever structural defects exist during the two (2) year Warranty Period. If the condominium developer is unwilling to or fails to perform its warranty obligations to repair or pay for the repair of structural defects, then a lawsuit must be filed in a court of law (e.g., the Superior Court of the District of Columbia) within the five (5) year statute of limitations period (i.e., “within 5 years after the date the applicable warranty period began”). DC Condo Act § 42-1903.17(a). If not filed within this time (and barring any applicable exceptions), the legal claim for breach of the Washington DC Warranty Against Structural Defects will be forever barred by the statute of limitations and cannot be asserted in court thereafter.

Condominium Conversions and Structural Defect Warranties

The Warranty against structural defects applies to both newly constructed condominiums and older buildings (e.g., apartment buildings) that are newly converted into condominiums (“condominium conversions”). However, if a condominium developer offers the condominium conversion for sale in “as-is” condition, then the developer’s warranty will only apply to structural defects in relation to the components it installs or the work it performs in converting the existing building into a condominium, unless a more extensive warranty is provided in writing. DC Condo Act § 42-1903.16(c).

How to Apply the Warranty Period & Statue of Limitations

Structural defects covered by the Washington DC condominium Warranty Against Structural Defects are typically caused by defective construction (e.g., poor workmanship or use of faulty materials) that occurs when the condominium is being constructed. These construction defects are often concealed behind building exteriors and may cause increasing damage over time. Sometimes these defects are “latent,” meaning they remain unnoticed until they finally manifest themselves months or years after purchase in the form of property damage such as water entry into the condominium building. Any hidden structural defect caused by defective workmanship in the original construction will, by definition, exist at the beginning of and, therefore, within the two (2) year warranty period. Even if the structural defects are not discovered until after the two (2) year warranty period has expired, a lawsuit can still be brought for breach of warranty if it can be shown that: (1) the structural defect existed within the two (2) year warranty period, and (2) suit is filed within the five (5) year statute of limitations.

Identifying Structural Defect Warranty Claims

All condominium associations in the District of Columbia should have a construction transition deficiency study performed as soon as possible after the period of developer control ends (i.e., the date when residential unit owners take majority control over the condominium board of directors). See “Developer Transition for Washington DC Condominiums” for an overview of the transition process. The purpose of the transition deficiency study is to identify, in a written report, any construction defects, including latent or otherwise “yet-to-be-discovered” construction defects, so that they can be brought to the developer’s attention in a timely manner while warranty claims and other non-warranty claims for construction defects are still enforceable. See article “Resolving Condominium Construction Defect Claims in Washington DC” for an article discussing other non-warranty legal claims.

Court Enforcement of the Warranty; Damages, Attorney Fees, and Costs

If the developer refuses to repair a structural defect covered by the warranty, a condominium association or unit owner may file a lawsuit in a court of law (e.g., the Superior Court of the District of Columbia) to enforce the warranty and seek a damages award for breach of the structural defect warranty. This would include the cost of repairing the structural defects and resulting damage caused by the structural defects. DC Condo Act § 42-1903.16(a-1)(2). Additionally, “attorney fees and costs” may be awarded to an association or unit owner who pursues a successful breach of warranty claim in a court of law. DC Condo Act § 42-1903.16(e)(7)(H).

THE STRUCTURAL DEFECT WARRANTY SECURITY CLAIM PROGRAM ADMINISTERED BY THE MAYOR OF THE DISTRICT OF COLUMBIA

Condominium Developer’s Warranty Security

A condominium developer in Washington DC is required to post a bond, letter of credit or other form of security acceptable to the Mayor of the District of Columbia (“Mayor” or “Mayor’s Office”) that can be drawn upon, if necessary, to satisfy costs that arise from the developer’s failure or inability to fulfill its warranty obligations to repair structural defects (the “warranty security”). DC Condo Act § 42-1903.16(e)(1)(A) and (j)(7). The warranty security must be posted with (i.e., delivered to) the Mayor’s Office and must name the Mayor as beneficiary in an amount equal to 10% of the estimated construction or conversion costs. DC Condo Act § 42-1903.16(e)(1)(A).

If the developer fails to correct structural defects in the common elements or individual units, a condominium association or unit owner (“claimant”) can make a structural defect warranty security claim with the District of Columbia asking it to secure and release funds from the developer’s warranty security to be used to pay the cost of repairing the structural defects and other permissible damages. DC Condo Act § 42-1903.16(e)(7)(F) and (e-1)(2). See “How and When to Make a Claim Against the Developer’s Warranty Security,” below.

Calculation of Developer’s Warranty Security Amount

The warranty security amount equals 10% of the estimated cost to construct the proposed condominium as calculated from the time the developer files its application for condominium registration. DC Condo Act § 42-1903.16(e)(1)(A) and (e)(1)(D). A developer must estimate this amount because construction has not yet commenced when the application is filed. However, a “ballpark figure” or “back of the napkin” estimate is not sufficient. Instead, a condominium developer’s estimate must be based on costs prevailing “at the time of filing the application for condominium registration” and must be “determined according to industry standards for estimating construction costs.” DC Condo Act § 42-1903.16(e)(1)(D).

A condominium developer must post additional warranty security if its actual condominium construction costs measured from “substantial completion” exceeded its estimated cost by more than ten percent (10%). DC Condo Act § 42-1903.16(e)(1)(D).

How and When to Make a Claim Against the Developer’s Warranty Security

     Where to Make a Claim

The term “Mayor” means “the Mayor of the District of Columbia, or his or her designated agent.”  DC Code § 2–502. The Warranty Security Claim Program is administered for the Mayor by the agency known as the Rental Conversion and Sales Division of the District of Columbia Department of Housing and Community Development’s Housing Regulation Administration (“RCSD”). Structural defect claims made against a condominium developer’s warranty security (“structural defect warranty security claims”) are filed with and handled by RCSD. The contact information for RCSD is set forth below:

Government of the District of Columbia
D.C. Department of Housing and Community Development
Housing Regulation Administration
Rental Conversion and Sale Division
1800 Martin Luther King, Jr. Avenue, S.E.
Washington, D.C.  20020
Phone: (202)-442-4407 or 4373
Fax: (202) 645-5870
Email: dhcd.casd@dc.gov
Website: https://dhcd.dc.gov/service/conversion-and-sales

According to RCSD’s publication “How to File a Condominium Structural Defect Warranty Claim,” a claimant should file its structural defect warranty security claim via email at dhcd.casd@dc.gov. An email sent to this address will generate an automatic reply confirming of receipt of the claim. Note that RCSD sometimes refers to itself as the “Conversion and Sales Division” or “CASD”, hence its email address. See “Conversions and Sales Division” Website.

     New Rules to be Adopted by Mayor’s Office

As of the date of this article, the method of filing a claim with RCSD discussed above is subject to change. The Condominium Warranty Claims Clarification Amendment Act of 2022 [D.C. Law 24-262], effective February 23, 2023, requires the Mayor to implement new proposed rules governing structural defect claims by August 22, 2023. DC Condo Act § 42-1903.16(e)(10)(g)(1A)(A). Thereafter the proposed rules will be subject to a 60-day public review and comment period, followed by a 45-day period during which the proposed rules will be subject to approval or disapproval by the Council of the District of Columbia. DC Condo Act § 42-1903.16(e)(10)(g)(1A)(B). In the interim, we recommend sending both an email and a hardcopy by certified mail, return receipt requested for additional proof that the claim was received.

     Prior Notice to Condominium Developer of Intent to File Claim

A condominium association or unit owner claimant must give the condominium developer 30 days prior written notice of its intent to file a structural defect warranty security claim with the Mayor. This notice must be in writing and sent via certified mail, return receipt requested. During this 30-day period the condominium developer has an “opportunity to respond” to the condominium association or unit owner making the claim. DC Condo Act § 42-1903.16(e)(7)(A).

     Time for Filing a Structural Defect Claim with RCSD

If unresolved after giving 30 days prior notice, a condominium association or unit owner claimant may file a structural defect claim with RCSD. A copy of the claim must also be sent to the condominium developer via certified mail, return receipt requested on the filing date. DC Condo Act 42-1903.16(e)(7)(B).

Developer’s Response to Claim

A condominium developer must file a written response to the claimant’s structural defect warranty security claim. The developer’s response must be filed with RCSD 30 days after its receipt of  the claim. The developer must also send a copy to the claimant by certified mail, return receipt requested. DC Condo Act § 42-1903.16(e)(7)(C).

Mayor’s Decision on Structural Defect Claim

After receiving the claim and the developer’s response, RCSD will decide “whether the claim of structural defects is a perfected claim.” DC Condo Act § 42-1903.16(e)(7)(D)(i).  If the structural defect claim is determined to be “perfected,”  RCSD must then determine the cost to repair or replace the structural defects to be paid from the developer’s warranty security posted with the Mayor. DC Condo Act § 42-1903.16(e)(7)(E).

     Perfecting a Claim

A claimant’s structural defect warranty security claim becomes a “perfected claim” when it establishes “that a structural defect exists,” and it “contains all the information and supporting proof required by the Warranty Against Structural Defects statute or “other applicable law or regulation.” DC Condo Act § 42-1903.16(j)(5). The warranty statue provides the definition of a “structural defect” (discussed above) and the RCSD provides guidelines as to what referenced “information and supporting proof” it requires.

     New Rules to be Adopted for Perfecting a Claim

RCSD, on behalf of the Mayor, has published a list of the information and supporting proof it requires in order for a structural defect warranty claim to be deemed “perfected.” See RCSD publication, “How to File a Condominium Structural Defect Warranty Claim.” However, as noted above, the Mayor’s Office is in the process of implementing new proposed rules governing structural defect claims under the Warranty Claims Clarification Amendment Act of 2022 [D.C. Law 24-262]. See DC Condo Act § 42-1903.16(e)(10)(g)(1A)(A). Is anticipated that these new rules will provide updated guidance on how to how to “perfect” a claim.

Recently, RCSD advised our firm, that a “Claimant must provide” the following information “to perfect a claim” against the developer’s warranty security:

“(1) a formal letter filing a claim against the warranty security within the statutory warranty period and requesting the Mayor to review the claim and issue a determination.

(2) Documentation, prepared by a qualified expert, providing their opinion, that a building component is structurally defective as defined by the Condominium Act.

(3) copies of correspondence between the Association or Unit Owner and Declarant establishing the Declarant’s failure or refusal to repair, replace, or renovate, the structurally defect[ive] building components along with proof of delivery of notice of the claim to the Declarant via certified mail.

(4) a cost estimate for the repair, replacement or renovation of the structurally defective building components.”

Until RCSD has established rules for perfecting a claim that have been adopted by the Council of the District of Columbia, it is prudent to follow these guidelines if possible, including filing within the 2-year warranty period. A claimant can also attempt to confirm in writing with RCSD as to what it is currently requiring to “perfect a claim” pending the adoption of its proposed rules.

     Second Bite at the Apple in Perfecting a Claim

An initial determination by RCSD that a structural defect claim is “not perfected” is not fatal to a structural defect claim. Rather, a condominium association or unit owner claimant may refile its structural defect warranty security claim “based on additional or different information” in a subsequent effort to perfect a structural defect claim. DC Condo Act § 42-1903.16(e)(7)(D)(ii).

     Awarding Warranty Security Funds To The Claimant

Upon deciding that the structural defect claim is a “perfected claim,” the RCSD, on behalf of the Mayor, must next decide “the cost to repair or replace the structural defects that must be paid from the [developer’s] warranty security posted with the Mayor.” This determination must be “based on the materials provided in the claim.” DC Condo Act § 42-1903.16(e)(7)(E). Thereafter, the condominium developer and the condominium association or unit owner claimant must complete all forms required by the Mayor to release the necessary funds, after which the Mayor is required to release the funds to the claimant within 30 calendar days. DC Condo Act § 42-1903.16(e)(7)(F).

     What Else can be included the Mayor’s award?

          Resulting Damages

In addition to awarding the cost to repair or replace the structural defects, the Mayor must also award the cost of repairing “damage to a unit or a portion of the common elements” caused by or resulting from the structural defect. DC Condo Act § 42-1903.16(a-1)(2). This is important because sometimes construction defects, such a defectively installed roof or improper flashing of windows, can cause substantial property damage to a condominium building and its residential units.

          Costs

Costs arising out of a claim may also be awarded. Specifically, the Mayor must approve the release of funds from the developer’s warranty security “to satisfy any costs” that arise from a condominium developer’s failure to satisfy the requirements of the Warranty Against Structural Defects as provided in: (i) a written agreement between the claimant and the developer; (ii) an order of the Mayor; (iii) an order of the Office of Administrative Hearings in the event the Mayor’s decision is appealed (discussed below); or (iv) an order of a court, if the claimant files a lawsuit to enforce its structural defect warranty claim. DC Condo Act § 42-1903.16(e-1)(1)-(4).The term “costs” is not defined so a claimant could potentially seek any costs incurred in connection with bringing the claim.

Deadline for filing Structural Defect Warranty Security Claims

     Five-Year Statutory Deadline

Recent amendments to the structural defect warranty statutes clarify that a claimant has up to five years after the date the warranty period began to file an administrative structural defect claim against the developer’s warranty security under the Warranty Security Claim Program administered by the Mayor’s Office. See DC Condo Act 42-1903.17(a), stating that the 5-year statute of limitations for filing a lawsuit also applies to “non-judicial, regulatory or administrative proceedings”. This language was added by the Warranty Claims Clarification Amendment Act of 2022 [D.C. Law 24-262], effective February 23, 2023.

     New Rules to Address Conflict with Existing Two-Year RCSD Guidelines

At the time of writing this article, the five-year period for bringing an administrative claim is in conflict with existing RCSD policy published on its website.  According to the publication “How to File a Condominium Structural Defect Warranty Claim,” RCSD’s will only hear structural defect warranty security claims if filed within the two-year warranty period. However, as noted above, the Mayor’s Office is in the process of implementing new proposed rules that govern structural defect claims under the Warranty Claims Clarification Amendment Act of 2022 [D.C. Law 24-262]. See DC Condo Act § 42-1903.16(e)(10)(g)(1A)(A). These new rules should rectify the conflict.

Until RCSD resolves this conflict, it would be prudent to file a structural defect warranty claim within the 2-year warranty period if possible. Another reason to file within the two-year period is the fact that a condominium developer can begin reducing the amount of the warranty security held by the Mayor’s Office starting two years after the warranty period begins. See “Reduction of the Warranty Security Amount After 2 Years” below. The availability of the warranty security funds to a claimant serves as a strong incentive for condominium developer’s to make repairs.

Reduction of the Warranty Security Amount After 2 Years

     Reason To Bring Claim Within 2 Years

Although a claimant may be a five-years to file a structural defect warranty security claim, if a claimant waits too long there may not be any warranty security funds left to make a claim against. This is because the developer can begin reducing the amount of its warranty security two years after its conveyance of the first condominium unit. DC Condo Act § 42-1903.16(e)(3)(A). However, the developer’s right to reduce or released its warranty security terminated once a claim has been filed. DC Condo Act § 42-1903.16(e)(8). Filing a lawsuit for breach of the Warranty Against Structural Defects has the same effect. Once suit is filed, the Mayor may not release or reduce the security funds until a decision is rendered by the court. DC Condo Act § 42-1903.16(e)(7)(H).

Thus, it will usually be advantageous for a condominium association to file a structural defect warranty security claim within two-years. This requires having an engineering consultant identify construction defects early on so can be brought to attention of the developer 30 days before the two-year period ends.  This timing will ensure that the maximum warranty security funds will be available to satisfy structural warranty claims.

     Reduction Rules

Assuming there are no pending structural defect warranty security claims, a condominium developer can reduce the amount of the warranty security posted with the Mayor’s Office in pro rata segments, beginning two years after the conveyance of each unit based on the residential units percentage interest. DC Condo Act § 42-1903.16(e)(3)(A). However, the developer cannot reduce the warranty security by more than 50% until one year after developer’s control over the association board of directors is transferred to the residential unit owners (“transfer of control”). DC Condo Act § 42-1903.16(e)(3)(A).

Private Resolution of Structural Defect Warranty Security Claims

Condominium developers and associations or unit owner claimants may, and often do, negotiate their own private agreement to resolve a structural defect warranty claim, before RCSD renders a determination on behalf of the Mayor. Private settlements are encouraged as they conserve administrative resources and expense. Indeed, the parties to negotiations can request that the Mayor delay deciding a structural defect warranty security claim if productive negotiations are ongoing. If a private negotiated resolution is reached, the Mayor’s Office is required to release the funds pursuant to a written agreement between the condominium developer and the association or unit owner claimant, if approved by the Mayor. DC Condo Act § 42-1903.16(e-1)(1).

Appeal of Mayor’s Determination Regarding Structural Defect Claims

A condominium developer or claimant may appeal the Mayor’s determination regarding a structural defect claim to the Office of Administrative Hearings (“OAH”). The appeal must be filed within 30 calendar days of the Mayor’s final determination. DC Condo Act § 42-1903.16(e)(7)(G). Once an appeal is filed with OAH, any award made by the Mayor regarding the developer’s warranty security is suspended pending OAH’s issuance of an order regarding the appeal, which will supersede any decision by the Mayor. DC Condo Act § 42-1903.16(e)(7)(G). In the event OAH rules in favor of a claimant on a structural defect warranty claim, the Mayor must release developer’s warranty security funds to the claimant in an amount determined by OAH in its order. DC Condo Act § 42-1903.16 (e-1)(3).).

SIMULTANEOUS PROCEEDINGS: LAWSUIT AND ADMINISTRATIVE CLAIM

Claimants have two legal avenues to enforce a breach of the Warranty Against Structural Defects in the District of Columbia: (1) file a lawsuit in a court of law (e.g., the District of Columbia Superior Court); and (2) file an administrative claim with the Mayor’s Office.  These two types of proceedings are not mutually exclusive and can be brought simultaneously subject to the following rules:

(i) The fact that a claimant has already filed an administrative claim with the Mayor, does not precluded the subsequent filing of a lawsuit in a court of law to judicially enforce its structural defect warranty claim. DC Condo Act § 42–1903.17(b).

(ii) If a claimant files a lawsuit with the court before making an administrative claim, it must notify the Mayor. Once a lawsuit for breach of the warranty is filed, the warranty security posted with the Mayor’s Office cannot be reduced or released until a decision is rendered by the court. DC Condo Act § 42-1903.16(e)(7)(H).

(iii) If a claimant files a lawsuit with the court after making an administrative claim, any decision already made by the Mayor regarding the claim against the developer’s warranty security is stayed (i.e., put on hold) until the breach of warranty claim is resolved by the court. DC Condo Act § 42–1903.17(b)

CONSULTATION WITH AN EXPERIENCED CONDOMINIUM CONSTRUCTION LAW ATTORNEY

Representing condominiums in construction defect disputes is a highly complex area of law. A board of directors transitioning from developer control should seek free consultation early on with an experienced condominium construction defect attorney who can accurately advise the board: (1) when the statute of limitations expires as to the many different claims applicable to the condominium association and its unit owner members; (2) how to properly preserve those claims; (3) the importance of obtaining a timely transition deficiency report to identify construction defect before warranties and other legal rights expire; and (4) how to negotiate proper, comprehensive and long-lasting repairs.

NOTE ABOUT TERMINOLOGY

The term “developer” is used in this article to describe the person or entity that created the condominium association. “Developer” is the terminology commonly used for this purpose. The District of Columbia Condominium Act, however, refers to the developer as a “declarant” because it is the person or entity that files the condominium declaration, a legal document necessary to create a condominium.

The terms “condominium association” is used in this article to describe the organization or entity that governs the affairs of the condominium in accordance with the condominium bylaws and declaration, and whose members consist of all condominium unit owners. Condominium association is the terminology commonly used for this purpose. However, the District of Columbia Condominium Act refers to a condominium association as a “unit owners’ association.”

The terms “board of directors” of a condominium association are used to refer to the administrative entity made up of board members that have authority under the condominium bylaws and declaration to act on behalf of the condominium association. The District of Columbia Condominium Act refers to a board of directors as the “executive board.”

The terms “substantial completion”  refers to substantial completion of the condominium as certified by the condominium developer’s project architect. The date of substantial completion of the condominium is the “substantial completion date certified by the condominium project architect.” This is the precise terminology used in the Warranty Against Structural Defects at DC Condo Act § 42-1903.16(a-1)(B), (e-1)(D) and (e-1)(E)(2).

The terms “transfer of control” over the condominium association means the date when a majority (51% or more) of the board of directors of the condominium is composed of residential unit owners other than the developer or its appointees or successors. See DC Condo Act § 42-1903.16(e)10).

The terms “period of developer control” over the condominium association refers to the period  of time prior to when the developer transfers majority control over the board of directors to the residential unit owners.

LEGAL CONSULTATION & LEGAL ADVICE

The information provided in this article should not be considered legal advice applicable to any case involving condominium construction defects, including a case concerning the District of Columbia Condominium Warranty Against Structural Defects. All cases are different and require individual analysis. Condominium associations should seek out a complementary consultation from a condominium law firm versed in construction defect law, such as Cowie Law Group, P.C.  We recommend that all condominium associations the District of Columbia obtain such a consultation as soon as possible after unit owners take control of the association from the condominium developer, or as soon as possible after a transition committee has been established. Our firm can answer board member (or transition committee member) questions and lay out a timeline for identifying construction defects before warranty rights expire, as well as a strategy to ensure that  timely claims are made, and proper repairs are performed.

DISTRICT OF COLUMBIA CONDOMINIUM LAWYERS

WASHINGTON DC CONSTRUCTION DEFECT ATTORNEYS

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The post THE CONDOMINIUM WARRANTY AGAINST STRUCTURAL DEFECTS IN THE DISTRICT OF COLUMBIA appeared first on COWIE LAW GROUP - Maryland Condominium Construction Defect Lawyers.

This article discusses the circumstances under which a condominium unit owners association pursuing construction defect claims may be entitled to recover attorney’s fees, litigation expenses and treble damages under the District of Columbia Consumer Protection Procedures Act.

DC Condominium Association’s Can Recover Attorney’s Fees, Litigation Costs and Treble Damages in Construction Defect Cases Involving Misrepresentation

The District of Columbia Consumer Protection Procedures Act (“CPPA”) § 28-3905(k)(1)(A) creates a private legal claim (a/k/a “cause of action”) which can be asserted by a condominium unit owners association (“condominium association”) on behalf of two or more of its unit owner members who are misled by a condominium developer regarding the condition or quality of a newly constructed or newly converted condominium. Under the DC CPPA, a successful claimant is entitled to recover “treble damages” (i.e., three times the amount of damages it proves), plus recovery of “reasonable attorney’s fees” incurred in prosecuting the construction defect claim and “[a]ny other relief the court determines proper,” including non-attorney fee litigation expenses. DC CPPA § 28-3905(k)(2)(A), (B) and (F).

The CPPA Creates the Legal Claim that Allows a Condominium Associations to Recover Attorney’s Fees, Litigation Costs and Treble Damages

The DC CPPA is a consumer-oriented statute designed to protect Washington DC consumers misled in connection with the purchase of consumer “real estate,” including transactions involving the purchase of a condominium unit and interest in the condominium common elements. Typically, these cases involve the sale of a newly constructed or newly converted condominium, which, contrary to developer representations, contains latent construction defects.

The DC CPPA is a “remedial statute,” intended to be “applied liberally” by the courts protect consumers by establishing “an enforceable right to truthful information” about consumer real estate transactions in the District of Columbia. DC Code § 28-3901(c). One way in which the DC CPPA protects DC consumers of condominiums is by allowing for the recovery of treble damages and reasonable attorney’s fees so as to encourage private attorneys to take on consumer misrepresentation cases. District Cablevision Limited Partnership v. Bassin, 828 A.2d 714, 728 (D.C.2003). 

Another way in which the DC CPPA protects DC consumers is by creating a statutory claim for misrepresentation and omission in the sale of a condominium that does not require proof of “intent to deceive” or “duty to disclose,” a traditional legal roadblock for consumers seeking to prove a common law fraud claim. Saucier v. Countrywide Home Loans, 64 A3d. 428, 442 (D.C.2012); Wetzel v. Capital City Real Estate, LLC, 73 A.3d 1000, 1004-05 (D.C.2013); Grayson v AT&T, 15 A.2d 129, 251 (D.C.2011). For example, to prevail on a claim under the DC CPPA, a consumer need only allege and prove that they suffered damages as a result of being misled by a misrepresentation of, or failure to state, a material fact. DC CPPA § 28-3904(e) and (f). Thus, there can be liability for misleading a unit owner in the sale of a condominium, even if the misrepresentation or omission by the declarant, developer, builder or other affiliate was unintentional. 

Factual Scenarios Giving Rise to CPPA Claims in DC Condominium Construction Defect Cases 

DC CPPA liability in condominium construction defect case arises when a newly constructed or newly converted condominium contains latent construction defects that are contrary to what the condominium developer represented about the condition and quality of the condominium when selling it to the public. The unsuspecting unit owners who becomes saddled with the expense of repairing the latent construction defects may have a CPPA claim against the developer and other responsible parties who mislead them by making untrue or misleading statements (misrepresentations), or by failing to disclose important facts (omissions), about the true condition of the condominium in connection with the sale of units. It is not necessary for a DC CPPA claimant to be in a contractual relationship with the person or entity who made the misrepresentation or omission of material fact in order to bring a claim for violation of the DC CPPA. Wetzel v. Capital City Real Estate, LLC, 73 A.3d 1000, 1004-06 (D.C.2013).

To qualify, however, the representations or omissions of fact must be “material,” that is, they would have would impacted the decision of an average consumer to purchase a unit and common element ownership interest in the condominium. See, Saucier v. Countrywide Home Loans, 64 A3d. 428, 440-446 (D.C.2012) (discussing “materiality” under the DC CPPA). Damages can consist of three times the proven cost of repairing the construction defects and damage caused thereby or the cost of obtaining the represented amenities and quality that were not delivered, plus reasonable attorney’s fees and litigation costs. 

A condominium association can pursue a DC CPPA claim on behalf of two or more of its unit owner members if the subject of the misleading conduct and damage caused thereby is a “matter that affects the condominium.” DC Condo Act § 42-1903.08(a)(4). For example, if, in connection with a condominium conversion, a declarant represents to purchasing unit owners in a Public Offering Statement that the common element roof of the building had been completely removed and replaced with a brand new roof, when in fact the old deteriorate and leaking roof was merely covered with an extra layer of roofing material, this would be a matter affecting the condominium. As such, the condominium association could sue the declarant on behalf of the unit owners for violation of the DC CPPA and seek three times the cost of installing a “new roof” (i.e., treble damages) plus reasonable attorney’s fees and litigation costs.

Unfair or Deceptive Trade Practices Under the CPPA in Condominium Construction Defect Cases  

A violation of the DC CPPA occurs when a person engages in an “unfair or deceptive trade practice.” The DC CPPA contains a non-exclusive list of specific examples of conduct that constitutes “unfair or deceptive trade practices.” These include making a misrepresentation about the condition or quality of construction of a condominium or failing to disclose material facts regarding problems with the condominium common elements as well as other conduct which is misleading to condominium purchasers. For example, if a condominium developer represents that the condominium is constructed in accordance with applicable building permits and it is not, that may be an unfair trade practice. Likewise, if the developer promises that it has and/or will make certain repairs or renovations in connection with the conversion of a condominium which it does not make, that may also be an unfair trade practice. If the condominium association and/or its unit owner members suffer actual damages as a result of relying upon such misrepresentations or omissions, they may bring a private cause of action under DC CPPA § 28-3905(k)(1)(A). Grayson v. AT&T, 15 A.3d 219, 244 (D.C.2011) (claimant asserting a private cause of action under the DC CPPA must shows an “injury-in-fact” to themselves or the persons they represent resulting from the unfair trade practice).

Quoted below are some of the specified “unfair or deceptive trade practices” set forth in the DC CPPA that condominium construction defect attorneys utilize as a legal basis for asserting a claim for treble damages and attorney’s fees under the DC CPPA in cases where condominium developers have misled unit owners about the condition of a condominium that contains latent construction defects: 

“It shall be a violation of this chapter for any person to engage in an unfair or deceptive trade practice, …including to: 

(a)  represent that [newly constructed or converted condominiums or portions thereof] … have … approval, certification, accessories, characteristics, ingredients, uses, benefits, or quantities that they do not have;

* * * * *

(c) represent that [a converted condominium or portions thereof] are … new if in fact they are deteriorated, altered, reconditioned, reclaimed, or second hand, or have been used;

(d) represent that [newly constructed or converted condominiums or portions thereof] are of particular standard, quality, grade, style, or model, if in fact they are of another;

(e) misrepresent … a material fact [concerning a newly constructed or converted condominium] which has a tendency to mislead;

(e-1) [r]epresent that a transaction [to purchase a newly constructed or converted condominium] confers or involves rights … which it does not have or involve… ;

(f) fail to state a material fact [concerning newly constructed or converted condominiums] if such failure tends to mislead;

(f-1) [u]se innuendo or ambiguity as to a material fact [concerning newly constructed or converted condominiums], which has a tendency to mislead;

(h) advertise or offer [newly constructed or converted condominiums] without intent to… sell [them] as advertised or offered;

* * * * *

(p) falsely state or represent that repairs, alterations, modifications, or servicing have been made [in connection with the conversion of an existing building into a condominium] and receiving remuneration therefor when they have not been made….”

DC CPPA  § 28–3904.

Note that some of the above enumerated unfair or deceptive trade practices do require proof of intent, while others do not. Compare §28-3904(h) with §28-3904(e) and (f). Note also that the “unfair or deceptive trade practice” enumerated in DC CPPA § 28-3904 (quoted in part above) are examples only and not exclusive. Therefore, other conduct that misleads consumers, not specifically described in the statute may constitute and “unfair or deceptive trade practice” in violation of the DC CPPA, including any practices prohibited by other DC statutes and common law. Atwater v. District of Columbia Dep’t of Consumer Regulatory Affairs, 566 A.2d 462, 465-467 (D.C.1989); Osbourne v. Capital City Mortgage Corp., 727 A.2d 322, 325 (D.C.1999); District Cablevision Limited partnership v. Bassin, 828 A.2d 714, 722-23 (D.C.2003). In determining what non specified conduct may constitute an “unfair or deceptive trade practice,” the statute requires DC Courts to give “due consideration and weight … to … interpretation by the Federal Trade Commission and the federal courts.” DC CPPA § 28-3901(d).

Proving Treble Damages Under the CPPA in a Condominium Construction Defect Case

Treble damages are recoverable in order to encourage private attorneys to take consumer protection act cases. Williams v. First Gov’t Mortgage & Investors Corp., 255 F.3d 738, 745 (D.C. Cir. 2000); District Cablevision Limited partnership v. Bassin, 828 A.2d 714, 728(D.C.2003). As such, treble damages under the DC CPPA have a remedial purpose and are not designed to punish. Id., at 725-729., Therefore, unlike punitive damages, a claimant is entitled to an award treble damages without having to make a showing of egregious conduct. District Cablevision Limited partnership v. Bassin, 828 A.2d 714, 728 (D.C.2003). Once it is established that a consumer has suffered any monetary damage, the DC CPPA authorizes courts to treble those damages without any further findings. Williams v. First Gov’t Mortgage & Investors Corp., 255 F.3d 738, 745 (D.C. Cir. 2000); Byrd v. Jackson, 902 A.2d 778, 782 (D.C.2006); District Cablevision Limited partnership v. Bassin, 828 A.2d 714, 729 (D.C.2003).

Proving Attorney’s Fees and Litigation Costs under the CPPA in a Condominium Construction Defect Case

Generally, parties to a lawsuit are not entitled to recover their attorney’s fees and other litigation expenses in the absence of an applicable statute or contractual agreement which specifically allows for the recovery of such fees and expenses. The DC CPPA is such a statute because it permits a person seeking relief from an unfair or deceptive trade practice to recover their “reasonable attorney’s fees” and “any other relief which the court deems proper.” DC CPPA § 28-3905(k)(2)(B) and (F). To the extent that a person seeking redress under the DC CPPA has litigation expenses, other than attorney’s fees (e.g., court filing fees, expert witness fees, paralegal fees, deposition expenses), the court may award such expenses under the provision of the DC CPPA that permits a claimant to recover “[a]ny other relief which the court determines proper.” DC CPPA § 28-3905(k)(2) (F) ; In Re Inphonic, Inc., Wireless Phone Rebate Litigation, United States District Court for the District of Columbia, No. 06-0507 (ESH), Memorandum Opinion and Order, 5-6 (MDL docket number 1792).

Allowing for the recovery of reasonable attorney’s fees is designed to encourage private attorneys to take consumer protection act cases. Williams v. First Gov’t Mortgage & Investors Corp., 255 F.3d 738, 745 (D.C. Cir. 2000). Therefore, to ensure that this purpose is not defeated, DC Courts have rejected the argument that the amount of claimant’s attorneys fee claim can be attacked as unreasonable solely because it is disproportionate to, or even far greater than, the amount of compensatory damages actually awarded. Williams v. First Gov’t Mortgage & Investors Corp., 255 F.3d 738, 747 (D.C. Cir. 2000) (rejecting the “rule of proportionality” with regard to attorney’s fees awarded under the DC CPPA). Allowing attorney fees awards to be defeated or reduced on grounds that they are disproportionate to the damages recovered, would discourage, not encourage, private attorneys from taking consumer protection cases, making it “‘difficult, if not impossible for individuals with meritorious … claims but relatively small potential damages to obtain redress from the courts.’” Id.; In Re Inphonic, Inc., Wireless Phone Rebate Litigation, United States District Court for the District of Columbia, No. 06-0507 (ESH), Memorandum Opinion and Order, 15-16 (MDL docket number 1792).

It is also not a ground for reducing the amount of reasonable attorney’s that a claimant’s attorney’s fees are attributable to proving other, non-DC CPPA claims, such as negligent misrepresentation, breach of contract, negligent construction, breach of warranty against structural defects. Rather, all reasonable attorney’s fees pursuing a case are recoverable so long as the other claims sufficiently overlap the CPPA claim and arise out of a common core of facts such as the defective construction or renovation of a condominium. Williams v. First Gov’t Mortgage & Investors Corp., 255 F.3d 738, 746-747 (D.C. Cir. 2000); In Re Inphonic, Inc., Wireless Phone Rebate Litigation, United States District Court for the District of Columbia, No. 06-0507 (ESH), Memorandum Opinion and Order, 10-11 (MDL docket number 1792). This applies even if the claimant is not successful on the other, non-DC CPPA claims. Williams v. First Gov’t Mortgage & Investors Corp., 255 F.3d 738, 746 (D.C. Cir. 2000) ( “‘fees for time spent on claims that ultimately were unsuccessful should be excluded only when the claims are distinctly different in all respects, both legal and factual from plaintiffs successful claims’”).

Punitive Damages Under the CPPA in a Condominium Construction Defect Case

If it can be proven with “clear and convincing evidence, that an unfair or deceptive trade practice perpetrated on unit owners involved  “outrageous or egregious” wrongdoing in which the condominium developer or declarant acted with “evil motive, actual malice or willful disregard for [their] rights,” then a DC condominium association, on behalf of its unit owner members, may recover punitive damages under DC CPPA § 28-3905(k)(2)(C), in addition to treble damages. District Cablevision Limited partnership v. Bassin, 828 A.2d 714, 725 -729 (D.C.2003) (under the DC CPPA, punitive damages are designed to punish intentional wrongdoers and thus cannot be awarded without the requisite evidentiary showing, whereas treble damages are remedial in nature and require no evidentiary showing).

Note about Definition of “Goods and Services” 

Where the statutory language quoted above refers “goods and services,” I have inserted in brackets, the terms “newly constructed or converted condominiums” which is the subject matter of this article. The definition of “goods and services,” under DC CPPA §28-3901(a)(7), includes “real estate transactions, and consumer services of all types,” thereby including the sale of residential condominiums and represented services and amenities offered in connection with the sale of residential condominiums. See Saucier v. Countrywide Home Loans, 64 A3d. 428, 442 (D.C.2012) (suit by condominium association for violation of DC CPPA arising out of construction defects); Wetzel v. Capital City Real Estate, LLC, 73 A.3d 1000, 1004-05 (D.C.2013) (suit by condominium unit owner for violation of DC CPPA arising out of construction defects).

Note about 2018 Amendment to the CPPA: New terminology (“Unfair and Deceptive Trade Practices”) and Incorporation of Federal Trade Commission Precedent

Effective July 17, 2018, the DC CPPA was amended to make it consistent with similar statutes in other states and federal trade commission law. The amendment changed the statutory terminology, in that the term “unlawful trade practices” was replaced with “unfair and deceptive trade practices.” This amendment was intended to make the CPP a consistent with similar statutes in other states and federal trade commission law. The amendment also provides that that courts should consider interpretations by the Federal Trade Commission and federal courts when interpreting or deciding what action to take with regard to “unfair or deceptive act or practice.” DC CPPA §28-3901(d).

This is the terminology and interpretation guidance used in many other state consumer protection acts, including Maryland’s Consumer Protection Act, Maryland Commercial Law Article §§ 13-105 and 13-301. For example, The Maryland Court of Appeals, relying upon “the interpretations of the Federal Trade Commission Act by the Federal Trade Commission and the federal courts,” held that  “[i]mplicit in any advertisement and rental of an apartment is the representation that the leasing of the apartment is lawful” and in compliance with licensing laws. Golt v. Phillips, 308 Md. 1, 9-10, fn. 3 and accompanying text (Md. 1986) (“[f]or consumer protection purposes, the meaning of any statement or representation is determined not only by what is explicitly stated, but also by what is reasonably implied”). Likewise, it is implicit in the sale of a newly constructed condominium in the District of Columbia that the condominium complies with applicable building codes and laws requiring compliance with approved plans and specifications submitted to the Department of Buildings. For an article discussing the Maryland Consumer Protection Act, See “Condominium Association’s Right to Recover Attorney’s Fees in Construction Defect Cases,” by Nicholas D. Cowie. 

Practical Tips 

When faced with a construction defect matter, misrepresentation claims such as violation of the DC CPPA should not be overlooked. For an article providing an overview of other legal claims that can be brought in connection with a condominium construction defect case, see “Resolving Condominium Construction Defect Claims in Washington DC,” by Nicholas D. Cowie. For an article discussing how the DC warranty against structural defect works and how to make claims against a Declarant’s security Bond or Letter of Credit to fund warranty repairs, see “The Condominium Warranty Against Structural Defects In Washington DC”, by Nicholas D. Cowie.

Note About Author

Nicholas D. Cowie is a condominium lawyer and construction defect litigation attorney practicing law throughout Washington DC and the State of Maryland. Mr. Cowie established the “Construction Law” course at the University of Baltimore School of Law where he served as an adjunct professor of construction law and is highly regarded for his knowledge and practice of construction law and construction defect litigation. Mr. Cowie also is the instructor for the Community Association Institute CRC course entitled “Successful Strategies for Resolving Construction Defect Claims With Condominium Developers.”  and the law firm of Cowie Law Group have extensive experience representing condominium associations asserting consumer protection act claims. Mr. Cowie served as trial counsel in a case where the court awarded $500,000 in attorney’s fees for violation of the Maryland Consumer Protection Act following entry of a $6,600,000 jury verdict against a developer and builder of a condominium for construction defects. Milton Company v. Council of Unit Owners of Bentley Place Condominium, 121 Md. App 100, 121 (1998),aff’d, 354 Md. 264 (1999).

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NOTE ON LEGAL ADVICE: This Article should not be relied upon as a legal advice applicable to any specific case the application of the District of Columbia Consumer Protection Procedures Act to a Washington DC condominium construction defect claim. Rather, it is a general statement of legal principles that may or may not apply to your Washington DC condominium. The individual facts of each case need to be analyzed to determine the application of law.  Contact  one of the experienced Washington DC Condominium Construction Defect Attorneys at Cowie Law Group, P.C. for a consultation relative to your condominium’s specific situation.

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RESOLVING CONDOMINIUM CONSTRUCTION DEFECT WARRANTY CLAIMS IN MARYLAND

A Guide for Maryland Condominium Associations

This article provides a general guide for Maryland condominium associations transitioning from developer control to proactively identify and resolve condominium construction defect warranty claims in Maryland with condominium developers and builders before warranty and other legal rights expire. This proactive approach can facilitate an amicable resolution of defect claims without the need for litigation.

Newly constructed and newly converted condominiums in Maryland often contain concealed or “latent” construction defects. Left undetected and unrepaired, latent defects stemming from the original construction of a condominium can cause extensive damage over time, requiring associations to assess their members for unanticipated repair costs that could have been avoided by making timely developer warranty claims.  

A. Condominium Association Responsibility for Timely Evaluation of Common Element Construction Following Period of Developer Control

Condominium associations are responsible for overseeing and maintaining condominium common element facilities (e.g., roofs, exterior walls, foundations, lobbies, common hallways, elevators, surrounding grounds, and common mechanical, electrical, and plumbing systems). Following the period of developer control, it is incumbent upon a condominium association’s first unit owner elected board of directors to evaluate the construction of the common element facilities to identify construction deficiencies so they can be brought to the developer’s attention for repair while warranty and other legal rights are still in effect. This is the first step in identifying and preserving condominium construction defect warranty claims.

An early identification of construction defects also assists the condominium association in determining whether the original budgeted reserve fund established by the condominium during the period of developer control is adequate to cover the future cost of maintaining, repairing, and ultimately replacing the common element facilities. A reserve fund is based on an underlying assumption that the common element facilities of the condominium are constructed properly and will have a normal life expectancy (e.g., a 30 roof, 45-year exterior siding, etc.). An evaluation of construction allows a transitioning condominium association to independently verify these assumptions in the original reserve budget created by the developer. For example, if the roof of a newly constructed condominium is found to be leaking and in need of immediate replacement due to a defect in the original construction, then a budget based on a projected roof replacement in thirty (30) years is grossly insufficient.

B.  The Transition Deficiency Study – Identifying Condominium Construction Defect Warranty Claims

Evaluating Construction and Identifying Construction Defects

Following transition from developer control, condominium associations should hire an engineering or architectural firm to perform a “transition deficiency study” (also known in the community association industry as a “transition study,” “transition report,” “deficiency report,” “warranty analysis,” “construction analysis,” or “construction defect report”). The purpose of the transition deficiency study is to evaluate the construction of the common elements, identify construction defects, and set forth the findings in a written report becomes the basis for negotiating a resolution of condominium construction defect warranty claims.

The transition deficiency study is intended to provide a useful and comprehensive list of construction defects prepared by a construction expert, citing specific violations of building codes, approved plans and specifications, and other applicable industry standards. The condominium association’s attorney can then use the study to put the developer on notice of the defects and request warranty repairs. When construction defects are identified early in this manner, before they can cause serious damage to the building, the repair expense is typically substantially less, making it easier to negotiate an amicable resolution with the developer. Ideally, at the end of the transition process, all construction defects will be identified and properly corrected by the condominium developer so that the condominium association can then establish an accurate reserve fund based on common element facilities that have a normal life expectancy.

Retaining the services of a qualified consultant to inspect construction of common element facilities is important because some construction defects that occur during the original construction or conversion of a condominium are concealed behind a building’s exterior facade or may simply not be recognized as a problem to average homeowner purchasers when they acquire their units. Left undiscovered and unrepaired, latent construction defects can result in extensive hidden building damage over time, resulting in unanticipated repair expenses that can wreak havoc on an Association’s financial condition, requiring it to borrow money and assess unit owners. For example, the failure to properly flash windows, balcony beam penetrations, and other openings in a building envelope can cause extensive and insidious water damage within the exterior building walls of a condominium causing rotting of wood sheathing and structural framing. The damage may only come to light when mold or water stains begin to appear years later within the interior living space of units. A properly performed and utilized transition deficiency study greatly reduces the risk that a condominium association’s unit owner members will be assessed significant amounts for unexpected repairs caused by hidden or “latent” construction defects caused during construction. In short, a comprehensive transition study prepared by a design, professional that identifies construction deficiencies and references the applicable building codes, plans and specifications, and industry standards is essential to the successful resolution of condominium construction defect warranty claims.

For more information about transition deficiency studies, see article: “Transition Studies – Condos & HOAS Should Identify Construction Defects Before Warranties Expire.”

C. Meeting Notice Deadlines and Preserving Warranty Claims – The Importance of Early Consultation with an Experienced Condominium Construction Defect Attorney

In addition to seeking proposals for conducting a transition deficiency study, the first unit owner-elected board following transition from developer control should also obtain a complimentary consultation with an experienced condominium transition attorney with substantial experience representing condominiums in construction defect matters. Such an attorney can advise the board of applicable deadlines necessary to avoid waiving warranty rights and other legal claims and will provide a timeline for the association to follow that will ensure that the transition deficiency study is obtained in a timely manner, well within applicable notice, warranty, and statute of limitations time periods, so that any serious construction defects identified in the study can be brought to the developer for repair within the applicable warranty periods. Without knowing when its legal rights expire, anassociation cannot successfully resolve condominium construction defect warranty claims.

D. Condominium Association Standing to Bring Representative Claims on Behalf of Unit Owners

A condominium association in Maryland has the legal authority to assert warranty and other construction defect legal claims in its own name and in a representative capacity on behalf of two or more of its unit owner members with regard to construction defects affecting the condominium. Maryland Condominium Act (“MD Condo Act’) § 11-109(d)(4) and (19). Developers often insert language into governing documents that purport to deprive the association of its ability to pursue common element defect claims on behalf of unit owner members. As a practical matter, it is the continuing ability of a condominium association to assert these legal claims that motivates condominium developers and builders to repair construction defects. Therefore it is important to have experienced construction defect legal counsel review governing documents to identify such issues early in the transition process and to take necessary counter-measures to preserving the legal claims.

E. Legal Claims for Construction Defects That Can Be Asserted by a Condominium Association

Below is an overview of some construction defect legal claims that can be asserted in Maryland by a condominium association in its own name or on behalf of its unit owner members against condominium developers and/or other responsible parties. In the event it should ever become necessary to litigate, each of these legal claims will have its own legal strengths and weaknesses. Some legal claims may cover certain construction defects or afford monetary damages that others claims do not. It is the ability to assert claims that enables an association to bargain from a position of strength, thereby increasing the likelihood of a favorable resolution without litigation Therefore, it behooves the association to make sure it does not waive any viable legal claims while negotiating with a developer by allowing the statute of limitations to run or by failing to give proper notice. Hiring an experienced Maryland condominium construction defect lawyer who understands its legal rights will better enable an association to successfully resolve its condominium construction defect warranty claims.

• The Statutory Implied Warranty on the Common Elements

In Maryland, there is an implied warranty created by the Maryland Condominium Act that runs from the developer to a condominium association. MD Condo Act § 11-131(d). The common element warranty applies to the roofs, foundations, external and supporting walls, mechanical, electrical, and plumbing systems, and other structural elements. MD Condo Act § 11-131(d)(1). The warranty is implied by statute and need not be in writing. The statute requires that the developer be responsible for correcting any defect in materials or workmanship, and that the specified common elements are within acceptable industry standards in effect when the building was constructed. MD Condo Act § 11-131(d)(2). The Maryland Condominium Act expressly gives a condominium association authority to assert the warranty on the common elements in its own name. MD Condo Act § 11-109(d)(19). A suit for enforcement of the warranty on the “general” common element warranty can be brought only by the council of unit owners. MD Condo Act § 11-131(d)(4). A suit for enforcement of the warranty on the “limited” common elements may be brought by the condominium association or any unit owner to whose use it is reserved. MD Condo Act § 11-131(d)(4).

Notice of common element construction defects must be given to the condominium developer within the warranty period. MD Condo Act § 11-131(e). The warranty period extends for three years and in some cases longer (discussed below) There is a one year statute of limitations such that a lawsuit for enforcement of the warranty on the common elements must be brought within one year of the expiration of the warranty period if the developer fails to correct the defects. MD Condo Act § 11-131(e). In order to determine the deadline for giving notice and when the one year statute of limitations commences, one must first determine when the warranty period expires. As a general rule, the warranty period expires on the latest of the following three alternatives:

(i) Three years from the first transfer of title to a unit at the condominium;

(ii) As to common elements that are not completed at the transfer of title, three years from the completion of the common element in question and/or its availability for use by all unit owners, whichever occurs later; or

(iii) Two years from the date on which unit owners, other than the developer, take majority control over the association board of directors.

The statute is designed so that the warranty period can never expire shorter than two years after the developer turns over control of the association to non-developer unit owners.

• Title 10 Implied and Express Warranties in the Sale of New Homes

In Maryland there is an implied and an express warranty in the sale of a newly constructed home that is created by Title 10 of the Maryland Real Property Article (“RP”) (a/k/a “Title 10 Implied Warranties”). See RP § 10-203 (implied warranty) and RP § 10-202 (express warranty). These warranties apply to condominium developers and are applicable to both units and common elements, also apply to newly converted condominiums (i.e., older buildings that have been renovated and converted into condominiums.) MD Condo Act § 11-131(b).. Title 10 Implied and Express warranty claims belong to each unit owner individually (as do the rest of the claims discussed below), but can be asserted on behalf of two or more unit owners by the condominium association if the claim involves “matters affecting the condominium.”

Under the Title 10 Implied warranty, the builder/seller of a condominium unit warrants that the unit and its common element improvements are free from faulty materials, constructed in accordance with sound engineering standards, constructed in a workmanlike manner, and fit for habitation. RP § 10-203(a). The warranty is implied by statute and need not be stated in writing.

The Title 10 Express Warranties are not implied and must be based on written statements about the condominium or a sample or model that is made as part of the basis of the bargain to purchase a condominium unit. Typically, these express warranties refer to written promises contained in a contract, but also can arise from written statements in sales brochures, public offering statements, advertisements, model home depictions, drawings, and other written or pictorial descriptions of the condominium. A typical express on warranty might be a promise to construct a condominium in accordance with applicable building codes or a promise to build a clubhouse with swimming pool, or some other important part of the decision to purchase a unit at the condominium. The express warranty is breached if the unit or common elements fail to conform to the written promise or description, or fail to sufficiently conform to a model or sample. RP § 10-202(a).

The Title 10 Implied and Express warranties do not expire on the subsequent sale of a condominium unit by the original purchaser to a subsequent purchaser. Instead, these warranties continue to protect the subsequent purchaser until the warranty for the original purchaser would have otherwise expired had the original purchaser not sold their unit. RP § 10-204(c).

Determining when the warranty period for each unit owner commences and the statute of limitations expires can be an extremely complex and requires a fact-based analysis. In very general terms, however, the time for asserting Title 10 Implied or Express Warranty Claims in a court of law (including calculation of both warranty period and statute of limitations) can be as short as two years and as long as four years from the date of a unit owner settlement, depending on a number of factors, such as the date on which the defects were discovered, whether they are structural defects or non-structural defects, and when the unit owner took possession of the unit. RP § 10-204. The warranty period for a Title 10 Express warranty can be longer than a Title 10 Implied warranty if the express warranty specifies a longer period of time (e.g., a “five-year roof”).

• Negligent Construction

Condominium developers, building contractors and subcontractors, and, in some cases, their officers, members and employees, can be held liable for negligently constructing or converting a condominium building. A negligent construction claim usually arises out of the use of improper construction methods that deviate from applicable building codes, approved plans and specifications, manufacturer’s instructions and other industry standards. Use of faulty or defective materials, failure to supervise, failure to inspect and defective design can also be a basis for a negligent construction claim. Maryland’s version of the so-called “economic loss rule” bars many negligent construction defect claims where a party seeks only the cost of repairing a construction defect. However, there are exceptions. In general terms, the rule does not apply in the following situations: (1) where both parties are in a close business or transactional relationship or other “special relationship” akin to a contractual privity (a/k/a “an intimate nexus between the parties”); (2) where the defect in question creates “a serious risk of death or personal injury;” or (3) where the damages resulting from the negligence do not fall within “the defined definition of economic loss.”

The statute of limitations for a negligent construction claim in Maryland is three years. Maryland Courts & Judicial Proceedings Article (“CJ”) § 5-101. Under the discovery rule adopted by Maryland Courts, the three-year statute of limitations on a negligent claim runs from the date when a claimant actually knows, or by the exercise of reasonable diligence should know, of the injury, or damage giving rise to their legal claim (hereinafter referred to as “discovery”).

• Breach of Contract and Common Law Implied Warranties

Maryland recognizes a legal claim for breach of express contractual promises, such as a promise in a contract of sale to repair construction defects brought to the developer’s attention. Maryland also recognizes a legal claim for breach of implied common law contractual warranties, such as the “implied warranty of good faith and fair dealing.” A party may be liable for breach of the implied covenant of good faith and fair dealing when it evades or defeats the spirit of the contract in connection with its performance or enforcement, such as where one party fails to perform unfinished work or promised repairs. It is also implied in a contract for the construction and sale of a condominium unit and appurtenant common elements that the construction will conform to applicable law, including building codes. This failure to construct substantially in accordance with applicable building codes can be a breach of contract even if such compliance is not expressly set forth in writing within the contract. The statute of limitations for a breach of contract claim is three years, CJ § 5-101, and runs from the date of discovery of the breach under the “discovery rule.”

• Violation of the Maryland Consumer Protection Act

The Maryland Consumer Protection Act (“MCPA”) creates a private cause of action which can be asserted by a condominium association on behalf of its unit owner members who are deceived or otherwise misled by “unlawful trade practices” in connection with the sale and purchase of a condominium. MCPA § 13-408(a) and 13-303. The MCPA defines various unlawful trade practices that include misrepresentations about the characteristics and quality of construction, a failure to state material facts regarding problems with the condominium common elements, and other conduct which is misleading to consumers of condominiums. MCPA § 13-303. For example, if it is represented that a condominium will be built in accordance with the county-approved plans and specifications, it is a violation of the MCPA if there is substantial deviation from the applicable plans and specifications that results in defective conditions.

A condominium developer who engages in such unlawful trade practices can be held liable for an Association’s reasonable attorney’s fees in pursuing construction defect claims. MCPA § 13-408(b). In one Maryland construction defect case, a condominium association was awarded $500,000 in attorney’s fees under the MCPA following a $6.6 million verdict against the developer and builder of the condominium, as well as against its president personally. See Milton Company v. Council of Unit Owners of Bentley Place Condominium, 121 Md App. 100, 121 (1998), aff’d 354 Md 264 (1999). See also article entitled: “Condominium Entitled to Attorneys Fees in Addition to Construction Defect Damages.” A claim under the MCPA has a 3-year statute of limitations under CJ § 5-101, which runs from the date of discovery under the “discovery rule.”

• Negligent Misrepresentation and Fraud

Negligent misrepresentation and fraud are common law legal claims that provide a remedy when a defendant, including a condominium developer, makes a false representation or omits a fact when there is a duty to disclose. The difference between negligent misrepresentation and fraud is that negligent misrepresentation does not require an intent to deceive on the part of the defendant in making the representation. Rather, the representation can be based on careless/reckless behavior, such as making untrue statements to unit owners about the condominium without knowledge as to whether or not they are true or not.

In the case of both fraud and negligent misrepresentation, the untrue statements or misleading omission must be material and reasonably relied upon by the Association and/or its members to their detriment, such as entering into a contract of sale and obtaining long-term financing based on a misrepresentation that the building was constructed in accordance with the plans and specifications approved by local County or City building authorities. The statute of limitations for a negligent misrepresentation or fraud claim related to the quality or condition of construction is generally three years under CJ § 5-101, running from the date of discovery under the discovery rule. In the case of fraud, the statute of limitations can be extended if the construction defect legal claim is intentionally concealed.

• Misleading Statement in Public Offering Statement

The Maryland Condominium Act creates a private cause of action against a condominium developer who makes a false or misleading statement in a Public Offering Statement (“POS”) or omits material facts in a manner that is misleading. MD Condo Act § 11-126(f). A claim under § 11-126(f) of the MD Condo Act has a one year statute of limitations for misleading representations in a POS from the date of discovery under MD Condo Act § 11-126(f).

F. Note on Statute of Limitations

Although the statute of limitations period for some typical construction defect claims are set forth above, a condominium association should not make any decisions based on its own determination of when the statute of limitations expires without consulting with an experienced construction defect attorney. Determining when the statute of limitations expires as to any construction defect claims is fact-based analysis and will always be different for every condominium depending on many factors, including the specific legal terms of documents pertaining to the condominium (e.g., governing documents and sales contracts), the nature of construction defects at issue and when they were discovered, the dates of common element completion, the dates of original unit owner settlements, the date control over the association is transferred from the developer to non-developer unit owners, etc. The statute of limitations analysis must also take into account the numerous unit owner members, each of whom has legal claims relative to the common elements that can often be asserted on their behalf by the condominium association. In each case, different legal claims will have different statute of limitations periods that commence at different times, and those periods can vary as to the defect in question, the unit owner involved, and the time of discovery. Condominium associations should consult with an attorney before taking or not taking action in reliance on the information set forth in this article.

G. Tolling Agreements – Preserving Condominium Association Legal Claims

The legal claims discussed above are of limited duration and will expire if not brought in a court of law by filing a lawsuit within the applicable “statute of limitations.” The statute of limitations is the time period within which a legal claim must be brought in a court of law or it shall be forever barred. In general, there are two ways to stop the statute of limitations from running on a party’s legal claims: (1) file a lawsuit asserting those legal claims in court before the statute of limitations expires; or (2) have the responsible parties sign a tolling agreement before the statute of limitations expires.

A tolling agreement is a private contract that courts will enforce under which the parties (for example, a condominium association and a developer) agree that the statute of limitations time period will stop running, or be “tolled,” while they attempt to negotiate a resolution of their construction dispute. However, the statute of limitations will only stop as to those parties who agree to “toll” the running of the statute of limitations. A tolling agreement does not affect claims against any person or entity who does not agree to toll the statute of limitations. Likewise, when filing a lawsuit, the statute of limitations is only tolled as to the persons or entities against whom the suit is filed. For a more detailed explanation of tolling agreements, see article by condominium construction defect attorney Nicholas D. Cowie entitled: “Tolling Agreements: Use Them to Preserve Association Claims During Length Construction Defect Negotiations.”

Before negotiating serious construction defects claims with developers, builders, and other responsible parties, an association should first obtain a tolling agreement from them in order to preserve legal claims and prevent them from becoming time-barred by the statute of limitations while attempting to reach an amicable resolution. A tolling agreement allows a condominium association to focus on negotiations without having to be concerned about filing a law suit in order to prevent those claims from becoming time-barred by the expiration of the statute of limitations. A tolling agreement preserves the condominium’s bargaining power and benefits both the developer and the association by giving them a “time-out” so that they can resolve their claims without litigation.

It is important to retain experienced legal counsel to draft a tolling agreement. In our law firm’s review of cases, we find that many attorneys representing condominiums enter into tolling agreements fail to include important construction defect legal claims and responsible parties. As a result, the statute of limitations continues to run and even expires on these important legal rights during negotiations. Although a condominium association can agree to enter into a limited tolling agreement, attorneys unfamiliar with construction defect litigation on behalf of condominiums often do not understand and thus do not explain to their association clients what legal rights they are giving up and what the alternatives are. As a result, associations are unable to make informed decisions about excluding legal rights in a tolling agreement until it is too late.

For more information about tolling agreements, see article entitled: “Tolling Agreements: Attorneys Using Tolling Agreements to Preserve Construction Defect Legal Claims During Developer Negotiations.”

H. Negotiating Proper Repair of Construction Defects

Once a condominium association has notified the developer of construction defects and obtained a tolling agreement, it should work with its transition engineering consultant to ensure that the developer performs repairs that properly address the underlying construction deficiency. In many cases, developer repairs prove ineffective and fail to address pervasive problems. This typically occurs when condominium associations simply accept whatever repairs are offered by the developer without involving their construction consultants to ensure that a proper repair is being offered and without documenting repair agreements to ensure accountability as to the method and scope of repair. Involving the condominium associations’s design professional construction consultant who prepared the transition study in all aspects of the negotiation, including approval of proposed repairs, is  essential to successfully resolving condominium construction defect warranty claims.

Condominium associations should be careful about accepting verbal offers from developers and builders to make unspecified “repairs” in response to complaints about construction problems. The informal nature of such an agreement may be appropriate in some circumstances, however, in most cases, problems will arise when the developer’s definition of “repair” differs from that required by code, contract, or industry standard. For example, when a developer agrees, informally, to repair a window or roof leak, the “repair” as far as the developer is concerned may consist of merely sending out a worker with a caulk gun to seal gaps that should have been protected with a solid flashing material during the original construction. Caulk is generally not an appropriate substitute for flashing. In this example, caulk is a temporary and inappropriate fix that may actually conceal the underlying absence of flashing until the caulking seal breaks or is bypassed by water infiltration at another location and the leak reappears six months later. This example demonstrates the need for written clarity, as well as the necessity of seeking the assistance of the association’s construction expert to review and approve the offered repairs.

A condominium association does not have to accept whatever undefined repair the developer is offering. Instead, it should request a detailed description, preferably in writing, of the proposed repair being offered by the developer. The developer’s proposed repair can then be evaluated by a construction consultant working for the condominium. The consultant can review the applicable construction drawings and field conditions and advise the association whether the offered repair is reasonable and appropriate to address the underlying construction defect. If not, the consultant can suggest alternative repair approaches, request additional information, or suggest modifications to the developer’s repair proposal. In some cases, additional joint invasive inspections may be proposed to determine the appropriate repair and/or the extent, or “scope,” of repairs needed throughout the community. In this manner, the association can make informed decisions based on its construction consultant’s expertise rather than accepting whatever the developer is offering without understanding the appropriateness and effectiveness of the repair being offered.

All repairs negotiated in this manner should be documented so as to avoid misunderstanding and create an objective standard by which the repair can be judged. If the repair should fail the association has a written reference by which to judge whether the repair was performed properly as agreed.

This framework for negotiating the method and scope of repair promotes accountability and finality. It can be employed on a larger scale when a condominium association is negotiating repair of multiple defects discovered during a transition deficiency study. Each repair agreed upon by the parties can be specified in writing and become part of an agreement under which the developer agrees to perform specified repairs pursuant to a specific method and at all the specific locations where the defect exists in accordance with applicable construction standards. In some cases, it is appropriate to incorporate these agreed-upon repairs into a larger repair agreement that can also provide for future repair related activities and contingencies, such as resolution of disputes over repairs that arise during the repair work, unforeseen conditions discovered during repairs, provisions for having the association’s consultant inspect and approve the developer’s repair work, reimbursement of construction defect related expenses incurred by the condominium association, including consultant inspection fees, attorney’s fees, and defect evaluation and defect-related repair costs previously incurred by the condominium association.

I. Legal Obligation to Pursue Timely Construction Defect Claims

A Maryland appellate court has held that a condominium association can be sued by its unit owner members for failing to timely investigate and bring a lawsuit against the condominium developer for construction and design defects causing water leaks into the condominium buildings. See, Greenstein v. Council of Unit Owners of Avalon Court Six Condominium, 201 Md. App 186 (2011) (“Greenstein”).

In Greenstein, the condominium association complained about building water leak problems for many years. Ultimately, the association filed a lawsuit against the developer of the condominium when it failed to make effective repairs to stop the leaking. The court dismissed the condominium association’s suit because it was filed after the statute of limitations had expired. The association then assessed the unit owners for the cost of repairing the developer’s construction defects that cause the water leaks. In response to the assessment, some unit owners sued the association for negligence in failing to bring a timely lawsuit. The Maryland Court of Special Appeals held that the unit owners’ lawsuit against the condominium association could go forward because the association had a duty to timely pursue recovery from the developer on behalf of unit owners for damage to the common elements caused by the developer’s negligence, breach of contract, and other applicable law. Greenstein 201 MD App at 205.

It is important to note that the condominium association in Greenstein could have avoided these legal problems and liability had it consulted with an experienced condominium construction defect attorney and been advised of the pending expiration of the statute of limitations and filed a timely lawsuit, or, alternatively, entered into a tolling agreement when it first began negotiating with the developer.

J. Conclusion – Early Consultation with Qualified Legal Counsel that Understands Applicable Legal Claims and Statute of Limitations is Key to Condominium Association Making Informed Decisions Relative to Construction Defect Resolution

The most important step a transitioning association can take toward successfully identifying and amicably resolving construction defect claims is to seek an early, complementary consultation from an attorney with substantial experience in representing condominiums in construction defect matters. Such a consultation, tailored to the community in question, will provide an association with a road map and a timeline for proceeding each step of the way so that it can protect its warranties and other legal rights before they expire, thereby giving it the opportunity to negotiate proper repairs to be performed by the developer.

NOTE ABOUT TERMINOLOGY:

The term “condominium association” is used in this article to describe the organization or entity that governs the affairs of the condominium in accordance with the condominium bylaws and declaration, and whose members consist of all condominium unit owners. Although “condominium association” is the terminology commonly used for this purpose, the Maryland Condominium Act refers to a condominium association as a “council of unit owners.”

NOTE ABOUT AUTHOR:

Nicholas D Cowie is a partner in the law firm of Cowie Law Group, P.C. and is licensed to practice law in Maryland and Washington DC (District of Columbia). Mr. Cowie has been resolving construction defect disputes on behalf of condominium associations for over 29 years. He has been involved in some of the major litigation that has shaped the condominium construction defect law in Maryland. Mr. Cowie has served as adjunct law school professor of construction law and drafted legislation enacted into law that protects and preserves the rights of condominium associations, homeowners associations, and their members in construction defect disputes by extending time periods for bringing common element condominium warranty claims and preventing condominium developers from shortening statute of limitations on warranty and other legal claims that condominium associations and their members can assert for construction defects. The law firm of Cowie Law Group, P.C. consists of attorneys who are versed and experienced in both construction law and condominium law, and who are known for representing condominiums in construction defect claims, financial disputes, developer collection and allocation of unit owner assessments and fees, and other developer contractual and legal obligations occurring prior to transition.

CONDOMINIUM & CONSTRUCTION DEFECT ATTORNEYS

Resolving Condominium Construction Defect Warranty Claims in Maryland and Washington DC

410-327-3800 | 301-830-8315 | 202-670-6289

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Maryland Legislation Prevents Condominium Developers from Shortening Statute of Limitations Applicable to Condominium Construction Defect Warranty Claims

A new Maryland law prevents developers from shortening the Statute of limitations time period within which condominium associations and their unit owner members can assert condominium construction defect warranty claims and other legal claims for hidden construction defects in newly constructed condominiums. The legislation known as HB 77 and SB 258 passed both houses of the Maryland General Assembly and was signed into law by Governor Lawrence J. Hogan on April 24, 2018 (see photo above). Nicholas D. Cowie, Esq. is the author of the legislation, which will be codified as Section 11-134.1 of the Maryland Condominium Act, effective October 1, 2018.

This article provides background and discusses how this new legislation ends the practice by which some condominium developers used statute of limitations shortening provisions and other similar restrictions in condominium declarations, bylaws, and contracts of saleto prevent condominium associations and their unit owner members from asserting construction defect warranty claims and other legal claims for latent construction defects.

The Statute of Limitations applicable to Construction Defect Warranty Claims  

The statute of limitations (sometimes referred to simply as “limitations”) is the time period within which a legal claim must be filed in a court of law or be forever barred. Under Maryland law, condominium associations and their unit owner members have anywhere from two (2) to four (4) years to assert various statutory construction defect warranty claims(warranty period plus the limitations), and a three (3) years to assert most other claims for construction defects. These statute of limitations time periods commence at different times depending on the type of legal claim and the facts and circumstances of each case. For example, in the case of statutory express and implied warranties, the statute of limitations time period usually does not commence or “begin to run” until after the expiration of the warranty period. The statute of limitations on most other construction defect legal claims (e.g., negligent construction, negligent misrepresentation, breach of contract, and violation of the Maryland Consumer Protection Act) commences when a hidden defect or evidence thereof is discovered or reasonably apparent.

Latent Construction Defects

Construction defects that occur during construction of a condominium (e.g., building code violations, deviations from plans and specifications, and other faulty workmanship and use of improper materials) are often concealed behind exterior walls or hidden from sight by subsequent layers of construction work. Any evidence of their existence may be unrecognizable to the average home purchaser. These hidden construction defects are sometimes referred to as “latent defects.” They are not apparent at the time of purchase and may go unnoticed for months or years until they begin to manifest (e.g., leaks that appear at windows, doors and roofs, stones dislodging and falling from the exterior walls, full depth cracks developing in foundation walls, etc.).

Warranty periods and statutes of limitations afford Maryland condominium associations and their members an opportunity to discover latent construction defects so they can be brought to the attention of the developer for correction before construction defect warranty claims expire. If the developer refuses to repair construction defects, a lawsuit can be filed, or, if applicable, stayed while the parties arbitrate or mediate. If suit is not filed within the statute of limitations, construction defect claims will be barred and the cost of repairing developer construction defects will fall upon the unit owners.

Statute of Limitation Shortening Provisions

In an effort to prevent condominium associations and unit owners from making timely construction defect warranty claims for latent construction defects, some condominium developers use provisions in their contracts of sale that impose a shortened statute of limitations of one year or less from the date of settlement on the unit. In more extreme examples, these shortening provisions result in the statute of limitations expiring before a unit owner even gets to settlement. These provisions contain legalese that is incomprehensible to unit owners who typically have no idea that their legal rights terminate in such a short time frame.

The effect of these statute of limitations shortening provisions is to bar all legal claims that a unit owner may have, known or unknown, unless they file a lawsuit against the developer within the shortened limitations period. As a consequence, a unit owner’s structural warranty rights become time-barred before the two-year structural statutory warranty period provided by Maryland law even expires, and other legal claims for latent construction defects become time-barred years before they normally would be under applicable Maryland law.

Condominium communities are especially vulnerable to these statute of limitation shortening provisions because they are initially under developer control for the first few years such that there is no opportunity for unit owner members to conduct independent assessments of building construction (e.g., roof, exterior walls, etc.) until the developer turns over control of the association. By the time control of the condominium association is turned over to the unit owners, the shortened statute of limitations has usually long expired, thereby barring the unit owners’ legal claims for construction defects discovered in their condominium.

The New Legislation

HB 77 and SB 258 renders statute of limitations shortening provisions unenforceable as a legal defense to a claim by a condominium association or unit owner for any construction defect resulting from a failure to comply with: (1) applicable building codes; (2) county-approved plans and specifications; (3) manufacturer’s installation instructions; or (4) implied statutory warranties created by Maryland law, which, among other things, require that construction be free from defective materials, performed in a workmanlike manner and in accordance with applicable industry standards (a “covered construction defect”). The legislation applies to statute of limitations shortening provisions contained in developer contracts for the initial sale of a new residential condominium unit or contained in “any other instrument made by a developer or vendor” in accordance with the Maryland Condominium Act, including a condominium declaration and by-laws.

The legislation also renders unenforceable other similar provisions used in condominium declarations, bylaws, and contracts of sale to shorten the normal time period for bringing construction defect warranty claims or other legal claims for construction defects. These consist of the following, which are unenforceable under the new law in connection with any covered construction defect claim:

1. Advancing the Limitations Commencement Date:

   Provisions that advance the normal statute of limitations commencement date in order to make the statute of limitation expire sooner than it normally would under applicable law.

2. Shortening the Time Allowed to Seek Arbitration:

   Provisions that require claims subject to arbitration to be submitted to arbitration within a period of time that is shorter than the statute of limitations applicable to the claim. This prevents developers from imposing arbitration and then requiring condominium associations and their unit owners to waive their claims if they don’t bring an arbitration proceeding within a period of time that is shorter than the normal statute of limitations applicable to the claim.

3. Procedural Roadblocks Designed to Prevent Timely Claims from Being Made:

   Provisions that operate to prevent a condominium association or unit owner or from timely filing a lawsuit, initiating arbitration, or otherwise asserting a claim within applicable statute of limitations. This prevents developers from imposing unreasonable procedural roadblocks in condominium documents that must be overcome before an association or unit owner can pursue a legal claim, if those roadblocks would operate to prevent timely pursuit of legal claims for covered construction defects.

The legislation does not apply to the settlement of disputed claims between developers, condominium associations, and unit owners. This allows associations, unit owners, and developers to freely enter into settlement agreements to resolve construction defect claims.

Note about Author:Nicholas D. Cowie, Esq., a partner in the law firm of Cowie Law Group, P.C., is the author of HB 77 and SB 258. Mr. Cowie worked closely with the bill’s sponsors, Delegate Marvin E. Holmes, Jr. and Senator Delores G. Kelley, and with the support of many other organizations, government agencies, and individuals to obtain passage of this important legislation. An article discussing this important legislation drafted by attorney, Nicholas D. Cowie which benefits  Maryland condominiums and HOAs, was published in the Beacon, a Community Associations Institute publication for the Chesapeake Region Chapter covering Maryland and Delaware. See, New Laws Prevent Shortening Statute of Limitation’s on Maryland Condominium Construction Defect Warranty Claims.

Note about Statue of Limitations and Condominium Construction Defect Claims:The application of the statute limitations to a condominium construction defect claim is a highly complex area of law requiring sophisticated analysis of multiple claims and the particular facts and circumstances of each case. Condominium associations and unit owners experiencing construction defect claims should consult with an attorney experienced in handling construction defect cases as soon as possible in order to plan a course of action to protect their rights, including entering into tolling agreements that can stop the statue of limitations from running on claims while parties attempt to negotiate repairs. In our firms practice we find that many attorneys that represent condominiums as general counsel do not fully understand the statute of limitations and how it applies to the multiple different types of construction defect claims available to condominium association and their unit owner members. Sadly, we are often asked to review cases where a condominium association’s general from a well established firm has allowed the statue limitations to expire as to all or multiple potential claims without even realizing it. Having legal counsel that specializes in this area of law is therefore extremely important.

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CONDOMINIUM CONSTRUCTION DEFECT RESOLUTION IN WASHINGTON DC

A Guide for Washington DC  Condominiums

Newly constructed and newly converted condominiums in the District of Columbia often contain concealed or “latent” construction defects. Left undetected and unrepaired, defects in the construction of a condominium can cause extensive damage over time, requiring associations to assess their members substantial repair costs that could have been avoided by making timely developer warranty claims.  

This article provides a general overview of how Washington DC condominium associations transitioning from developer control can proactively and successfully identify defects and resolve construction defect claims with condominium developers and builders.

Condominium Association Responsibility for Timely Evaluation of Common Element Construction

Condominium associations are charged with the responsibility of overseeing and maintaining condominium common element facilities, typically consisting of building roofs, exterior walls, foundations, lobbies, common hallways, elevators, surrounding grounds, and the common structural mechanical, electrical, and plumbing systems. Following the period of developer control, it is incumbent upon a condominium association’s first unit owner elected board of directors to evaluate the construction of the condominium common element facilities and determine whether the existing, developer-created, budget and reserve fund are adequate to cover the cost of maintaining, repairing, and ultimately replacing the condominium facilities over time.

Significantly, condominium reserves for future upkeep and replacement are budgeted based on an underlying assumption that the various condominium facilities are constructed properly and will have a normal life expectancy (e.g., a 30 roof, 45-year exterior walls, etc.). Relying on such assumptions in budgets made during the period of developer control can be costly. For example, if the leaking roof of a newly constructed condominium is found to be in need of immediate replacement due to a defect in the original construction, then a developer-created reserve budget based on a projected roof replacement in thirty (30) years is grossly insufficient.

 The Transition Deficiency Study – Identifying Construction Defects

For the above reasons, the first unit owner-elected board should make it a priority to hire a qualified engineering or architectural firm to perform an evaluation of the construction of the condominium in order to identify any construction defects so they can be brought to the developer’s attention for repair before warranties and other legal claims expire. The findings of such an evaluation are set forth in a written report commonly referred to in the community association industry as a “transition deficiency study” (also know as a “transition study,” “transition defect study,” “deficiency report,” “warranty analysis,” “construction analysis,” or “construction defect report”).

A properly performed and utilized transition deficiency study greatly reduces the risk that a condominium association’s unit owner members will unexpectedly have to pay out of pocket for the repair of construction defects and resulting damage that could have been the responsibility of the condominium developer if identified at the outset. Ideally, at the end of the transition process, all construction defects will be identified and properly corrected by the condominium developer so that the condominium association can then establish an accurate reserve fund based on common element facilities that have a normal life expectancy.

The condominium association board of directors should seek proposals for conducting a transition deficiency study upon assuming control over the governance of a condominium association from the developer. It is highly recommended that, in connection with seeking such proposals, the board also obtain a complimentary consultation with an experienced condominium construction defect attorney who can advise the board of all the applicable deadlines necessary to preserve warranty and other legal rights specific to the condominium in question. In this manner the board can ensure that the transition deficiency study is obtained in a timely manner, well within applicable warranty periods and statutes of limitations, so that any serious construction defects identified in the study will still be the developer’s legal responsibility to correct when the report is completed.

Retaining the services of a qualified consultant to inspect construction of common element facilities is important because some construction defects that occur during the original construction or conversion of a condominium are concealed behind a building’s exterior facade or may not otherwise be apparent to laypersons when unit owners purchase their homes and take control of the Association. In fact, such defects may go undiscovered for years. Left undiscovered and unrepaired, latent construction defects can result in extensive hidden building damage and unanticipated repair expenses that wreak havoc on an Association’s financial condition, requiring it to borrow money and assess unit owners. For example, the failure to properly flash windows, balcony beam penetrations, and other openings in a building envelope can cause extensive and insidious water damage within the exterior building walls of a condominium causing rotting of wood sheathing and structural framing. The damage may only come to light when mold or water stains begin to appear years later within the interior living space of units.

Likewise, improper attachment of exterior stone and brick veneer can require a condominium association to assess its members for the cost of removing and replacing the entire exterior building facade. Such defects may not come to light until years after construction when pieces of stone and brick veneer begin to pull away and fall from the building.

Having a qualified engineering or architectural consultant conduct a timely transition deficiency study also satisfies a condominium association’s fiduciary responsibility to effectively make common element warranty claims before they expire. Instead of board members complaining piecemeal to the developer about “problems” as they arise, the transition deficiency study provides a useful and comprehensive list of construction defects prepared by a construction expert, citing specific violations of building codes, approved plans and specifications, and other applicable industry standards. The condominium association’s attorney can then present the study to the developer to be utilized as the basis for good faith discussions toward a resolution of construction defect disputes. When construction defects are identified early in this manner, before they can cause serious damage to the building, the repair expense is substantially less, making it easier to negotiate an amicable resolution with the developer.

What Condominium Associations Need to Know About Resolving Construction Defect Claims

 In order to make informed decisions about how to successfully negotiate and resolve construction defect disputes with developers, a condominium association board of directors must have answers to the questions listed below. Without answers to these questions, condominium associations often wave legal rights or obtaining inadequate repairs.

• What are the available legal claims for construction defects that can be asserted by the condominium association?
• When does the statute of limitations expire as to each of these legal claims?
• How can these legal claims be preserved so they do not expire during negotiations for repairs and/or monetary compensation?
• How can an association negotiate in a manner that ensures developer accountability for proper, comprehensive repairs?

These questions are addressed below. However, the answers will always be different for every condominium depending on many factors, including the specific legal terms of documents pertaining to the condominium (e.g., governing documents and sales contracts), the nature of construction defects at issue and when they were discovered, the common element completion dates, the original unit owner settlement dates, etc.

Construction Defect Legal Claims that can be Asserted by Condominium Associations

A condominium association in Washington DC has the legal authority to assert construction defect legal claims in its own name and on behalf of its unit owner members in a representative capacity with regard to construction defects affecting the condominium. District of Columbia Condominium Act (“DC Condo Act’) § 42-1903.08(a)(4). As a practical matter, it is the continuing ability of a condominium association to assert these legal claims that motivates condominium developers and builders to repair construction defects.

Below is an overview of some construction defect legal claims that can be asserted in the District of Columbia by condominium associations against condominium developers, contractors and/or their officers, members, and employees. In the event it should ever become necessary to litigate, each of these legal claims will have its own legal strengths and weaknesses. Some legal claims may cover certain construction defects or afford monetary damages that others claims do not. Therefore, it behooves the association to make sure it does not waive any viable legal claims while negotiating with a developer because it is the ability to assert claims that enables an association to bargain from a position of strength, thereby increasing the likelihood of a favorable resolution without litigation.

2.  The DC Statutory Warranty Against Structural Defects

   There is a statutory warranty in the District of Columbia that protects condominium associations and their unit owner members from structural defects in newly constructed and newly converted condominiums. DC Condo Act § 42-1903.16(b). If a condominium developer refuses or is unable to fulfill its warranty obligations to repair structural defects, a condominium association can bring a breach of warranty claim for damages in the Superior Court for the District of Columbia and can also petition the District of Columbia government to release the condominium developer’s bond or letter of credit required to be posted as security for the fulfillment of its warranty obligations. DC Condo Act § 42-1903.16(e). There is a five-year statute of limitations for breach of warranty claims brought in the Superior Court and claims made with the District of Columbia government against the developer’s security must be asserted within a two-year warranty period. For details on how to apply the warranty period and statute of limitations and a detailed discussion of the warranty itself, see article by condominium construction defect lawyer Nicholas D. Cowie entitled: “The Condominium Warranty Against Structural Defects in Washington D.C.”

3.  Negligent Construction
   

   Condominium developers and their building contractors and subcontractors, and in some cases their officers, members and employees, can be held liable for negligently constructing or converting a condominium building. A negligent construction claim usually arises out of the use of improper construction methods that deviate from applicable building codes, approved plans and specifications, manufacturer’s instructions and other industry standards. Use of faulty or defective materials, failure to supervise, failure to inspect and defective design can be a basis for a negligent construction claim. Washington DC has adopted a version of the so-called “economic loss rule” as a defense to a negligence claim where a party seeks the cost of repairing a construction defect. However, that rule does not apply where both parties are in a “special relationship,” where the defect creates “risk of death or personal injury,” or where the damages resulting from the negligence do not fall within “the defined definition of economic loss.” Moreover, DC courts appear open to considering other exceptions to the economic loss rule adopted by courts of other jurisdictions. The statute of limitations for a negligent construction claim resulting in property damages and repair costs is three years. Code of the district of Columbia (“DC Code”) § 12-301. Under the discovery rule, as adopted in Washington DC, the three-year statute of limitations on a negligent claim runs from the date when a claimant actually knows, or by the exercise of reasonable diligence should know, of the injury, its cause-in-fact, and some evidence of wrongdoing (hereinafter referred to as “discovery”). 

3.  Breach of Contract and Common Law Implied Warranties

   The District of Columbia recognizes a legal claim for breach of express contractual promises, such as a promise in a contract of sale to deliver a condominium constructed in accordance with plans and specifications and building codes. The District of Columbia also recognizes a legal claim for breach of implied common law contractual warranties, such as the “implied warranty of good faith and fair dealing.” A party may be liable for breach of the implied covenant of good faith and fair dealing when it evades or defeats the spirit of the contract in connection with its performance or enforcement, such as where one party fails to perform unfinished work or promised repairs. The statute of limitations for a breach of contract claim is three years, DC Code § 12-301(7), and runs from the date of discovery of the breach under the “discovery rule.” 

4.  Violation of the Consumer Protection Procedures Act

   The District of Columbia Consumer Protection Procedures Act (“CPPA”) creates a private cause of action which can be asserted by a condominium association on behalf of its unit owner members who are deceived or otherwise misled in connection with the purchase of a condominium from the condominium developer. CPPA § 28-3905 and DC Condo Act § 42-1903.08(a)(4). The CPPA defines various unlawful trade practices that can include misrepresentations about the quality of construction, a failure to disclose material facts regarding problems with the condominium common elements, and other conduct which is misleading to consumers of condominiums. CPPA § 28-3904. Unlike other legal claims discussed herein, a condominium developer who engages in such unlawful trade practices can be held liable for treble damages as well as the claimant’s reasonable attorney’s fees. CPPA §28-30905(k)(2). A claim under the CPPA has a 3-year statute of limitations under DC Code §12-301(8), which runs from the date of discovery under the “discovery rule.” 

5.  Negligent Misrepresentation and Fraud
   

   Negligent misrepresentation and fraud are common law legal claims that provide a remedy when a defendant, including a condominium developer, makes a false representation or omits a fact when there is a duty to disclose. The difference between negligent misrepresentation and fraud is that negligent misrepresentation does not require an intent to deceive on the part of the defendant in making the representation. Rather, the representation can be based on careless/reckless behavior, such as making untrue statements to unit owners about the condominium without knowledge as to whether or not they are true or not. In the case of both fraud and negligent misrepresentation, the untrue statements or misleading omission must be material and reasonably relied upon by the Plaintiff in taking action, such as entering into a contract of sale and obtaining long-term financing based on a representation that the building was constructed in accordance with the plans and specifications approved by the District of Columbia. The statute of limitations for a negligent misrepresentation or fraud claim related to the quality or condition of construction is three years from the date of discovery under the discovery rule. 

6.  Strict Liability
   

   Washington DC recognizes the product liability legal theory of “strict liability in tort.” Under this theory liability may be imposed without a showing of negligence in cases where components or systems in newly constructed condominiums sold to the public are defective and unreasonably dangerous and cause injury and damage to condominium purchasers. For example, where a construction defect causes mold growth that creates hazardous air quality resulting in personal injury and loss of use of a condominium unit due to inhabitability. Strict liability claims are also subject to the economic loss rule (discussed above) and have a three-year statute of limitations running from the date of discovery under the “discovery rule.”

7.  Misleading Statement in Public Offering Statement

   The District of Columbia Condominium Act creates a private cause of action against a condominium developer who makes a false or misleading statement in a Public Offering Statement (“POS”) or omits a material fact with respect to the portion of the POS that he or she prepared or caused to be prepared. DC Condo Act § 42-1904.02(d). Each person who purchases a condominium in the District of Columbia must be provided with a POS that contains information prescribed by the District of Columbia Condominium Act at § 42-1904.04. For example, the POS must, among other things, “fully and accurately” … “disclose” … “the characteristics of the condominium and the units therein offered,” including “all unusual and material circumstances or features affecting the condominium.” DC Condo Act § 42-1904.04(a). In order to recover for a cause of action based on misleading statements in a POS, a condominium association must demonstrate that two or more unit owners sustained damages to their interest in the common elements as a result of the misleading statements in question. A claim under § 42-1904.04(d) of the DC Condo Act has a three-year statute of limitations from the date of discovery under DC Code § 12-301(8).

Tolling Agreements – Preserving Condominium Association Legal Claims

The legal claims discussed above are of limited duration and will expire if not brought in a court of law by filing a lawsuit within the applicable “statute of limitations.” The statute of limitations is the time period within which a legal claim must be brought in a court of law or it shall be forever barred. In general, there are two ways to stop the statute of limitations from running on a party’s legal claims: (1) file a lawsuit asserting those legal claims in court before the statute of limitations expires; or (2) have the responsible parties sign a tolling agreement before the statute of limitations expires.

A tolling agreement is a private contract that courts will enforce under which the parties agree that the statute of limitations time period will stop running, or be “tolled,” while they attempt to negotiate a resolution of their dispute. However, the statute of limitations will only stop as to those parties who agree to “toll” the running of the statute of limitations. A tolling agreement does not affect claims against any person or entity who does not agree to toll the statute of limitations. Likewise, when filing a lawsuit, the statute of limitations is only tolled as to the persons or entities against whom the suit is filed. For a more detailed explanation of tolling agreements, see article by condominium construction defect attorney Nicholas D. Cowie entitled: “Tolling Agreements: Use Them to Preserve Association Claims During Lengty Construction Defect Negotiations.”

Before negotiating serious construction defects claims with developers, builders, and other responsible parties, an association should first obtain a tolling agreement to preserve its legal claims and prevent them from becoming time-barred by the statute of limitations while it attempts to reach an amicable resolution. A tolling agreement allows a condominium association to focus on negotiations without having to be concerned about filing a law suit in order to prevent those claims from becoming time-barred by the expiration of the statute of limitations. A tolling agreement preserves the condominium’s bargaining power and benefits both the developer and the association by giving them a “time-out” so that they can resolve their claims without litigation.

It is important to retain experienced legal counsel to draft a tolling agreement. In our law firm’s review of cases, we find that many attorneys representing condominiums enter into tolling agreements fail to include important construction defect legal claims and responsible parties. As a result, the statute of limitations continues to run and even expires on these important legal rights during negotiations. Although a condominium association can agree to enter into a limited tolling agreement, attorneys unfamiliar with construction defect litigation on behalf of condominiums often do not understand and thus do not explain to their association clients what legal rights they are giving up and what the alternatives are. As a result, associations are unable to make informed decisions about excluding legal rights in a tolling agreement until it is too late.

Legal Obligation to Pursue Timely Construction Defect Claims

A Maryland appellate court has held that a condominium association can be sued by its unit owner members for failing to timely investigate and bring a lawsuit against the condominium developer for construction and design defects causing water leaks into the condominium buildings. See, Greenstein v. Council of Unit Owners of Avalon Court Six Condominium, 201 Md. App 186 (2011) (“Greenstein”). 

Although courts within the District of Columbia have not addressed this precise issue, they often look to Maryland case law for precedent in such cases. In Greenstein, the condominium association complained about building water leak problems for many years. Ultimately, the association filed a lawsuit against the developer of the condominium when it failed to make effective repairs to stop the leaking. The court dismissed the condominium association’s suit because it was filed after the statute of limitations had expired. The association then assessed the unit owners for the cost of repairing the developer’s construction defects that cause the water leaks. In response to the assessment, some unit owners sued the association for negligence in failing to bring a timely lawsuit. The Maryland Court of Special Appeals held that the unit owners’ lawsuit against the condominium association could go forward because the association had a duty to timely pursue recovery from the developer on behalf of unit owners for damage to the common elements caused by the developer’s negligence, breach of contract, and other applicable law. Greenstein 201 MD App at 205.

It is important to note that the condominium association in Greenstein could have avoided these legal problems and liability had it been cognizant of the pending expiration of the statute of limitations or had it entered into a tolling agreement when it first began negotiating with the developer.

A Condominium Association Must Understand the Statute of Limitations from the Outset in order to make Informed Decisions 

In order to ensure that it makes timely decisions about when to obtain a transition study and when to enter into a tolling agreement and/or file suit, a condominium association must first know when the statute of limitations expires as to the legal claims that it can assert. Without that information, associations are likely to unknowingly waive their legal claims. Determining when the statute of limitations expires is an extremely complex task in the case of condominium construction defect claims. Due consideration must be given to the numerous unit owner members, each of whom has legal claims relative to the common elements that can often be asserted on their behalf by the condominium association. In each case, different legal claims will have different statute of limitations periods that commence, or “accrue,” at different times, and those periods can vary as to the defect in question, the unit owner involved, and the time of discovery. In our firm’s review of cases handled by other attorneys over the years, we have often found that attorneys represent condominium associations in negotiations with developers over construction defect claims without ever analyzing, understanding, or even advising to the association when the statute of limitations expires as to the many different legal claims that the association can assert in its own name or on behalf of its unit owner members. Without this information, the associations often unknowingly allow, the statute of limitations to expire, resulting in the association losing its bargaining power in the negotiations, or its lawsuit being dismissed as time-barred if one is ever filed.

Negotiating Proper Repair of Construction Defects

Most construction defect disputes between condominium associations and developers are resolved or settled amicably without the need for litigation. Unfortunately, in many such cases, the negotiated repairs ultimately prove ineffective and fail to address underlying pervasive problems. This typically occurs when condominium associations simply accept whatever repairs are offered by the developer without involving their construction consultants to ensure that a proper repair is being offered and without documenting agreements to ensure accountability as to the method and scope of repair.

Condominium associations should be careful about accepting verbal offers from developers and builders to make unspecified “repairs” in response to complaints about construction problems. The informal nature of such an agreement may be appropriate in some circumstances, however, in most cases, problems will arise when the developer’s definition of “repair” differs from that required by code, contract, or industry standard. For example, when a developer agrees, informally, to repair a window or roof leak, the “repair” as far as the developer is concerned may consist of merely sending out a worker with a caulk gun to seal gaps that should have been protected with a solid flashing material during the original construction. Caulk is generally not an appropriate substitute for flashing. In this example, caulk is a temporary and inappropriate fix that may actually conceal the underlying absence of flashing until the caulking seal breaks or is bypassed by water infiltration at another location and the leak reappears six months later. This example demonstrates the need for written clarity, as well as the opportunity to seek the assistance of the association’s construction expert.

A condominium association does not have to accept whatever undefined repair the developer is offering. Instead, it should request a detailed description, preferably in writing, of the proposed repair being offered by the developer. The developer’s proposed repair can then be evaluated by a construction consultant working for the condominium. The consultant can review the applicable construction drawings and field conditions and advise the association whether the repair is reasonable and appropriate to address the underlying construction defect. If not, the consultant can suggest alternative repair approaches, request additional information, or suggest modifications to the developer’s repair proposal. In some cases, additional joint invasive inspections may be proposed to determine the appropriate repair and/or the extent, or “scope,” of repairs needed throughout the community. In this manner, the association can make decisions informed by its own construction consultant’s expertise rather than accepting whatever the developer is offering without understanding the appropriateness and effectiveness of the repair being offered.

All repairs negotiated in this manner should be documented so as to avoid misunderstanding and create an objective standard by which the repair can be judged. If the repair should fail the association has a written reference by which to judge whether the repair was performed properly as agreed.

This framework for negotiating the method and scope of repair promotes accountability and finality. It can be employed on a larger scale when a condominium association is negotiating repair of multiple defects discovered during a transition deficiency study. Each repair agreed upon by the parties can be specified in writing and become part of an agreement under which the developer agrees to perform specified repairs pursuant to a specific method and at all the specific locations where the defect exists in accordance with construction standards agreed to by the parties and their construction consultants. These written understandings can then be incorporated into a larger repair agreement that can also provide for future repair related activities and contingencies, such as resolution of disputes over repairs by third parties, unforeseen conditions discovered during repairs, provisions for having the association’s consultant inspect and approve the developer’s repair work, reimbursement of construction defect related expenses incurred by the condominium association, including consultant inspection fees, attorney’s fees, and defect evaluation and repair fees.

Conclusion – Early Consultation with Qualified Legal Counsel is Key to Making Informed Decisions Relative to Construction Defect Resolution

 Representing condominium associations in construction defect claims is an extremely complex area of law. Legal counsel well versed in representing condominiums on a day-to-day basis often lack expertise and experience necessary to protect the interests of a condominium association when it comes to construction defect resolution. There are myriad of pitfalls beyond the scope of this article that are routinely overlooked by attorneys who lack the knowledge and experienced that comes with years of representing condominiums in construction defect litigation.  These oversights result in the loss or serious compromise of association legal claims, unnecessary expense, loss of bargaining power, unfavorable settlements, or even dismissal of an associations case if litigation ensues.

In our practice, we often come across the same group of attorneys who represent condominium developers and builders in construction defect disputes. They are well versed in condominium construction defect law and they know which attorneys have a track record of successfully representing condominiums in construction defect litigation. Developer’s attorneys will invariably “run circles” around condominium legal counsel who lack construction defect litigation experience. There is no substitute for years of experience resolving construction defect disputes on behalf of condominiums, including negotiating and drafting repair agreements and litigating actual construction defect claims on behalf of condominium associations in case where settlement is not possible. It is for this reason that many condominium associations do not use their general counsel for construction defect matters. Instead, they consult with and retain separate counsel with expertise in the very specialized field of representing condominiums in construction defect disputes with condominium developers and builders.

The most important step a transitioning association can take toward successfully identifying and amicably resolving construction defect claims is to seek an early, complementary consultation from an attorney with substantial experience in representing condominiums in construction defect matters. Such a consultation, tailored to the community in question, will provide an association with a road map and a timeline for proceeding each step of the way so that it can make informed decisions about protecting its warranties and other legal rights in a timely manner, before they expire. Preserving these claims, will greatly increase the chances of successfully resolving construction defect disputes without the need for litigation.

NOTE ABOUT TERMINOLOGY:

The term “developer” is used in this article to describe the person or entity that creates the condominium association. Although “developer” is the terminology commonly used for this purpose, the District of Columbia Condominium Act refers to a developer as a “declarant” because it is the person or entity that files the condominium declaration necessary to create a condominium.

The term “condominium association” is used in this article to describe the organization or entity that governs the affairs of the condominium in accordance with the condominium bylaws and declaration, and whose members consist of all condominium unit owners. Although “condominium association” is the terminology commonly used for this purpose, the District of Columbia Condominium Act refers to a condominium association as a “unit owners’ association.”

The term “board of directors” is used to refer to the administrative entity made up of board members that have authority under the condominium bylaws and declaration to act on behalf of the condominium association. The District of Columbia Condominium Act refers to a board of directors as an “executive board.”

NOTE ABOUT AUTHOR:

Nicholas D Cowie is a partner in the law firm of Cowie Law Group, P.C. and is licensed in Maryland and Washington DC (District of Columbia). Mr. Cowie has been continuously resolving construction defect disputes on behalf of condominium associations for over 29 years. He has been involved in some of the major litigation that has shaped the condominium construction defect law in Maryland. Mr. Cowie has served as adjunct law school professor of construction law and drafted legislation enacted into law that protects and preserves the rights of condominium associations, homeowners associations, and their members in construction defect disputes. The law firm of Cowie Law Group, P.C. consists of attorneys who are versed and experienced in both construction law and condominium law, and who are known for representing condominiums in construction defect claims, financial disputes, developer collection and allocation of unit owner assessments and fees, and other developer contractual and legal obligations occurring prior to transition.

410-327-3800 / 301-830-8315 / 202-670-6289

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Legal Requirements and Checklist

Developer transition is the process by which governance over a condominium unit owners’ association (“condominium association”) is transferred from condominium developer to unit owner control. Below is an overview of the legal requirements in the District of Columbia that govern this transition process as well as a “transition checklist” for unit owner-elected boards of directors that have recently transitioned from developer control.

TRANSITION LAW OVERVIEW

PERIOD OF DEVELOPER CONTROL

A developer initially controls a condominium association because it owns all unsold units in the newly created condominium. As such, the condominium developer has the controlling votes associated with majority ownership and can appoint its own employees as the initial members of the board of directors and thereby control how the association conducts its affairs. This is referred to as the “period of developer control,” during which the condominium developer makes all decisions on behalf of the condominium association.

The developer also creates a condominium association’s governing documents allowing it to dictate, subject to applicable law, the procedures and time periods under which control over the association’s board of directors is ultimately transferred to the unit owners.

In Washington DC, condominium developers are authorized by statute to control the operations of a condominium association and appoint officers and board members during the period of developer control. District of Columbia Condominium Act (“DC Condo Act”) §42-1903.02(a) and (c).

THE TRANSITION MEETING

In the District of Columbia, a transition meeting to allow the unit owners to elect all members of the board is held following the end of the developer control period. DC Condo Act §42-1903.01(b). Generally, the period of developer control will end by statute upon the earlier of the following two events: (1) units representing 75% of the undivided interests in the common elements have been conveyed by the declarant to purchasing unit owner; or (2) three years from the date the first unit is conveyed by the developer to a purchasing unit owner (two years for non-expandable condominiums). DC Condo Act §42-1903.02(a).

OVERLAPPING TERMS OF DEVELOPER-APPOINTED BOARD MEMBERS

Under the DC Condo Act there can be overlapping terms of developer-appointed and unit owner-elected board members during the period of developer control.

Two special meetings must be held in order to allow non-developer unit owners to elect up to 1/3 of the board membership. These elections occur when approximately 25% and 50% of the units at the condominium have been conveyed. These elections can result in overlapping terms of developer-appointed and unit owner-elected board members during the period of developer control. DC Condo Act §42-1903.02(d)(1). Once the period of developer control ends, the entire the board membership is elected by the unit owners. DC Condo Act §42-1903.01(b)

TERMINATION OF CONTRACTS

Certain contracts entered into by the developer on behalf of the condominium association during the period of developer control may be terminated without penalty upon not less than 90 days’ written notice. DC Condo Act §42-1903.02(b)(1). These include association contracts with developer affiliates, management contracts, employment contracts and agreements to lease parking spaces. DC Condo Act §42-1903.02(b)(1).

TRANSITION CHECKLIST

Below is a transition checklist for the initial, unit owner-elected board of directors once it assumes control of a condominium association following the period of developer control.

1. Document/Asset Inventory & Request

Conduct an inventory of the unit owners’ association’s documents and assets. Make a formal written request of the condominium developer to turn over all documents, funds and assets to the extent not already done so. Appendix A below contains a list of items taken from the Maryland Condominium Act that can be used as a guide in determining what if anything needs to be requested from the developer.

2. Contract Review

Review all contracts entered into during the period of developer control. Obtain competitive proposals from vendors for comparison purposes. Contracts that are not in the best interest of the condominium association can be terminated, without liability, under the DC Condo Act by providing 90 days advanced notice.

3. Audit Financial Records

Have an independent auditor examine and audit the association’s financial records during the period of developer control to ensure that all monies were properly collected and accounted for. For example, an auditor can determine whether the correct amount of assessments were collected, whether the association’s reserve accounts were properly funded, or whether there was any inappropriate use of association funds to pay developer obligations. In some cases, an auditor may determine that the condominium developer owes the association a substantial amount of money.

4. Transition and Reserve Studies

Obtain transition and reserve studies in order to identify construction defects and determine whether the developer-created budget and reserve account are adequate to maintain, repair, and replace the condominium common elements over time. For example, if a common element roof is found to be in need of immediate replacement because of construction deficiencies, then a developer-created reserve budget based on a projected roof replacement in 30 years is grossly insufficient.

a. The Transition Study: The purpose of a transition study (also referred to as a “deficiency report” or “warranty analysis”) is to evaluate construction and identify construction defects while warranties are still enforceable so construction defects can be submitted to the developer for warranty repairs. Timely transition studies are essential because defects in newly constructed condominiums may not be apparent when unit owners first take control of the association. Defects in the original construction can remain hidden for years until they manifest themselves in the form of property damage. Left undiscovered and unrepaired, even minor construction deficiencies can result in extensive property damage requiring associations to borrow money and assess unit owners. Moreover, when defects are not identified in a timely manner, warranty rights may be barred by expiration of warranty periods or statute of limitations. Architectural and engineering firms can identify construction defects early on and investigate suspicious conditions before warranty rights expire so timely notice can be given to the developer. Once defects have been identified and then corrected by the developer, the condominium association can establish an accurate reserve budget.

b. The Reserve Study: A reserve study does not seek to evaluate construction. Rather, its purpose is to determine the amount of annual assessments that should be placed into a reserve account to pay for future repair or replacement of the major community components for which the association is responsible, such as roofs, exterior walls, elevators, etc. A normal useful life, or “life expectancy,” is assigned to each of these components (e.g., a 30-year roof), as well as an estimated cost to repair or replace those components at the end of their useful life. Based on these projections, a reserve analyst estimates the amount of money that the condominium association should allocate to its reserve account each year so that the necessary funds will be available for future repairs and replacement. This type of planning avoids a one-time huge assessment for major repair/replacement projects.

5. Retain Legal Counsel

a. General Counsel: Retain general counsel to work with the board members and its management company handling a the wide variety of general legal issues that face a Washington DC condominium association, such as interpreting governing documents, preparing legal opinions, delinquent assessment collection, contract negotiation, dealing with threatened litigation, amending governing documents, etc.

b. Warranty/Construction Defect Legal Counsel: Request a free consultation from an attorney with expertise in condominium construction defect law. Such an attorney can advise the association when applicable warranties and other legal claims expire and how to preserve the association’s legal claims while negotiating proper repairs with the developer. Armed with such information, a transitioning condominium association board of directors can make informed decisions. This legal consultation should be requested as soon as the unit owner-elected board assumes control of the association to ensure that no warranty and other legal rights are allowed to expire.

6. Review Insurance Coverage

Review association insurance coverage obtained during the period of developer control. Make sure coverage complies with governing documents, industry standards, and applicable laws (e.g., property insurance, comprehensive general liability insurance, fidelity insurance, directors & officers/errors & omissions policy). In the event of a lawsuit, having proper coverage will not only provide the association with a legal defense and pay any judgment, but can also provide immunity to directors and officers and cap association liability to the amount of insurance coverage.

7. General Housekeeping Matters

There are a number of housekeeping matters not covered by this checklist involving condominium governance and business that will need to be addressed by the first board to transition from developer control. A condominium association’s property manager and/or attorney typically guides the board in these matters. Some examples include: selecting officers (President, Vice President, Secretary and Treasurer); appointing committees (e.g., architectural review committee); scheduling meetings required by the governing documents; defining maintenance obligations and establishing a maintenance schedule; updating contact information for government agencies, utilities and vendors; amending developer-created governing documents and promulgating new rules and regulations based on the needs and concerns of the unit owner-controlled association; updating resale certifications to ensure they comply with applicable law; etc.

APPENDIX

Documents & Assets To Request from Developer

• Articles of incorporation, recorded declaration, and all recorded covenants, bylaws, plats, and restrictions of the condominium
• All books and records, including financial statements, minutes and completed business transactions
• Policies, rules, and regulations
• The financial records from the date of creation to the date of transfer of control, including budget information regarding estimated and actual expenditures by the condominium and any report relating to the reserves for repairs and replacement of common elements
• All contracts to which the condominium is a party
• The name, address, and telephone number of any contractor or subcontractor employed by the condominium
• Insurance policies in effect and all prior insurance policies
• Any permit or notice of code violation issued to the condominium by the county, local, State, or federal government
• Any warranty in effect
• Drawings, architectural plans, or other suitable documents setting forth the necessary information for location, maintenance, and repair of all condominium facilities
• Individual owner files and records, including assessment account records, correspondence, and notices of any violations
• A roster of current unit owners, including mailing addresses, telephone numbers and unit numbers
• The condominium funds, including operating funds, replacement reserves, investment accounts and working capital
• The tangible property of the condominium

NOTE ABOUT AUTHOR: Nicholas D. Cowie is a partner in the law firm of Cowie Law Group, P.C. and has been representing condominium associations for over 25 years. Mr. Cowie is licensed in Maryland and Washington DC and has extensive experience representing condominiums with developer transition issues including construction defect claims and financial disputes involving developer collection, payment and allocation of condominium assessments and fees.

NOTE ABOUT TERMINOLOGY:

The term “developer” is used in this article to describe the person or entity that creates the condominium association. “Developer” is the terminology often used for this purpose. The District of Columbia Condominium Act, however, refers to a developer as a “declarant” because it is the person or entity that files the condominium declaration necessary to create a condominium.

The term “condominium association” is used in this article to describe the organization or entity that governs the affairs of the condominium in accordance with the condominium bylaws and declaration, and whose members consist of all condominium unit owners. “Condominium association” is the terminology commonly used for this purpose. However, the District of Columbia Condominium Act refers to a condominium association as a “unit owners’ association.”

The term “board of directors” is used to refer to the administrative entity made up of board members that have authority under the condominium bylaws and declaration to act on behalf of the condominium association. The District of Columbia Condominium Act refers to a board of directors as an “executive board.” 

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MARYLAND CONDOMINIUMS

Transition of Association Governance from Developer to Unit Owner Control

INTRODUCTION

“Developer transition” is the process by which the governance of a condominium association is transferred from developer to unit owner control. This article provides a brief overview of the legal requirements that govern the developer transition process for Maryland condominiums. This article also as well as a “transition checklist” for transitioning unit owner-controlled boards of directors.

PERIOD OF DEVELOPER CONTROL

A developer initially controls an association because it owns all unsold units in the newly created condominium community. As such, the developer has the controlling votes associated with majority ownership and can appoint its own employees as the initial members of the board of directors and thereby control how the condominium association conducts its affairs. This is referred to as the “period of developer control,” during which the developer makes all decisions on behalf of the association.

The developer also creates an association’s governing documents, allowing it to dictate, subject to applicable law, the procedures and time periods under which control over the association’s board of directors will eventually be transferred to the homeowners.

THE TRANSITION MEETING

The period of developer control continues until a “transition meeting” is held to elect members of the board of directors from amongst the condominium unit owners. The transition meeting must be held within 60 days after the date that units representing 50 percent of the votes in the condominium have been conveyed by the developer to the purchasing unit owners. Maryland Condominium Act (“ MD Condo Act”) §11-109(c)(16)(i)1. The transition meeting can be held earlier if the developer specifies a lesser percentage of conveyances in the governing documents as a trigger for the 60 day period to commence. MD Condo Act §11-109(c)(16)(i)2.

OVERLAPPING TERMS OF DEVELOPER-APPOINTED BOARD MEMBERS

The terms of board members appointed by the developer during the period of developer control must end 10 days after a replacement board member is elected at the transition meeting. MD Condo Act §11-109(c)(16)(iii). This law is designed to prevent overlapping terms of developer-appointed and unit owner-elected condominium board members.

DOCUMENT/ASSET TURNOVER

Within 30 days following the transition meeting, a Maryland condominium developer is required to turn over specified documents and assets to the unit owner-elected board of directors. MD Condo Act §11-109(c)(16)(iv). This includes financial records, contracts, architectural plans, condominium funds, owner records, etc. A complete list of these items is set forth as an Appendix to this article.

TERMINATION OF CONTRACTS

Following the transition meeting, the newly-elected, owner-controlled board of directors has a right, without liability, and upon 30 days prior notice, to terminate association contracts entered into during the period of developer control for the purpose of handling the condominium’s financial matters, maintenance, or other services for the community. MD Condo Act §11-109(c)(16)(v). The association’s right to terminate, however, does not apply to contracts for the “the provision of utility services or communications systems.” MD Condo Act §11-109(c)(16)(v)2.B.

TRANSITION CHECKLIST

Below is a checklist of developer transition items to be addressed by the first unit owner-elected board of directors once it assumes control of the condominium association following the transition meeting.

1. Document/Asset Inventory & Request

Conduct an inventory of association documents and assets. Make a formal written request of the developer to turn over all documents, funds and assets listed in Appendix A to the extent not already done so. These must be turned over within 30 days of the transition meeting.

2. Contract Review

Review all contractual agreements entered into during the period of developer control to handle the association’s financial matters, maintenance, or other services. If there are any concerns, obtain competitive proposals from vendors and professionals for comparison purposes. Contracts that do not appear to be in the best interest of the condominium association can be terminated, without liability, upon 30 days in notice.

3. Audit Financial Records

Have an independent auditor examine the association’s financial records during the period of developer control to ensure that all monies were properly collected, utilized and accounted for. An auditor can determine whether the correct amount of assessments were collected, whether the association’s reserve accounts were properly funded, or whether there was any inappropriate use of association funds to pay developer obligations. In some cases, an auditor may conclude that the developer owes the condominium association a substantial amount of money.

4. Transition and Reserve Studies

Obtain transition and reserve studies in order to identify construction defects and determine whether the developer-created budget and reserve account are adequate to maintain, repair and replace the common areas of the community over time. For example, if a common element roof is found to be in need of immediate replacement because of construction defects, then a developer-created reserve budget based on a projected roof replacement in 30 years is grossly insufficient.

The Transition Study: the purpose of a transition study (also referred to as a “deficiency report” or “warranty analysis”) is to evaluate construction of the common elements and common areas to identify construction deficiencies while warranties are still enforceable so they can be submitted to the developer for warranty repair. Timely transition studies are essential as part of the developer transition process because defects in newly constructed communities may not be apparent when unit owners first take control of the association. Defects in the original construction can remain hidden for years until they manifest themselves in the form of property damage. Left undiscovered and unrepaired, even minor construction deficiencies can result in extensive property damage requiring associations to borrow money and assess homeowners. Moreover, when defects are not identified in a timely manner, warranty rights may be barred by expiration of warranty periods or statute of limitations. Architectural and engineering firms can identify construction defects early on and investigate suspicious conditions before warranty rights expire so timely notice can be given to the developer. Once defects have been identified and corrected by the developer, the association can establish an accurate reserve budget.

The Reserve Study: A reserve study does not seek to evaluate construction. Rather, its purpose is to determine the amount of annual assessments that should be placed into a reserve account to pay for future repair or replacement of the major community components for which the association is responsible, such as roofs, exterior walls, sidewalks, roadways, stormwater management ponds, clubhouses, etc. A normal useful life, or “life expectancy,” is assigned to each of these components (e.g., a 30-year club house roof), as well as an estimated cost to repair or replace those components at the end of their useful life. Based on these projections, a reserve analyst estimates the amount of money that the association should allocate to its reserve account each year so that the necessary funds will be available for future repairs and replacement. This type of planning avoids a one-time huge assessment for major repair/replacement projects.

5. Retain Legal Counsel

General Counsel: Retain general counsel to work with the board members and the association’s management company to handle the wide variety of general legal issues that face Maryland condominiums and their associations, such as interpreting governing documents, preparing legal opinions, collecting delinquent assessments, reviewing and negotiating proposed contracts, dealing with threatened litigation, amending governing documents, and complying with applicable laws.

Warranty/Construction Defect Legal Counsel: Request a free consultation from an attorney with expertise in condominium  association construction defect law. Such an attorney can advise the association when applicable warranties and other legal claims expire and how to preserve the association’s legal claims while negotiating proper repairs with the developer. Armed with such information, a transitioning association can make informed decisions. This legal consultation should be requested as soon as the newly elected board assumes control of the association to ensure that no warranty and other legal rights are allowed to expire.

6. Review Insurance Coverage

Review association insurance coverage obtained during the period of developer control. Make sure coverage complies with governing documents, industry standards, and applicable laws (e.g., master policy, property insurance, comprehensive general liability insurance, fidelity insurance, directors and officers/errors and omissions policy). In the event of a lawsuit, having proper coverage will not only provide the association with a legal defense and pay any judgment, but can also provide immunity to members of the board of directors and officers as well as cap association liability to the amount of insurance coverage.

7. General Housekeeping Matters

There are a number of housekeeping matters not covered by this checklist involving association governance and business that will need to be addressed by the first board to transition from developer control. An association’s property manager and/or its attorney typically guides the board in these matters. Some examples include: selecting officers (President, Vice President, Secretary and Treasurer); appointing committees (e.g., architectural review committee); scheduling meetings required by the governing documents (e.g., annual and regular meetings of association); defining maintenance obligations and establishing a maintenance schedule; amending developer-created governing documents and promulgating new rules and regulations based on the needs of the owner-controlled association, etc.

APPENDIX

 DEVELOPER TRANSITION

DOCUMENTS & ASSETS TO BE TURNED OVER BY DEVELOPER

• Articles of incorporation, recorded declaration, and all recorded covenants, bylaws, plats, and restrictions of the condominium
• All books and records, including financial statements, minutes and completed business transactions
• Policies, rules, and regulations
• The financial records from the date of creation to the date of transfer of control, including budget information regarding estimated and actual expenditures by the condominium and any report relating to the reserves for repairs and replacement of common elements
• All contracts to which the condominium is a party
• The name, address, and telephone number of any contractor or subcontractor employed by the condominium
• Insurance policies in effect and all prior insurance policies
• Any permit or notice of code violation issued to the condominium by the county, local, State, or federal government
• Any warranty in effect
• Drawings, architectural plans, or other suitable documents setting forth the necessary information for location, maintenance, and repair of all condominium facilities
• Individual owner files and records, including assessment account records, correspondence, and notices of any violations
• A roster of current unit owners, including mailing addresses, telephone numbers and unit numbers
• The condominium funds, including operating funds, replacement reserves, investment accounts and working capital
• The tangible property of the condominium

NOTE ABOUT TERMINOLOGY: Under the Maryland Condominium Act, a condominium association is referred to as a “council of unit owners,” which the legal entity that governs the affairs of the condominium as set forth in Sections 11-101(f) and 11-109 of the Maryland Real Property Article, Annotated Code of Maryland. A council of unit owners can be an incorporated or unincorporated and its members are comprised of all unit owners.

NOTE ABOUT AUTHOR: Nicholas D. Cowie is a partner in the law firm of Cowie Law Group, P.C. and has been representing Maryland condominiums for over 25 years. Mr. Cowie is licensed in Maryland and Washington DC and has extensive experience representing condominium associations with developer transition issues including financial disputes regarding the developer financial disputes (e.g., payment, collection and use of assessments) and construction defect claims. Mr. Cowie participated in the drafting and efforts to obtain passage of Maryland laws that benefit Maryland condominiums and their associations in the transition process by requiring developers to turnover specified documents and by extending warranty periods for Maryland condominiums and HOAs. Mr. Cowie contributed to the drafting and worked to obtain passage of House Bill 667, enacted on October 1, 2009, which created the laws discussed above that strengthen the rights of Maryland condominium and homeowners associations in the transition process

NOTE ABOUT ARTICLE: This article appeared as a two part series on Developer Transition in the Community Association Institutes publication called “The Beacon” (Chesapeake Region Chapter), Summer Issue 2017.

The post DEVELOPER TRANSITION – MARYLAND CONDOMINIUMS appeared first on COWIE LAW GROUP - Maryland Condominium Construction Defect Lawyers.

The Community Associations Institute (“CAI”) recently partnered with its members and industry stakeholders to create a survey about construction deficiencies to learn how they impact homeowners and condominium associations.

Click here to view the Construction Defects Report Report containing the details of the responses to the survey.

Click here to see a video presentation summarizing the results of the Construction Defects Survey.

This Community Associations Institute (“CAI”) Construction Defects Report demonstrates that many community associations do not discover construction deficiencies until after warranties have expired and/or fail to take the necessary actions to preserve their claims before the statutes of limitations runs. As a result, many homeowners and Condominium associations ended up using association funds to correct builder construction defects and damages caused thereby.

The recommendations from the CAI Construction Defect Survey of community associations are summarized as follows:

Since nearly half of deficiencies are being found after the statute of limitation expires, states should consider lengthening, not shortening, the statutory period.

Consumer protections must remain intact so homeowners who buy into a community and are victim to a deficiency may retain the value of their most important investment: their home.

Legislators must not be swayed by the argument that lessening warranty protections for homeowners will lead to the development of more affordable housing. Construction deficiencies cause property values to drop, sadly making housing affordable at the expense of the homeowner, not the builder. The goal in creating affordable housing is not to lessen current property values, but to create a pathway for new buyers to purchase new homes.

Legislators should not view communities as filing frivolous lawsuits. While the great majority of complaints are resolved without litigation, associations must have the ability to file suit if anything threatens resolution.

Legislators should not view communities as filing frivolous lawsuits. While a vast majority of communities have the right to litigate, most resolve their claims without a court judgement, as reported above. Associations must not be mandated to ADR prior to filing litigation.

Legislators should not seek to limit periods of repose and should not require mandatory ADR prior to litigation. This is because community associations must file legal action within a statutory period. That period can expire during lengthy and mandatory ADR processes.

Association must be permitted alternative repair funding methods during thelengthy periods between suit and recovery. Further, attorney’s fees should be paid for by the party at fault.

Boards of directors and managers (if applicable) should work directly and transparently with the association to identify the defects, gather evidence, document complaints, make temporary repairs and discuss the opportunities available to make the most informed decision on pursuing a claim. As the survey findings indicate, nearly half of all construction deficiencies are resolved through negotiation between the community association and the developer and do not require the expensive approach of litigation.

States or municipalities looking to amend their laws or ordinances should take the following into consideration:

Lengthen the statutory period of limitation and repose.
Strengthen overall warranty protections for homeowners.
Permit associations to make alternative methods for funding repairs.
Permit – not mandate – associations to resolve claims prior to litigation with alternative dispute resolution, specifically mediation.

As this study’s finds, stripping the warranty protections for homeowners only increases the cost of homeownership following the sale and will not reduce purchase prices.

Significantly, the CAI Construction Defects Report also demonstrates the importance of early consultation with, and retention of, an experienced construction defect attorney familiar with laws that affect community associations to increase the likelihood of a favorable outcome. Handling construction defect legal claims on behalf of Condominiums and HOAs is a highly complex and specialized area of law. A condominium association’s general counsel may not be the attorney to use when a community association is faced with potentially serious construction defect issues. It is often wise to consider the legal services of a firm that is known for representing condominiums and HOAs in resolving construction defect disputes and has track record and experience in this area.

The full Construction Defect Survey, entitled “Protecting Homebuyers and Homeowners from Construction Deficiencies in Condominiums and Preserving Property Values Survey Report (February 2017),” is reproduced below.

Community Associations Institute (CAI) | Construction Deficiency Consumer Protection Survey Report

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Protecting Homebuyers and Homeowners from Construction

Deficiencies in Condominiums and Preserving Property Values

Survey Report (February 2017)

Introduction………………………………………………………………………………………………………………………… 2

Condominium and HOA Residents Experience with Consumer Protection Warranties – Summary of Findings..3 Discovery and Impact of the Deficiency………………………………………………………………………………………………………………………. 3

1. The warranty period expired in nearly half of all communities experiencing a construction deficiency.3 2. Poor workmanship is the most common type of deficiency…………………………………………………………………………………………. 3
2. In communities where the statute of limitation or repose had lapsed, communities most often collected a special assessment to fund the repair or did not repair the deficiency at all…………………………………………………………………….. 3
3. Construction deficiencies may negatively impact owners’ ability to sell their …………………………….. 4
4. Construction deficiencies may have a direct, negative impact on property ……………………………….. 4
5. Communities with fewer than 250 homes are most affected by deficiencies……………………………………… 5
6. Most common deficiencies included waterproofing, structure and roof ……………………………….. 5
7. Most deficiencies occur in the development of new………………………………………………. 5

Claims Against Deficiencies During the Warranty Period…………………………………………………………………… 5

9. Most warranty claims are resolved outside of……………………………………………………………….. 5
10. Most communities’ declarations do not prevent litigation or require alternative dispute resolution (ADR)….. 6
11. Mediation was the most common form of ADR used prior to filing a ……………………………………. 6
12. The majority of pre-litigation processes lasted more than 361 days if cases did not settle…………………….. 6
13. It takes more than a year for the majority of communities to recover damages………………………………… 6
14. The amount of damages recovered may not be sufficient for the rebuild, replacement or ……………. 6

Conclusion – Summary of Recommendations………………………………………………………………………………….. 7

Additional Resources……………………………………………………………………………………………………………… 8

Statement of Practice – Preferred Resolution Method Between Associations and Developers………………………… 8

CAI Public Policy – Protection of Association Claims in Construction Defect Legislation………………………………….. 9

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Introduction

Former quarterback and Hall-of-Famer Joe Montana is known for his Super Bowl wins with the San Francisco 49ers, but in August of 2016 his name was in the news for joining another team. He and a group of residents filed a class-action suit against Millennium Partners and Transbay Terminal Developers to recover the losses of property value suffered by the sinking and tilting of the Millennium Tower.

Towering 58 stories above San Francisco’s Financial District, and what has come to be known as “Leaning Tower of San Francisco,” the Millennium Tower has sunk 16 inches into the soil and titled 2 inches to the northwest since opening in 2009. It is expected to sink an additional 8-15 inches in the coming years. The city’s attorney Dennis Herrera called the situation “every homeowner’s worse nightmare.” (Robinson, 2016)

The Millennium Tower is a high-profile case highlighting construction deficiencies. It is because of its status and those involved that it received media attention. Unfortunately, the residents of the Millennium Tower are a few among thousands of homeowners every year discovering they are living their own worst nightmare. The consequences of builders’ negligence and material deficiencies are causing thousands of homeowners around the country every year to file claims seeking repairs for damages of their most important investment: their home.

Yet many developers around the U.S. are seeking refuge from these claims by pushing legislation to weaken building warrant laws that protect consumers. To add insult to the attempts, many developers are encouraging this legislation under the guise that these protections are making it too costly to build affordable housing.

The legislation being pushed in the states has similar trends. The legislation will make it more difficult  for homeowners to collect damages, either requiring them to pursue alternative dispute resolution or requiring higher percentages of homeowner approval before filing legal action. Not only do these requirements cause delay in repairs, but they permit developers to postpone repairs long enough to fall outside of the states’ statute of limitations and repose. Further the legislation proposes to shorten the warranty period as well the deadline to file a claim once the defect is found. Legislation further attempts to redefine a defect as only those that cause physical harm, a would-be metaphorical punch to the gut of Millennium Tower residents.

It is because of this recent trend in legislation that Community Associations Institute (CAI) partnered with its members and industry stakeholders to create a survey about construction deficiencies to learn how they impact homeowners and community associations. This report details the responses of the survey.

Community Associations Institute (CAI) | Construction Deficiency Consumer Protection Survey Report

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Condominium and HOA Residents Experience with Consumer Protection Warranties – Summary of Findings

CAI partnered with its members and industry stakeholders to draft a survey on construction deficiencies to learn how they impact homeowners and community associations.

SURVEY RESPONDENTS: The survey respondents included 525 individual responses from condominium and homeowner associations across the country with the number of homes ranging from a couple dozen to more than 1,000.

The survey findings clearly tell the story that even the current warranty protections and statutes of repose are not adequate to ensure the homes within the community are properly repaired. Further, current protections are inadequate to maintain home property values and show that lowering these protections will only increase the cost and burden of homeownership, a stark contrast to builders’ claims that these provisions prevent the construction of affordable housing.

Discovery and Impact of the Deficiency

1.     The warranty period expired in nearly half of all communities experiencing a construction

47.3% of communities identified a construction deficiency after its warranty period.

52.7% of communities identified a deficiency within its warranty period.

Recommendation: Since nearly half of deficiencies are being found after the statute of limitation expires, states should consider lengthening, not shortening, the statutory period.

2.     Poor workmanship is the most common type of *

81.3% identified the deficiency was in construction. Poor workmanship resulted in plumbing leaks, electrical or mechanical problems and cracks in foundation walls.

46.1% of respondents identified a deficiency in design. Architects and engineers may have designed buildings and systems that did not work as intended.

41.9% of respondents reported a deficiency in building materials. In this case the building materials were defective or damaged and lead to the deficiency.

3.     In communities where the statute of limitation or repose had lapsed, communities most often collected a special assessment to fund the repair or did not repair the deficiency at all.

44.4% of respondents to this question paid for the repair through a special assessment. Special assessments increase the cost of homeownership.

43.1% did not repair the deficiency.

The remainder paid for the repairs by using reserve funds, if permissible. Association covenants generally require that reserve funds be spent on capital improvements, not repairs.

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4.     Construction deficiencies may negatively impact owners’ ability to sell their home.

26.3% of respondents claimed a construction deficiency negatively impacted their ability to sell their home due to the lack of mortgage financing.

44.6% responded that the deficiency did not impact the sale of their home.

29.1% of respondents were unsure.

Respondents were allowed to comment on the question. Here are some notable comments:

• “Due to litigation – owners were unable to refinance or sell.”
• “When the board disclosed the situation, property values were slashed in half. ”
• “It has been horrible, but it hasn’t stopped people from wanting to They just can’t get conventional financing.”
• “Realtors did not want to show or even list the home because of the construction issues. ”
• “Due to the area of the community being a very desirable neighborhood, it has not currently affected any of the homes resale value or ability to arrange mortgage financing. ”
• “From the time we filed the suit until repairs completed it was over 3 years, so no one could refinance and no bank would loan while a suit was in place.”

• “One home was demolished by a No one could sell.”
• “2 possible sales Original cost $249,000. Now one unit on sale for $99,000.”

Recommendation: Consumer protections must remain intact so homeowners who buy into a community and are victim to a deficiency may retain the value of their most important investment: their home.

5.     Construction deficiencies may have a direct, negative impact on property value.

35.5% of respondents reported the deficiency had a direct, negative impact on their property value.

36.2% claimed property values did not suffer a direct, negative impact.

28.1% were unsure

Many comments explained that there was no impact on property value since homes were not sold during the litigation or repair process. Here are some other notable comments:

• “With close to 60 units selling each year during the construction defect process, lending was challenging but sales continued and the impact on selling price was not drastic.”
• “Owners who sold lost from 12% to 29% of their original investments at time of sale.”
• “It is considered an affordable housing community, so they are in high demand, even with known issues. ”
• “Property value was negatively impacted by both the disclosure of the deficiency/repair and the drain on the reserve finds.”
• “It’s almost impossible to sell homes, everyone is trying to leave because they think there are a bunch of other major issues.”
• “Tax relief obtained for diminished value based on initial engineer’s report.”

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Recommendation: Legislators must not be swayed by the argument that lessening warranty protections for homeowners will lead to the development of more affordable housing. Construction deficiencies cause property values to drop, sadly making housing affordable at the expense of the homeowner, not the builder. The goal in creating affordable housing is not to lessen current property values, but to create a pathway for new buyers to purchase new homes.

6.     Communities with fewer than 250 homes are most affected by deficiencies.

On average 75.7% of respondents live in a community with fewer than 250 homes. On average 35.1% of respondents live in a community with 101-250 homes. On average 18.8% of respondents live in a community with fewer than 50 homes.

7.     Most common deficiencies included waterproofing, structure and roof problems.*

48.2% reported a deficiency in waterproofing.

38.6% and 38.5% of respondents reported a deficiency in their structure and roof, respectively.

Those respondents whose deficiency was discovered within their warranty period reported more deficiencies found in the roof (42.3% to 34.8%) and fewer deficiencies found in the structure (37.3% to 39.9%) than those respondents whose defects were found outside of their warranty period. Decks as well as common areas likely hallways, stairwells, and clubhouses, were reported less. Plumbing was also reported as an additional comment.

8.     Most deficiencies occur in the development of new condominiums.

57.3% of respondents reported a deficiency occurred in a new condominium. This is opposed to converted condominiums, townhomes, mixed-use associations and single-family homes.

17.7% reported the deficiency was found in a townhome and 9.5% in single-family homes.

Claims Against Deficiencies During the Warranty Period

9.     Most warranty claims are resolved outside of courts.*

14% of respondents whose deficiency was discovered during the warranty period resolved their claim by court judgement.

44.2% were resolved with direct negotiation.

31.8% were resolved with a pre-litigation settlement.

16.2% were resolved using alternative dispute resolution.

Recommendation: Legislators should not view communities as filing frivolous lawsuits. While the great majority of complaints are resolved without litigation, associations must have the ability to file suit if anything threatens resolution.

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10.      Most communities’ declarations do not prevent litigation or require alternative dispute resolution (ADR).

82.1% of respondents whose deficiency was discovered during the warranty period reported their association declaration did not prevent them from filing a lawsuit or require ADR.

Recommendation: Legislators should not view communities as filing frivolous lawsuits. While a vast majority of communities have the right to litigate, most resolve their claims without a court judgement, as reported above. Associations must not be mandated to ADR prior to filing litigation.

11.      Mediation was the most common form of ADR used prior to filing a lawsuit.

23.5% of respondents whose deficiency was discovered during the warranty period attempted mediation prior to filing suit.

57.1% of those who filed a lawsuit did not use any pre-litigation procedures.

12.     The majority of pre-litigation processes lasted more than 361 days if cases did not settle.

51.3% of respondents whose deficiency was discovered during the warranty period reported the pre- litigation process as lasting longer than 361 days.

Recommendation: Legislators should not seek to limit periods of repose and should not require mandatory ADR prior to litigation. This is because community associations must file legal action within a statutory period. That period can expire during lengthy and mandatory ADR processes.

13.      It takes more than a year for the majority of communities to recover damages.

62.3% of respondents whose deficiency was discovered during the warranty period did not recover damages within 1 year.

12.1% recovered damages in less than a year. 19.3% recovered damages in 3-5 years.

34.9% recovered damages in 1-2 years.

8.4% reported did not recover damages for than 6 years (6% reported 6-10 years to recover, and 2.4% reported more than 10 years to recover).

Recommendations: Association must be permitted alternative repair funding methods during thelengthy periods between suit and recovery. Further, attorney’s fees should be paid for by the party at fault.

14.      The amount of damages recovered may not be sufficient for the rebuild, replacement or repair.

34.1% of respondents whose deficiency was discovered during the warranty period reported the amount of damages recovered was not sufficient for repair.

34.8% reported it was sufficient for repair.

31.1% responded the question did not apply.

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Conclusion – Summary of Recommendations

Boards of directors and managers (if applicable) should work directly and transparently with the association to identify the defects, gather evidence, document complaints, make temporary repairs and discuss the opportunities available to make the most informed decision on pursuing a claim. As the survey findings indicate, nearly half of all construction deficiencies are resolved through negotiation between the community association and the developer and do not require the expensive approach of litigation.

States or municipalities looking to amend their laws or ordinances should take the following into consideration:

• Lengthen the statutory period of limitation and repose.
• Strengthen overall warranty protections for homeowners.
• Permit associations to make alternative methods for funding repairs.
• Permit – not mandate – associations to resolve claims prior to litigation with alternative dispute resolution, specifically mediation.

As this study’s finds, stripping the warranty protections for homeowners only increases the cost of homeownership following the sale and will not reduce purchase prices.

*Respondents were allowed to select more than one answer to the question.

Community Associations Institute (CAI)

Government & Public Affairs Department

www.caionline.org

government@caionline.org (888) 224-4321

Published January 2017

Revised February 2017

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Additional Resources

Statement of Practice – Preferred Resolution Method Between Associations and Developers

Ross Feinberg, Esq., and Ron Perl, Esq. describe the complexities of construction deficiencies well in the introduction to their book, Construction Defect Litigation:

“Developers and contractors are professionals whose businesses are challenging under even the most ideal conditions. Residential development and construction are made all the more complex by fierce competition for resources, a shortage of qualified labor, an erratic economy, and incessant market demands.

Developers and contractors dislike construction defect litigation as much as homeowners do, and most will make genuine efforts to resolve problems quickly and efficiently—if you let them.

Whether a defect is severe enough to warrant legal action depends on which side of the contract you signed. For the homeowner, understandably, all defects are serious; but, from a practical standpoint, most probably aren’t serious enough to require a lawsuit. Constructive negotiations with the developer, builder, or contractor nearly always lead to resolution. In fact, most construction defects are resolved without legal action—and for good reason. Litigation is extremely costly. Associations and homeowners must compare the cost to repair construction defects against the cost to argue about them.

Although we are attorneys, we’re not encouraging readers to rush to the courthouse at the first sign of damage. On the contrary, we encourage you to pursue friendly resolution with your developer or contractor, let them make repairs, and consider all non-legal options seriously before you file suit. However, for the unfortunate minority who find themselves faced with litigation, we intend this book to provide enough guidance to make the process as productive and positive as possible—not only for homeowners and associations, but also for developers, contractors, and others involved in the process.

For common-interest developments, also known as community associations, an already complex process can be aggravated by added layers of governance and operation. Thus, the association’s manager and its board become key players in the litigation process. It’s a complicated, time-consuming process they generally know little about. For self-managed associations, board members also serve as managers who not only aren’t experts on litigation, but also may not have a firm grasp on governing and operating their associations.

In some cases, association boards consist of developer directors (because as owner of the unsold homes, the developer has a vested interest in governing the association) and homeowner directors. These are associations in transition. The balance of governance gradually shifts toward homeowner directors as properties sell, but resolving construction defects during the transition stage presents unique challenges because developers and homeowners are likely to have different interests. Addressing the specifics of the transition process is beyond the scope of this book; however, the process for resolving defect claims described here applies to those in transition and should prove very useful.”

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CAI Public Policy – Protection of Association Claims in Construction Defect Legislation

Public Policy Summary

Builders that construct homes and common elements for purchase by consumers must be required to deliver a product that is free from material defects and exhibits good workmanship. Builders rely on design professionals and subcontractors (hereafter referred to as “Construction Affiliates”) to deliver homes and common elements that meet those standards.

CAI recognizes the importance that homeowners have reasonable expectations of the quality of construction of their homes. CAI supports legislation and regulations concerning construction defects that adequately balance the rights and responsibilities of community associations, their governing boards, homeowners, builders and construction affiliates. The full policy statement may be found here or at www.caionline.org/publicpolicies/.

Community Associations Institute (CAI) | Construction Deficiency Consumer Protection Survey Report

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The post CONSTRUCTION DEFECTS SURVEY RESULTS SHOW THAT WARRANTY LAWS SHOULD BE STRENGTHENED FOR HOMEOWNERS & CONDOMINIUM ASSOCIATIONS appeared first on COWIE LAW GROUP - Maryland Condominium Construction Defect Lawyers.

Below is an Article concerning needed warranty reform legislation for condominiums. The legislation addresses unfair practices used by developers and builders to avoid their warranty responsibility for concealed construction defects in newly constructed condominiums they sell to the public. Recent efforts to get this legislation passed by the Maryland General Assembly have been unsuccessful, in part, due to a lack of vocal public involvement and attention to the issue.

This article explains how condominium owners and other members of the public can get involved in the effort to pass this important legislation that protects members of the public who purchase new condominiums with latent building code violations and other construction defects.

MARYLAND LEGISLATIVE UPDATE

Call to Action

 PROPOSED CONDOMINIUM WARRANTY REFORM LEGISLATION

What you can do to help make it law

By Nicholas D. Cowie

This article pertains to needed condominium construction defect warranty reform legislation that the Maryland Legislature has been reluctant to enact into law. Below is an explanation of the legislation and a list of practical steps CAI members can take to support the legislation during the upcoming 2017 legislative session.

 Background

 The warranty reform legislation was unsuccessfully introduced during the 2016 legislative session as “Senate Bill 250” (“SB 250”) and “House Bill 1170” (“HB 1170”). Both bills were identical, one being filed in the Senate and the other in the House of Delegates.

What the Legislation is Designed to Achieve

The condominium warranty reform legislation (SB 250 and HB 1170) was intended to address three unfair practices used by condominium developers to prevent condominium associations from being able to make warranty claims for construction defects in newly constructed condominiums:

1.  Developers Creating Associations Without Legal Authority to Enforce Warranty Claims.

SB 250 and HB 1170 would have closed a loophole under which developers attempt to create condominium associations that lack the legal power to enforce common element warranty claims.

2.  Developers Shortening Time Periods for Bringing Warranty Defect Claims.

SB 250 and HB 1170 would have prohibited (with exceptions) developer attempts to shorten the normal statutory time period for making condominium warranty defect claims.

3.  Developers Creating Governing Documents That Require Condominium Associations to Obtain Permission from Non-Unit Owners Before Making Warranty Claims.

SB 250 and HB 1170 would have prohibited developers from unilaterally creating governing documents that require a condominium association to obtain permission from third parties in order to make a warranty claim. For example, many developer-created governing documents today actually require an association to obtain written permission from each of the unit owners and their mortgage companies before making a common element warranty defect claim. 

These unfair practices are, in essence, “self-interested director” actions because these offending provisions, designed to prevent condominium associations from making warranty claims, are adopted on behalf of the association while its board of directors is under developer control and made up of developer employees who are supposed to be acting in the best interest of the association. Throwing up road blocks to prevent a condominium from being able to make a common element warranty claims is not in the best interest of a condominium association and its members.

More importantly, the legislation would resolve an untenable “catch 22” situation where a condominium association that fails to make a timely warranty claim because of these unfair practices can then be sued by its members for not making a timely warranty claim. Greenstein v. Council of Unit Owners of Avalon Court Six Condominium, 201 Md. App. 186, 206 (2011) (holding that a condominium association could be sued by its unit owner members for failing to bring a timely warranty claim, and it was no defense that the board of directors could not obtain approval from all unit owners before initiating the claim).

Passage of this warranty reform legislation is important because when condominium associations are prevented from making common element warranty claims, the cost of the developer’s failure to build the condominium in accordance with applicable laws unfairly falls on the backs of first-time homeowners, families, and senior citizens who thought they were purchasing new, defect-free common elements.

Why the Warranty Reform Legislation Was Not Enacted Into Law

During the 2016 legislative session, SB 250 and HB 1170 “never got out of committee” to be voted on by the full Senate and House of Delegates. This occurred because the legislative committees tasked with making a recommendation each voted to give the legislation an unfavorable report. There was simply not enough public support from the condominium community to overcome personal objections of certain legislative committee members and developer lobbying.

What You Can Do To Support the Warranty Reform Legislation Effort

Below are steps that Community Association Institute members can take to support warranty reform legislation during the upcoming 2017 legislative session.

• Provide Oral or Written Testimony at Legislative Committee Hearings.

House and Senate committees hold hearings on all proposed bills at which the public can provide written and/or oral testimony. While written testimony is important, live testimony is deemed to be of greater value.

• Contact Legislative Committee Members.

There are two legislative committees tasked with making a favorable or unfavorable recommendation as to the condominium warranty reform legislation:

(i) The Senate Judicial Proceedings Committee in the Senate; and

(ii) The House of Delegates Real Property Subcommittee.

As a practical matter, it is these two committees that decide whether the legislation will proceed to the full legislature for possible enactment into law. Therefore, it is crucial that each of the legislators on these committees hear from members of the public, especially their local constituents, urging support for the legislation.

• Join Our Mailing List For Supporters of Warranty Reform Legislation

Request to be added to our mailing list so that you can be kept informed about the legislation during the 2017 legislative session. We will keep you informed on the progress of the legislation and opportunities to provide written and/or oral testimony, as well as provide copies of the legislation, sample letters of support, and contact information to reach out to the committee members.

If you wish to be added to the mailing list please contact us by email at rsmith@cowielawgroup.com or call us at 410-327-3800 and ask for Rachel Smith.

Note about Author: Nicholas D. Cowie is a partner in the law firm of Cowie Law Group, P.C. and is the author of the condominium warranty reform legislation discussed in the article above. Mr. Cowie has led the effort to address these and other unfair practices that adversely affect Maryland condominium unit owners.

 Mr. Cowie also drafted and led the effort to pass earlier reform legislation that addressed practices used by developers and builders to prevent Condominium Associations and HOA (Homeowners Associations) and their members from being able to bring warranty claims when they sold new condominiums with concealed construction defects. Click to see Article on House Bill 597. This new proposed legislation is needed to addresses new unfair practices being used by developers and builders that harm purchasers of newly constructed communities in Maryland.

The post Warranty Reform Legislation for Condominiums – Unfair Practices used by Developers and Builders to avoid Warranty Responsibility for Construction Defects in Newly Constructed Condominiums appeared first on COWIE LAW GROUP - Maryland Condominium Construction Defect Lawyers.

 MARYLAND LAWYERS WHO RESOLVE CONSTRUCTION DEFECT CLAIMS FOR CONDOMINIUM AND HOMEOWNERS ASSOCIATIONS

QUALIFICATIONS, EXPERIENCE & RECOMENDATIONS

The attorneys at Cowie Law Group have a background in both construction law and community association law. We are experienced construction defect trial attorneys and we know the rights of Condominium and Homeowner Associations when it comes to warranties and other legal claims. In fact, Nicholas Cowie is the author of the 2010 legislation that extends warranty rights for Condominium and Homeowner Associations. See  “New Laws Extending Construction Defect Warranty Rights for Condominiums” and “New ConstructionDefect Warranty Laws.”

The vast majority of our community association construction defect cases are resolved through amicable developer negotiations. We work with engineers and architects to negotiated developer repairs and d/or monetary reimbursement for repairs of defects and damages caused thereby. Our law firms ability to resolve most condominium and HOA construction disputes without the need for litigation, may be in part due to the fact that our construction defect lawyers have a proven track record that is known to developers, builders and their attorneys. For example Nicholas Cowie is one of the trail attorneys who obtained a 6.6 million dollar verdict for a condominium in the Circuit Court for Montgomery County, Maryland. See “Jury Awards Condominium 6.6 Million Dollars plus $500,000 in attorneys fee for construction defects” and “Maryland’s Highest Court Affirms 6.6 Million Dollar Construction Defect Jury Verdict.” More recently, the attorneys at Cowie Law Group obtained a 5.6 Million Dollar Jury award for a condominium in the Circuit Court for Anne Arundel County, Maryland. See “Jury Awards 5.6 Million Dollars to Condominium for Construction Defect Repairs” and “Jury Awards Denton Condo $5.6 Million for Shoddy Construction.”

Representing a Community Associations in a construction defect disputes with developer is a very complex area of law. It is important to seek consultation and advice from an attorney who is not merely a community association lawyer, but also an experienced construction defect attorney that represents community associations. Having qualified and experienced legal counsel often increases the likelihood of a favorable outcome. Community associations should seek a free consultation and request references from any prospective legal counsel. Below are some recent references Cowie Law Group received from clients after we resolved their construction defect diputes:

 Condominium Conversion In Silver Spring, Maryland:

“Thank you to you and your team for the outstanding representation you provided to the [XXXXXXXX] Condominium Association.

It has been outstanding to work with you….”

Condominium in Berlin, Maryland: 

“The check was received today and it is in my possession but we will not cash it until the Board is in agreement with the project completion.

….the Association has achieved a number of improvements that has made these efforts worthwhile and put all of our units back within code compliance:

[LIST OF REPAIRED CONSTRUCTION DEFECTS OMMITTED]

On behalf of the Board and Association, I would like to thank both of you for your help during this process. We have achieved over $2 million in necessary warranty repairs…$2 million that would have ultimately come from our reserves and assessments as these deficiencies manifested themselves.

So please accept our thanks ….

…………… Condominium Association”

Condominium in BelAir, Maryland:

“We wish to thank you …. and your staff for the work you did in bringing our case to its successful conclusion.  There were many times … that we nearly despaired over our chances, especially when [DEFENDANT NAME OMITTED] continued to use delay tactics in the hope that our side would simply give up.  You appreciated our frustration, said the right words and kept us on course.  It was well worth seeing things through.

It was obvious that you had the know-how and experience to handle our case and [EXPERT NAME OMITTED] was clearly the right person for the job he did.  Now, we face the task of hiring the right people to fix our buildings.  Some owners have joined us in making these decisions and we now have the money, thanks to you, to do the job.

On behalf of [NAME OF CLIENT BOARD MEMBERS OMITTED], we again send our thanks and best regards….”

Please contact Cowie Law Group, P.C. if you are seeking a Maryland construction lawyer That represents condominium associations and HOAs. We will gladly provide references.

The post RESOLVING CONSTRUCTION DEFECT DISPUTES FOR CONDOMINIUM & HOMEOWNERS ASSOCIATIONS IN MARYLAND – CLIENT REVIEWS appeared first on COWIE LAW GROUP - Maryland Condominium Construction Defect Lawyers.