Paula Chin in Board Operations on December 28, 2018
One of the most common challenges for fledgling condo boards in newly constructed buildings is dealing with the structure’s physical flaws, from cracks in the foundation to leaky windows and roofs, and worse. When seeking relief from the sponsor, time is of the essence because courts have held that the statute of limitations for a breach-of-contract claim in construction-defect cases expires six years after the sale of the first unit. With developers typically retaining control of new buildings for five years after the initial closing, the window of opportunity is limited – and destined to slam shut.
“The engineering report should be sent right away to the board’s attorney so you can figure out your next steps,” says attorney Lisa Radetsky, a partner at Phillips Nizer. “That said, boards have to maintain perspective and avoid taking an adversarial approach right off the bat. If you speak with your sponsor directly – and calmly – they’re more likely to fix the problems.”
It helps to keep in mind that defects are not always the result of egregious cost-cutting or shoddy workmanship. Some building materials now come from as far away as Poland and China, architects note, and some contractors are installing them for the first time. A single defect can resound through an entire building.
And if a developer isn’t willing to make repairs? “You can file a lawsuit and hope the sponsor will settle, which they often do,” says attorney Julie Schechter, a partner at Montgomery McCracken Walker & Rhoads. “But beyond that, litigation can be costly and can take years. Also, many sponsors create LLCs with limited assets, which also diminish over time, making it less likely you’ll collect.”
There’s another downside to prolonged litigation: it can tarnish a building’s reputation and reduce its reserves. “When a case drags out, it becomes a matter of public record, which can scare off buyers and potential lenders,” says attorney Robert Braverman, principal and managing partner at Braverman Greenspun. “And if there are life-safety issues, like inadequate fire-stopping, you can’t wait for an uncertain outcome in court to make repairs. In the buildings I’ve represented with construction defects, we’ve sued only 20 or 30 percent of the time. Sometimes you have to bite the bullet and make assessments and move forward.”
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