Skip Ribbon Commands
Skip to main content

Warranties for New Construction

​​​CAI advocates for legislation and regulations strengthening protections for purchasers of new construction with laws that adequately balance the rights and responsibilities of community associations, thei​​r governing boards, homeowners, builders, and construction affiliates.​

​​​​Findings on Construction Deficiencies and the Effects on Homeowners 

Click to download this image.

​CAI released findings on construction deficiencies and its impact on consumer homeowners

For years associations have been under attack in state legislatures and municipalities by legislation and ordinances aimed at stripping associations’ ability to seek relief from damages due to legitimate deficiencies found in the construction of homes, units or common areas. 

“There exist identifiable trends in the legislation,” says Bauman. “Most of what we see in the declaration or preamble of the bills cite the need for more affordable housing.” Proponents of these bills argue that frivolous lawsuits filed by associations and the costs associated with them makes building affordable condominiums too risky. The bills add additional obstacles associations must fence before filing a lawsuit or limit the definition of a construction defect to those only causing physical, bodily harm. 

Ross Feinberg, Esq., and Ron Perl, Esq. describe the complexities of construction deficiencies well in the introduction to their book, Construction Defect Litigation, carried by Community Associations Institute.  “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.”

“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.”

The 2017 study found the vast majority of the claims were resolved outside of the courthouse. Most being resolved with direct negotiation.

“The process for associations to recover damages from a building deficiency is far more complex than the filing of a lawsuit,” Bauman adds. “Associations must determine whether the cost and time to pursue claims outweighs the costs.” The report found it took more than a year for nearly two-thirds of the communities to recover damages and only one-third reported the damages were enough to cover the repair.

“Market forces are dictating whether condominiums are being built,” Bauman further added, “not warranties. Laws are present in the states that make association’s weigh the breadth of filing a warranty claim before doing so. Reducing consumer protections by watering down the statutory warranties will not reduce purchase prices, but will increase the post-sale cost of home ownership.” 

© 2019-2020 Community Associations Institute