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May/June 2014


Got Defects?​

Litigation should be a last resort.​​​​​

By Ronald Perl, Esq.

​​​©2014​ Community Associations Institute​

DEVELOPERS AND CONTRACTORS are professionals who do business under less-than-optimal conditions. The simple reality of the construction industry is that fierce competition for resources, a shortage of qualified labor, an erratic economy, and incessant market demands make providing quality housing a constant challenge. Developers and contractors dislike construction defect litigation far more than homeowners do, and the good ones will make concerted 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, many probably aren't serious enough to require a lawsuit. Quite often, friendly negotiations with the builder in which both parties are committed to a good-faith resolution get the problem fixed. In fact, while there are certainly some developers who will not negotiate in good faith, many construction defects claims are resolved without filing legal action—and for good reason: Litigation is very costly and burdensome for all parties.

For community associations, an already complex process has an added layer of governance and operations with the association manager and board becoming key players in the litigation process. It's a process they must engage in generally with little or no understanding of how it works. For self-managed associations, the challenges can be significant.

And then there are association boards that are made up partly of developer directors (because, as owner of the unsold homes, the developer has a vested interest in governing the association) and the owner directors—who may have very different interests. These are associations in transition, and resolving construction defects at this stage presents unique challenges, but they can be addressed without litigation.

Construction defect litigation is complex, time consuming, and staggeringly expensive. Associations and homeowners must compare the cost to repair construction defects against the cost to argue about them. Then there is the process of collection judgments that may be obtained. Rather than rush to the courthouse at the first sign of damage, attempt to pursue friendly resolution with the developer or contractor. Let them make repairs and consider all non-legal options seriously before you file suit. The net benefit to the association may be greater than litigation.

Ronald Perl is a partner in the New Jersey law firm Hill Wallack LLP, a past CAI president, chair of CAI's Federal Legislative Action Committee and a fellow in CAI's College of Community Association Lawyers.