7 Significant Things You Need to Know About Construction Defects

Q: WHAT CONSTITUTES A CONSTRUCTION DEFECT FOR WHICH A BUILDER MAY BE LEGALLY RESPONSIBLE?

A: The answer to this question is multi-faceted and broad in scope, ranging from complex structural issues which threaten the integrity of buildings, to aesthetic issues such as improperly painted and deteriorating wood trim around windows. However, typically, courts have recognized the following general defect categories:

  1. Landslide/geotechnical problems - There exists a great deal of expansive soil in Southern California and Arizona. If these lots are not properly compacted and prepared for drainage, problems inevitably result including vertical and horizontal settlement or movement, slope failures, flooding, landslides and the like. These conditions lead to cracked foundation slabs and damage to the building, in the worst instances render a structure uninhabitable.
  2. Design deficiencies of buildings and/or common areas - Often design professionals such as architects and civil engineers design buildings and systems, which, as a practical matter, simply do not work. The focus may be on aesthetics or cost, and the result, not infrequently, manifests as a defect. Problems involve: roof systems, which, due to their complexity are prone to leak; improper choice of building materials resulting in water intrusion or other problems; poor drainage design and inadequate structural sections which result in cracks and deterioration of pavement, etc.
  3. Substandard/poor workmanship - Poor workmanship often manifests as water infiltration through some portion of the building envelope; electrical problems; dry rotting of wood or other building materials; termite or other pest infestations; plumbing back-ups and leaks; lack of sound insulation or fire-resistive construction between units, etc.
  4. Deficiencies with respect to building materials - It is not uncommon to find windows which leak or otherwise fail to perform adequately, even when properly installed. Other common manufacturing problems with building materials include deteriorating pipes, waterproofing membranes, and asphalt roofing shingles.

The courts use various standards to determine culpability for problems of the type noted above: whether the particular condition violates applicable building codes; whether the condition is the result of construction which in method or practice falls below the standards of care in the industry; whether the condition resulted from a deviation from the approved plans and specifications; or whether the condition is below the reasonable expectations of the buyer/homeowner. Historically, the problems described herein, as well as many others, involve a breach of one or more of these court-applied standards.

Q: ARE THERE APPLICABLE FILING DEADLINES? - I.E., HOW LONG DO I HAVE TO BRING A LAWSUIT?

A: California - There are three statutes of limitation which apply to construction defect cases in California. The first such statute (C.C.P. §337.15) requires the homeowners association or homeowner to file suit no more than ten years after "substantial completion" of the home. However, within this ten year statute there are a three (C.C.P. §338) and a four year statute (C.C.P. §337.1). The three year statute mandates that a Plaintiff homeowner association must file within three years from the time first discovered, or reasonably should have discovered, a particular defective condition. The four year statute applies to defects which are "patent" (obvious, readily observable) and requires that suit be filed no more than four years after "substantial completion" of the home. However, it is important to know that neither the three nor the four year statute may act to extend the ten year statute. Thus, if one were to discover a particular defect nine years after "substantial completion" of a home, he or she would only have one more year (so as to be within the ten year statute), within which to file suit.

Arizona - A.R.S. 12-552 requires homeowners associations or homeowners to file suit no more than eight years from substantial completion of the home. A.R.S. 12-552(B) extends the eight year statute up to one year (or nine years after substantial completion) if injury occurred or a latent defect is discovered during the eighth year after substantial completion. Within this eight year period there is a two and six year statute (A.R.S. 12-542 and A.R.S. 12-548).The two year statute is for negligence and the six year statute is for breach of the implied warranty of habitability. The time frames for both claims start running from the time the defect was first discovered. Both claims are important in a construction defect lawsuit.

Q: HOW CAN I OBTAIN A MONETARY RECOVERY AGAINST A BUILDER WHO IS BANKRUPT OR OUT OF BUSINESS?

A: Over the past several years many builders/developers have declared bankruptcy or have otherwise gone out of business. Fortunately for homeowners, even if a builder is bankrupt or out of business, its insurance carriers remain obligated to defend the developer against construction defect claims and causes of action, and to indemnify the builder for any such covered losses. Thus, it is critical in all instances to determine at the outset and before substantial litigation costs are incurred, the exact insurance posture of the builder. This will enable homeowners to balance litigation costs against the pool of potential recoverable monies and thereby make an informed decision regarding the economic propriety of pursuing litigation.

Q: WHERE DOES AN ASSOCIATION OR HOMEOWNER OBTAIN THE FUNDS NECESSARY TO PURSUE DEFECT LITIGATION?

A: Our firm typically advances 100% of the costs and expert fees associated with bringing a claim.

Q: WILL A LAWSUIT PREVENT ME FROM SELLING OR REFINANCING MY HOME?

A: Certain lenders and mortgage companies have reservations about lending to properties in litigation. However, as these types of lawsuits have grown to be quite common, more and more lenders and mortgage companies have changed their policy in that regard. There are presently many such companies which specialize in dealing with properties in litigation. Further, the disclosure laws in most states typically require a homeowner to disclose to a potential buyer the fact that the home is involved in litigation, and beyond that, may require disclosure of known defects even if a lawsuit is not filed.

Q: BY FILING A DEFECT LAWSUIT, WHAT TYPE OF DAMAGES CAN I RECOVER?

A: The typical measure of damages obtained in a construction defect suit regarding residential property is the "cost of repair." Thus, a homeowners association may obtain the costs of repairing the defective common areas and any damages that result from the common area defects. Additionally, expert fees and costs for the forensic investigation are recoverable. An association is also entitled to temporary repair costs it may have expended in its attempts to remedy or mitigate the defects. Finally, the costs of relocation are recoverable . Temporary relocation often becomes necessary depending on the extent of the repair work. In rare instances, other types of damages such as punitive damages may be recoverable. Such an instance may be where a developer defendant acted fraudulently by failing to disclose or concealing defects it knew existed at the time of sale.

Q: SHOULD I PERMIT THE BUILDER/DEVELOPER TO MAKE REPAIRS IF THEY ARE WILLING TO DO SO?

A: Nobody's perfect, developers included. It is not uncommon for reputable developers to offer to repair certain construction deficiencies. While this is generally a positive circumstance, a certain degree of caution is warranted. The reality is that you are thereby expecting a company which performed the work inadequately the first time (and perhaps on numerous subsequent occasions) to suddenly do the work properly. Thus, even where the developer has agreed to make repairs, it may still be wise to retain a competent lawyer and/or expert consultant to evaluate and monitor the developer's proposed investigation and repair.