Developers facing increase in lawsuits Condo, town house builders hard hit

April 11, 1993|By James M. Woodard | James M. Woodard,Copley News Service

Developing or designing a condominium or town house project can be dangerous to a professional's financial health.

The risk of lawsuits targeted at the project developer or architect has been steadily growing in recent years. We live in a litigation-prone era, and many opportunities to litigate often surface after the construction of a multiunit housing project.

In fact, about one-third of all recently completed condo or town house developments become involved in a lawsuit, said attorney Kelton Lee Gibson, who specializes in representing homeowners associations related to their legal concerns.

"Unfortunately, more and more homeowners associations are finding that the common areas and individual units of their projects have been saddled with construction problems which are not attributable to the lack of ordinary maintenance," he said. The problems can be caused by poor construction, poor design or poor choice or defective materials."

Most of the problems being litigated involve water leaks in roofs, walls, doors and windows, Mr. Gibson said. Defective drainage and grading is also a frequent problem, as are fences and outside walls.

"About 90 percent of problems involve water leaks or moisture," said Mr. Gibson, a partner in the California law firm of Myers, Widders & Gibson.

One cause for construction problems is traced to an overzealous effort by developers to control costs. Often, the lowest-bidding contractor will get the job even though his qualifications are minimal. And the developer will not pay for the architect's supervision of building to ensure the contractors are doing the job right.

This is clearly a case of false economy, says architect Howard Leach. The developer is liable for 10 years after the completion of his project. And he can be liable for damages even if the project was inspected and approved by a local building inspector, Mr. Gibson said.

The litigation trend is so serious that many builders, developers and architects won't participate in new condo/town house projects.

A key problem is the rising cost of liability insurance, says Mr. Leach. As in the medical field, the increasing number of lawsuits has pushed up the cost of professional liability insurance dramatically.

"Most architects carry errors and omissions insurance to cover their liability risks," Mr. Leach said. "But recently, the cost of that coverage has become so high many architects feel they can't afford it. They drop the insurance and stay away from high-risk projects like condo or town house developments."

This trend reduces the number of skilled designers available for this specialized area of development, resulting in the increasing use of "fringe designers" for new projects, Mr. Leach pointed out. This scenario often leads to poor designing and subsequent problems. And this, in turn, results in more problems to be litigated. It's a dangerous cycle.

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