(Recap) A familiar scene unfolds at many association meetings. Disgruntled unit owners come to the meeting, complaining of leaks, roof problems, mold and myriad of other issues. Some owners demand that the building and the leaks be completely repaired immediately. Others say that the association cannot afford to do significant repairs, and that special assessments will bankrupt them. Others say that the developer should be held responsible to fix these problems. The developer no longer returns the association’s phone calls, emails or faxes, and despite the Board’s invitation, has chosen not to attend a meeting in months. Board members are rightfully frustrated and confused about how to best fulfill their duties to the Association and the owners. Advice pours in from all sides. Seemingly conflicting information is received by different members of the Board. The Board is bombarded with questions and “facts” from owners about how to proceed. Below are some helpful responses to some of the most common of those “facts”:
“The Developer is bankrupt. We can’t sue it!”
Incorrect. Typically in construction defect/transition matters, the money to pay the association’s damages comes from the Developer’s and subcontractor’s insurance carriers. In the vast majority of developments, the Developer is an LLC created just for that particular project. It usually has no assets or employees. However, it does generally have insurance policies in place during and after construction is completed. These insurance policies are not a guarantee of proper workmanship, but if the errors, for example, allow water intrusion and that water causes damage to other parts of the building, then the insurance policies may cover the damage and provide a source of recovery.