If your association is contemplating filing a transition and/or construction defect related lawsuit, or is currently involved in a lawsuit with a contractor that worked on, and/or repaired common elements or property, it is logical to first approach corporate counsel regarding these claims. However, during that meeting, the Board and Management should ask serious questions of counsel in order to ensure that counsel is best equipped to handle this particular construction-related dispute. There are 5 important questions to ask counsel, to ensure that its rights protected , counsel is up to the challenge and that any fee arrangement is best and feasible.
Question 1: Have you represented an association in a lawsuit involving construction defects and/or “transition” before, and if so, to what extent?
Many law firms claim to be “community association law firms”. Most are capable enough of providing general advice, overseeing elections and collecting assessments from delinquent owners. However, litigation, particularly construction defect and transition-related litigation, is a practice area unto itself (the American Bar Association in fact has a separate and distinct construction litigation section). These types of disputes or cases often involve many defendants, extensive document review, and lengthy mediations and trials. Most community association firms are not set up to handle such cases properly. Moreover, these matters often require an analysis of complicated statute of limitations and repose issues, as well as detailed review of insurance policies and case law involving insurance policy language. If existing counsel, or others in his/her firm, do not have this particular experience and knowledge, a “second opinion” may be best.
Most importantly, construction defect cases can generate legal and expert fees that quickly spiral out of control, resulting in disgruntled board members, unhappy owners and opportunistic defendants who can sense when they are up against an inexperienced attorney. Defendants can tell when the association has lost its will to fight. Any good defense lawyer (and/or the relevant insurance carrier or contractor/sponsor) will capitalize on that, attempting to extricate their client for pennies on the dollar. Instead of recovering enough money to effectuate the repairs, some associations only recover enough money to pay their legal bills and expert costs. A result like this can damage an association for years. That is why you need to ask any attorney, whether they have prosecuted these types of cases before, and what their success rate has been. They should even be able to give you a list of references of clients whom they have represented through the transition process and for whom they obtained favorable results. If they can’t do that, then the Board should seek out other options.
In the next article we’ll discuss Question Two: Do you work on a contingency basis?