A majority of construction deficiencies occur in new condominium developments compared to townhomes and single-family homes, according to a new study by Community Associations Institute (CAI), a nonprofit dedicated to community association education, governance, and management.
The report examines the scale of construction deficiencies, litigation surrounding those claims, and the national impact on homeowners and community associations.
According to the report, 81 percent of respondents claim poor workmanship is the most common type of deficiency, resulting in plumbing leaks, electrical or mechanical problems, and cracks in foundation walls. In addition, the research found that 35 percent reported construction deficiencies negatively impact a homeowner’s property value and the ability to re-sell the home.
For years, community associations have been under attack in state legislatures and municipalities by legislation and ordinances aimed at stripping associations’ ability to seek relief from damages due to legitimate deficiencies found in the construction of homes, units, or common areas.
“There exists identifiable trends in the legislation,” says Dawn M. Bauman, CAI senior vice president, Government & Public Affairs. “Most of what we see in the declaration or preamble of the bills cite the need for more affordable housing.” Proponents of these bills argue that frivolous lawsuits filed by associations and the costs associated with them make building affordable condominiums too risky. The bills create additional obstacles associations must face before filing a lawsuit or limiting the definition of a construction defect to those only causing physical, bodily harm.
The study found the vast majority of the claims (44%) were resolved outside of the courthouse, with most resolved with direct negotiation.
“The process for associations to recover damages from a building deficiency is far more complex than filing a lawsuit,” Bauman adds. “Associations must determine whether the cost and time to pursue claims outweigh the repair costs.” The report found it took more than a year for nearly two-thirds of the communities to recover damages, and only one-third reported the damages paid were enough to cover the repair.