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Need to Know: What Board Members Should Know About Construction Defect

02/01/2023 2:34 PM | Anonymous member (Administrator)

By Sean Davis, DHA Construction Management

Buying a new home is a milestone experience full of choices for your colors, flooring, and finishes. For months, you stop by and check on the progress.  The anticipation builds until, finally, you close on the home and move in. As the months go by, you notice little flaws here and there but nothing that raises those little red flags. A couple of years go by, and you start seeing more prominent flaws in your home and neighborhood. The builder is long gone and so is the warranty. You begin to fear the problems are systemic and will only continue to worsen.  

I know what it feels like; I’ve been through this both as a homeowner and board member. It can be very emotional; after all, it's your home. It's where you create so many incredible memories. Buying a lemon should not be one of them.

Is there anything the HOA board of directors can do? The answer is yes. The most likely option is to consult a construction defect attorney, but when should you call one? Here are a few questions to help guide you. 

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  1. Does the community still look relatively new? A five-year-old community should not look like its twenty.
  2. Is there a significant amount of concrete around the community that is heaving or has cracks wider than a pencil? Concrete stairs should not look like this after three years.
  3. Is the asphalt wavy, or do you have several areas that collect water?
  4. Are there cracks in the drywall at the corners of the windows?
  5. Are there signs of water on the interior walls or whitish staining on the exterior?

If you answered yes to two or three of these, you should call an attorney and get their opinion.

Once you start down the path of a construction defect claim, there are a couple of things to expect. First, it is a slow process and your board must be committed to staying the course. The board and community manager must keep excellent records to ensure continuity as board members and managers change over time.  We had three different community managers and four different board members by the time the entire litigation process, preconstruction, and construction had concluded.  

Once an attorney accepts your case, they will gather evidence and conduct destructive or intrusive testing.  A team of construction experts will most likely remove relatively small sections of the buildings in the community. Then a forensic engineer will inspect the openings and other observable defects. They will note their observations, take pictures, and then the construction team will return to repair the test sections. The legal teams will generate and exchange many reports to prepare for a trial or negotiated settlement. This process can take several months to complete.

Once the legal process has run its course and nears completion, the board will be given copies of all the files from the claim, including pictures, reports, engineered drawings, and emails. In our case, there were more than 140 GB of files. To give you a sense of the enormity of information, it's about 15,000 volumes of the Encyclopedia Brittanica!  

You will also receive an essential document called the Rough Order of Magnitude, also known as the ROM. It is the detailed list of defects, associated measurements, and costs for the entire claim. There are a couple of critical points to keep in mind. The list of defects may be lengthy, and some will be more serious than others. It would be beneficial to ask your attorney to provide a matrix that details what defects were noted at each home and for the forensic engineer to give a qualitative rating based on their observations. It will help the upcoming preconstruction team prioritize the defects.

Finally, it is possible that the financial outcome will not be enough to cover the repair cost for every defect.  The board may need to prioritize the most severe defects to be addressed first. Ask to meet with the legal team and their forensic engineer to review the ROM and the settlement together. They will have the most insight into the depth and breadth of defects and help build the foundation moving forward in the reconstruction phase.

Sean Davis, PMP, MBA, is the President of DHA Construction Management. He has served on his HOA Board of Directors for more than seven years and led their effort for a successful construction defect claim. His company provides advice and construction consultation to Colorado community associations. With more than thirty years of construction experience, his mission is to help HOAs by eliminating construction risk, increasing the quality of construction, and maximizing the construction budget for them and the community managers who care for them. 

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