CONDO MANAGEMENT
Construction Defect Claims: Management Company Time Involvement
By  Thomas E. Miller, Esq.

California. -- Professional property managers face numerous and time sensitive tasks when their associations are faced with construction defect claims.  The following outline will provide a tangible understanding of the time involvement of management company executives and staff.  Although management strives to assist with each of these activities, most fall outside the scope of the standard contract with an association and are subject to additional costs to the association.  Contracts should be modified to address these added costs due to the increasing number of claims being filed every year.

Initial Recognition of Construction Defects:

• Identification of defects vs. maintenance

• Repair invoices and coordination

• Maintenance/repair requests

• Correspondence from homeowners regarding repairs

• Meetings with affected homeowners

• Phone calls/memos to board members regarding trends

• Additional site inspections

• Pull archived documents for attorneys

• Pull and permit inspection of homeowners association documents
  1.  Minutes
  2.  Correspondence with board of directors, etc. per list of documents.

• Permit and schedule preliminary site inspection by construction consultants

• Attend extra board of directors meetings regarding initial and final presentation of results

• Coordinate disclosures to homeowners with counsel.

Selection of Defect Counsel:

• Recommendations to board

• Interviews

• Selection

• Contract negotiations

• Notification to homeowners

Pre-litigation requirements by legislation:

• Follow timetable and guide board of directors

•  Meetings with developer representatives

• Notification to homeowners regarding options

• Meetings with homeowners regarding options and builders offer, if any

Litigation:

• Increased time at monthly board meetings and extra meetings

• Special homeowners association meeting to discuss surveys and pre-litigation matter

• Educating new board members and officers

• Telephone contact with board

• Pre-deposition and deposition

• Expert invoices and reconciliation

• Obtaining and investigation of outside financing for litigation

• Proxy solicitation for loans

• Attend mediations and mandatory settlement conferences

• Pre-trial preparation

• Trial attendance

• Calls from prospective buyers, sellers, real estate agents, special escrows.

• Additional accounting time to review invoices, pay vendors, negotiate terms and work with consultants

• Make mandatory loan payments and manage cash flow.

Reconstruction:

• Work with/interview one to three qualified reconstruction experts

• Prioritize repairs for settlement purposes

• Consider and discuss settlement offers (net to HOAs)

• Set up investment of settlement monies; interview investment advisors and selection

These duties are not anticipated as part of regular management contracts and vary from association to association.  Therefore, all manager involvement cannot be predictably quantified in advance.  Association boards should be prepared to look towards their management team as an integral part of the litigation process and an important service provider to their community.  Associations should be prepared to pay for these additional services.

Depending on which law firm the association chooses to guide them through construction defect claims, the time noted above can increase if the firm does not have uniquely qualified staff members, such as construction consultants or client services and accounting departments, to help alleviate additional requirements often left to the manager.