Berding | Weil Community Association ALERT Newsletter
Legal News and Comments for Community Association Boards and Managers Issue #40 • March 2010
Minefield!
Traps for the Unwary in recent CC&Rs
This is the first of a two-part series on how developers of new projects build firewalls into the governing documents that they draft for new associations to immunize themselves from liability. In this week's edition, Tyler Berding explores the new, shorter, limitations on actions contained in Title 7 of the California Civil Code. He discusses how developers have strategically loaded the bases in their favor by accelerating the statutes of limitation trigger for construction defect cases. In next week's edition, Matt Malone discusses, yet another builder firewall, those CC&R provisions that make it difficult, if not sometimes impossible, for association board members to bring claims for faulty construction.
What You Don't Know
When do Statutes of Limitation really begin to run on Construction Defect Claims?
By Tyler P. Berding, Esq.
INTRODUCTORY NOTE: Statutes of Limitation are intended to protect defendants from stale claims. They are also traps for the unwary claimant. If the time period expires before an appropriate claim is made, legal rights can be permanently lost. Here's a story about an artful attempt by a developer to deprive a new community association of some valuable time that it needs to evaluate the condition of the project before the limitation periods run out.
You just moved into a new condominium project. You bought one of the first units sold in the second phase. Sales in that phase are just about done and then the project will be sold out. The project is just a little over two years old, so you are satisfied that any warranty items will get fixed. How hard could it be with the developer still on the board and with a few units left to sell? Everything seems to be going as expected.
But all is not perfect. The iron fences around the project are corroding badly. And the common area landscaping has a lot of dead spots where the irrigation system apparently doesn't reach. There are places where rain and irrigation water pond for days and mosquitoes are breeding. You've also noticed that some of the wood fences in the project appear to be leaning. You went to the board meeting last night. Two owners are on the board along with three developer representatives. You raised those issues with the board, and one of the developer representatives told you that it was not the developer's problem any longer, that it was the association's responsibility to fix those particular defects. You argued that the developer is responsible for defects for ten years. You also pointed out that you only noticed these problems a few months ago. So how could it no longer be the developer's responsibility to fix clearly defective components?
It not only could be it actually was no longer the developer's responsibility. As to those components, its legal liability had lapsed. How did this happen? First of all, Title 7 of the California Civil Code specifies standards for residential construction, commencing at Section 896. In the same section it also lists special, shorter, periods for bringing actions on certain building components. A deteriorating manufactured product like iron fences and irrigation and drainage problems have a very short 1-year limit on claims. Wood fence post claims expire after 2 years. But you just found out about it, and you came to the board meeting a couple of days later, certainly a year (and definitely not two) hasn't passed. Or has it?
Berding|Weil Q&A of the Day
By Lucas J. Olona, Esq.
I have been reading about real estate in foreclosure. There seem to be a lot of condominiums for sale. As a potential investor, how can I learn about the financial health of a particular association? Who would be able to assist me in getting that information?
Before you buy anything, and at an absolute minimum in addition to anything you might do to verify the economics of the deal, find a realtor wherever the property is located who has a close association with either condominium management companies or accountants who in turn have access to the financial data of the community associations (homeowner associations) you are looking at. Hire an independent consultant who understands condominium maintenance and repair and community association budgets and reserve studies to review that data and give you a report on the overall condition of the buildings and an opinion on the financial ability of the homeowners association to properly maintain and repair them. As a basis for your decision you should also ask if the association has been approved (certified) under the recently released rules and guidelines of U.S. Federal Housing Administration (FHA) even if you do not anticipate seeking an a FHA guaranteed loan.

Personal Rights or a Community's Economic Survival --
Which comes First?
Criticizing private community associations as "un-democratic" and illustrating the growing disconnect between a zealous concern over governance and understanding the basic economic survival issues of community associations.
The Great Foreclosure Debate --
Readers Respond
Here are two of the letters we received in response to
"The Great Foreclosure Debate: Should Community Associations use Alternatives to Foreclosure to Protect Their Cash Flow?"
Condominium Conversions:
Old Apartment or New Product?
Does Caveat Emptor apply to Conversions?
The spate of conversion of old apartments to condominiums has finally abated largely due to the failed economy…»
The Great Foreclosure Debate
Should Community Associations Use Alternatives To Foreclosure To Protect Their Cash Flow?
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