Q.
Why would a developer build a cooperative instead of a condominium
building?
A.
A developer probably would not make such a decision. Most cooperatives
are not developed from the ground up. Nearly all cooperatives
in California were created by converting apartments or mobile
home rental parks to cooperatives.
Developers convert apartments
and mobile home rental parks to cooperatives instead of condominiums
because the properties don't meet the building standards for condominiums,
but notwithstanding, it is still profitable for the developer
to convert to a cooperative.
All things being equal,
condominiums are generally worth 20% more than a cooperative and
are much easier to sell. In addition, more attractive loans (interest
rates and terms) are available for condominiums.
Sometimes, it is possible
to convert a cooperative to a condominium. While such opportunities
are fairly rare, it is almost always financially beneficial for
the members of a cooperative to convert if it is possible. Top
DISPUTE WITH
DEVELOPER
Q.
One of the members of our homeowner association refuses to pay
her monthly assessments because the developer has not made repairs
to the interior of her individual home. The developer is still
in control of the association. What should the board do?
A.
The board must enforce the established delinquency policy and
should assume no responsibility in assisting the owner in her
dispute with the developer. An owner's dispute with the developer
is not an effective defense to the payment of assessments. Top
CAN'T LOCATE
PLANS
Q.
Our homeowner association has serious water intrusion problems
in the common areas. We have attempted several times to obtain
a set of plans from the developer without success. What should
we do?
A.
Sections 19850 and 19851 of the California Health and Safety Code
require that every city or county maintain a copy of the plans
for every common interest development during the life of the building(s)
for which the building department has issued a permit.
These plans and specifications
are open for inspection and may be copied, with some limitations.
Your association board
should also contact an attorney who specializes in construction
defects as soon as possible. The "statutes of limitation" extinguish
the legal rights of the association after the passage of time,
as set forth in the various statutes. Top
DEVELOPER
COMPLAINS
Q.
As a condominium developer, I would like to point out that the
present law in California discourages the building of condominiums
and other developments with homeowner associations. The primary
reason is that homeowner associations have up to ten years to
find construction defects and sue developers, architects, engineers
and contractors.
Consequently, building
homes that are included in homeowner associations has become very
expensive due to the high cost of insurance and expensive litigation
which ultimately is passed on to the consumer.
As much as 50% of any financial
settlement goes to trial attorneys and so called "experts" who
find defects. Attorneys who specialize in this field often solicit
business from home owner associations by telling these groups
that they will make money at no cost to the homeowners.
For small developers the
current system is very unjust because we are unable to get insurance
except at very high costs. To me it is quite obvious that these
costs are being passed onto the consumer.
In the contracting field
it is customary for the contractor to be responsible for defects
for twelve months after completion. Most states in the United
States have such a law, except California. The existing law (10
years) was passed as a result of strong lobbying by trial lawyers
in California who spent hundred of thousands of dollars to get
the law passed.
What is your response?
A.
First let me point out that the ten years within which homeowner
associations can sue a developer applies only to hidden defects.
These are defects that a person could not reasonably discover
such as the failure of a developer to insert fire blocks inside
walls. Defects that are reasonably discoverable have a limitation
of three or four years depending on the claim.
Lawyers specializing in
protecting consumers would never advise homeowner associations
that they can make money suing developers. Even if an association
prevails in court on every issue, the association must pay expert
fees, legal fees and other costs which are rarely fully recoverable.
The fact is that defective construction costs homeowners money.
Homeowners don't make money when their building is defective.
You claim that the system
is unfair and against developers. This is not true. In fact, the
Building Industry Association strongly supported the recently
enacted California Civil Code section 1375. This law is the most
pro developer law ever approved by the legislature in the history
of the state. It makes suing a developer for construction defects
more difficult, more time consuming and more expensive.
You state that the cost
of litigation is increasing the cost of housing which is the fault
of trial lawyers. The fact is, if developers built buildings without
material defects or voluntarily repaired defects, there would
be no need for litigation. Defects are the cause of litigation,
not lawyers.
When someone dies in a fire
because fire blocks were left out of buildings or buildings slide
down a slope because of defective soil preparation, a trial lawyer
is the only person an association of homeowners can count on to
protect their rights. Top
