While you and your firm may be well-versed in the design-related risks of condominium projects, they also come with hidden risks you may not have considered.
For years, 色多多视频has cautioned design professionals against taking on condominium projects. Consider the hard evidence: although less than 1 percent of the fees generated by Design Professional policyholders comes from condo projects, nearly 9 percent of claim dollars is attributed to these same projects.
In this article, rather than review the strictly-design-related pitfalls of condo design projects, we call your attention to the situations that often lead to homeowners associations dragging you into claims that have no relationship to your project responsibilities.
Homeowners associations want someone to blame
Homeowners associations (HOAs) operate and maintain condominium developments, particularly the common areas and systems, such as roofs and HVAC. They comprise all the unit owners and are led by an elected board. Few HOA members have experience in design, construction, and maintenance issues.
Here are several reasons why HOAs file claims that may very well involve the design professional:
“We have no money for that!” - Underfunded HOAs
An HOA will often confront a major expense, such as replacing an elevator, without sufficient funds to cover it. This can happen if the developer has set unrealistically low monthly condo fees to attract buyers. Whatever the reason, when the repair is needed and the money isn’t there, the HOA wants someone else to pay.
The HOA can require each owner to pony up a one-time special assessment, but more likely, they’ll go after the people who developed the project. However, if the developer no longer exists, the HOA will likely file a claim against the design team.
“Who knows how to restart the boiler?” - Unclear maintenance and operational responsibilities
When a developer transfers ownership of the property to the HOA, it’s customary to provide the HOA’s property or maintenance manager with an operations and maintenance manual and training on the property’s working parts and systems. The lack of a well-written manual and careful training can lead to the improper or nonexistent maintenance of sophisticated equipment that, when in disrepair, can cause serious damage or even bodily injury.
While the design team normally has no responsibility for the proper handoff of these duties, once the HOA goes looking for someone to reimburse the costs of fixing or replacing a major system, you can be sure the HOA will turn toward the design team.
“408 is complaining about the noise again.” - High-end condos
Owners of high-priced condominiums, who may have paid millions for their units, often feel they deserve perfection. Even though design and construction professionals know that no project achieves perfection, that doesn’t mean they won’t have to defend against a claim over the issue.
Take, for example, windows that are marketed as soundproof. Hearing a single car horn might be all it takes for a disgruntled owner to decide to rally other owners to force the board to “do something,” which can result in a claim.
“We’ll identify the problems for you.” - Plaintiff law firms
Plenty of contingency-fee plaintiff law firms are only too happy to help an HOA find problems in the design and construction of a condominium development. Typically, these firms inform HOA board members that they could be held personally responsible if they know of a problem and do not take legal action on behalf of the owners before the applicable statute of limitations runs out.
Faced with such a disturbing prospect, the HOA board engages the law firm that, in turn, brings in its expert to find as many problems as possible. No matter which types of problems the experts find, the design professionals will most likely be forced to defend against the resulting claims. This usually happens when the statute of repose is about to run out and maintenance has been deferred for years.
Can you negotiate?
In our experience, HOAs can be some of the most dangerous negotiating partners. For one thing, their members are, as we stated earlier, inexperienced in design, construction, and maintenance. For another, they have unreasonable expectations. Too often, the HOA seeks a settlement dollar figure that is way too high and refuses to move toward a more reasonable figure.
The design team, equipped with all the right facts and arguments, assumes they’re negotiating with a rational partner, only to find that the HOA doesn’t care about facts and arguments (particularly those that point to the HOA having failed to fulfill its responsibilities). Its mantra is, “As the designer, you’re the expert and you should have known.”
Forging ahead anyway
If you’re still not convinced to avoid condo design projects, then take the following steps before signing a contract:
Your contract should clearly state that you have no responsibility for either the development’s maintenance or the HOA’s ongoing performance of that maintenance. It should also detail what your scope of services includes and doesn’t include.
Carol Stair is the 色多多视频Design Professional West Regional Claims Manager
Matthew Ford is the 色多多视频Design Professional Southeast Regional Claims Manager
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