Not Just a Pretty Face Dealing With Construction Defects

Not Just a Pretty Face

 Descriptions of “vintage,” “refurbished” and “pre-owned” can persuade the decision toward some purchases—cars, computers, that perfect James Dean-era leather jacket—but for South Florida homebuyers, the allure of shiny and new is often too hard  to ignore. Moving into a brand-new building or even a gut rehab certainly has  its benefits, but there are also plenty of downsides to buying new units. Smart  buyers brush up on these potential pitfalls before finding themselves in a  money pit. And if it’s too late for that, then there are certain courses of action that can help  recoup some losses.  

 At the height of the real estate boom in the mid-2000s, developers built quickly  to keep pace with demand. That was good for eager buyers—and not so good for eager buyers. Some developers got into the game simply to make money, rather than provide a  lasting product. Speedy delivery coupled with some sketchy oversight has led to  problems with new-construction homes. “Whenever there is a building boom, builders become more interested in building  projects quickly than in building them correctly,” says Matthew J. Johnson, managing partner at the Florida office of Condo  Defects Law Group, LLP.  

 The most common problems involve water leakage, and it’s not necessarily detectable when someone’s looking at a building with wide-eyed buyer’s eyes. It might be due to flashing that’s left unfinished or done incorrectly at roofs, parapet walls, and windows;  downspouts incorrectly tied into sewer lines; or problems with flooding in  lower units and basements.  

 A thorough pre-sale inspection should catch some of these things but doesn’t always. For instance, sometimes a condo building’s roof isn’t easily accessible or the developer of the new building purposefully prevents  access to avoid discovery of problems. In other cases, the developer actually  may linger in control of the association board, making it difficult to find  problems, and then leave the board without the reserves to pay for repairs.  

 Oscar Garcia, district manager of KW Property Management, based out of Miami, is  currently dealing with a situation like this. “The developer resigned from the board, and not only has he not set up reserves,  he did not fix the problem and walks away from it, leaving them empty-handed  with no money to sue him,” he says. “I’m encouraging them to do a bake sale, have a sidewalk sale, a car wash, collect  funds to get a post-engineering report.” Garcia’s goal is to at least begin the process of approaching the developer to do the  right thing.  

 While water penetration is typically the most expensive issue to correct, there  are other big ones. “All sorts of defects,” says Jay Steven Levine, founder of Jay Steven Levine Law Group in Palm Beach  and Broward County. He’s talking everything from leaking roofs to faulty air conditioners to  landscaping with invasive roots that lift up driveways, foundations and  sidewalks. In homeowners associations, Levine often sees road compaction  problems as well, along with drainage problems on roads or within condos.  

 Marc Mallet, LCAM, the director of field operations and a property manager with  Miami area-based Atlantic | Pacific Management, also points to problems with  hairline structural cracks that appear after the building has settled. In South  Florida, any newly constructed residence is bound to have a pool, which can  also present structural cracking issues.  

 From Better to Worse?

 Through the past decades, some building codes and components have improved, such  as hurricane-impact glass and standardized hurricane shutters, but in many  cases older buildings are still sturdier. “With buildings 40 to 50 years old, like a car, as long as you’ve been changing the oil, they’re going to last,” Garcia says. “You could sit through a hurricane and the windows might blow out, but we could  hold onto the door frame,” he says.  

 Although the building codes are in place to insure safety and structural  integrity, enforcing them can be difficult especially during a building boom.  While a building official may approve a certificate of occupancy, there’s still potential for in-field errors and shortcuts that can lead to problems  later. Structures built during the boom of the early 2000s were “pushed through the process,” Garcia says. In turn, this led to decreased supervision on job-sites and,  therefore, increased problems.  

 “If [the building department] is short-staffed, the review time is less,” Levine notes. “I would think that they’re not going to catch everything, and for a developer to say, ‘We got the [certificate of occupancy] and the government is perfectly happy with  us,’ is not necessarily the case.” Even though there’s less construction taking place now, Levine warns that this still may not mean  better oversight because there may be fewer inspectors.  

 Quality also suffers in some cases due to poorly trained workers because  developers are so bent on getting the work done that they hire subcontractors  that they may not routinely hire, Johnson explains. Plus, during the height of  building, some general contractors jumped on the developer bandwagon, thinking  they could make a quick buck, but not realizing the intricacies of the process.  Overall, Levine says that newer construction may be better because of better  codes, but, he says “it’s up to the contractor to do a good job.”  

 Looking at the Law

 There are state and municipal construction codes that regulate building, but, as  mentioned, unscrupulous developers sometimes thumb their noses at these codes,  knowing that the chances at getting caught are low. Plus, it’s important to note that building departments cannot legally be held liable for  construction defects, which certainly makes sense to some degree, considering  their high case load and low staff numbers. Unfortunately, this poses a  possibly unintended effect. “Their incentive to do a good job is limited because they are usually immune from  liability, even when they approve construction that is not compliant with  applicable building codes,” Johnson says.  

 When problems present themselves after an owner moves in, the finger-pointing  begins, and it can be hard to catch the culprit. Because a unit owner in a new  building purchases from the developer, most of the blame falls to the developer  who can quickly make himself scarce. For each project, developers typically  create a separate LLC, which they dissolve after the units are sold off. Next  in line in the blame game are general contractors and subcontractors. “While the problem may originate with the subcontractor, the general contractors  contribute to the problem by failing to adequately supervise their  subcontractors,” Johnson says. “Often, developers act as their own general contractor and in this event, they  have a heightened responsibility to supervise the subcontractors,” he adds.  

 Making a Plan of Attack

 The key to successful litigation against a developer is to act quickly because  in any case, recourse for homeowners relies on some statutes of limitations,  which begin after the date of turnover from the developer to the unit owners.  You have four years to make claims on construction defects from the time the  problem is discovered, which includes the discovery of latent defects, in which  case the clock begins at the time the association should have known about the  defect. However, there is a 10-year statute of repose, meaning, Johnson  explains, “If a project is more than 10 years old, a claim may be barred regardless of when  the claimant knew or should have known of the defects.” In other words, if an association ignores signs of a potentially significant  defect, the clock is still running on that 10-year limit.  

 Still, there are exceptions to the rules, and it may be worth discussing  particular cases with a lawyer before assuming it won’t be covered. “The analysis related to the statute of limitations is typically a fact issue  based on the specific circumstances of the individual project,” Johnson says. He also suggests that, no matter the problem, a unit owner should  probably first complain to the association. But Johnson points out, “Owners also have rights that can be asserted against the developer and the  contractors responsible for creation of the defects.”  

 Protection Against Defects

 Before signing on the dotted line, a little due-diligence can go a long way. “The best protection against defective construction is probably to purchase from  a well-established developer with a reputation for standing behind its work  product,” Johnson advises.  

 Garcia warns against buying sight unseen over the Internet as well. “People think, ‘I’m buying a unit in South Beach, even if it’s falling apart,’” he says. However, not only may they not understand the extent to the  construction issues but they don’t understand the lien process when a unit is not built to code. “They really need to get financials, ask neighbors, inspect. Don’t let the blue-light sale scare you into buying it.”  

 Go see the unit in person before trusting a sales pitch. Then be on the lookout  for things like settlement cracks and water stains on ceilings and around  windows. “Smell to see if there is any dampness in the air,” suggests Mallet. “Go to the balcony and shake the railing to see if it is sturdy and that they’re deep within the slab pockets.” He also advises to open glass sliding doors to check their operation; examine  frames around the doors and windows for signs of moisture, and to look closely  for any signs of rust or droplets of water indicating condensation. Plus, open  the air-conditioning unit to check for the date of installation and rusting  around the unit; and open the electrical circuit breaker panel to check for  signs of corrosion or rusting; flush the toilets and run water in the sinks,  and look under sinks for water leakage. And, he adds, “Lastly, take a general look around walls and ceilings in the rooms to look for  things out of the norm.”  

 After turnover of the building from the developer, Johnson also recommends  getting a report done on the building envelope. Although this can cost some  money upfront, it can discover problems early on, allowing a follow-up with the  developer sooner than later and potentially avoiding more costly repairs down  the line. This report is on top of a developer’s initial report. “The developers don’t have an incentive to find problems,” Johnson reminds owners. “A third party investigator may open a wall or, if there’s a roof leak, pull some roof off to see if it’s a systemic problem.”  

 It may all seem like overkill but it’s definitely a buyer-beware situation. Don’t be wooed by the fancy façade just to discover that it’s all skin deep.                         

 Elisa Drake is a freelance writer and a frequent contributor to The South  Florida Cooperator.


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