Condo Association Receives $3M Construction Defect Settlement For ONE Leaky Door!

Portland, OR – Readers who have been following the HOA DETECTIVE™ for any length of time should know by now how we feel about the construction defect litigation racket.

Thanks in large part to Oregon’s lenient statute of limitations, which may allow a HOA to bring a  civil action for construction defects for up to ten years in certain situations, the Portland area has become something of a hot-bed of litigation activity with many prominent attorneys having set up shop in Stump Town to pursue the vast riches that await after the successful prosecution of a major construction claim.

Unfortunately faulty construction does exist and when a major problem is identified, and a successful claim is adjudicated, the amounts of money can be significant.

As is typical in almost all construction defect cases one of the stipulations in the settlement agreement of the case in question was that the agreement itself is declared confidential by the Court. As a result of the confidentiality clause we do know about this case is limited to a single memo that was prepared by the Board of Directors for the purpose of communicating to the HOA membership what the final outcome of the case was and what the status of the defect remediation effort would be moving forward.

The memo recently found its way to the desk of the HOA DETECTIVE™ during a due diligence examination of the a local condominium association which was also the plaintiff in the case.

As it turns out it doesn’t appear that there are actually any defects that need to be corrected, other than a single patio door in one of the condominium units, which apparently leaked and “damaged the unit’s floor…”, according to the memo.

Otherwise it appears the settlement of $3,000,000+ that the Association received, was the result of windows that were alleged to be defective but which had not in fact leaked, and also to compensate for an allegedly defective balcony waterproofing. To quote from the memo:

Question from HOA member:  “Have any of the residential windows in the building actually leaked?”

Board Response:No. There is one door that has leaked and damaged the unit’s floors but no windows have leaked. The single door is being fixed.”

The memo then goes on to answer another question which was obviously posed by one of the more rational members of the community:

Question from HOA member: “Why would we replace the windows if they aren’t leaking?”

Board Response: “We shouldn’t! Receiving money doesn’t mean we have to do any construction. All building systems wear out eventually and this settlement ensures that the HOA will have the money to cover replacement costs at the appropriate time”

There you have it! The windows don’t leak and shouldn’t be replaced, according to the Board of Directors! At least not until they wear out and eventually require replacement, at the appropriate time!

Meanwhile, the balcony or “deck coating” that is referred to in the memorandum, appears to be in need of re-coating due to nothing more than normal wear. Again quoting from the memo:

Question from HOA member: “What about the decks?”

Board Response: “Deck coatings are an important part of the building’s construction and need to be redone every few years. The building is due for its regular deck re-coating cycle…”

In other  words, the decks are in need of re-coating as a result of the routine maintenance requirements of the coating. Not because the coating is necessarily defective!

So, to summarize what we have learned from reading the memorandum:

  • A single door into one of the condominium units has leaked resulting in damage to the floor of the unit.
  • The windows are not leaking, shouldn’t be replaced and receiving money doesn’t mean we have to do any construction.
  • The deck coating needs to be redone every few years and is due for its regular deck re-coating cycle.

The wording in the memo raises the question of whether or not the coating was actually defective or whether a new application of the coating was needed because the “coating needs to be redone every few years” and was simply “due for its regular re-coating cycle?”

Considering that the memorandum includes an acknowledgement by the Board of Directors that the windows were not leaking at the time the claim was settled and shouldn’t be replaced, the question then becomes, what was the basis of multi-million dollar construction warranty claim in the first place?

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