construction housing starts trend

New condos have most construction issues: U.S. study

Thursday, March 2, 2017

According to a recent study of U.S. homeowners from the Community Associations Institute (CAI), most construction deficiencies occur in new condominium developments, rather than in townhomes and single family homes.

The report, called Protecting Home Buyers and Home Owners from Construction Deficiencies in Condominiums and Preserving Property Values Survey, examines the scale of construction issues, litigation surrounding those claims, and the national impact on U.S. homeowners and community associations.

According to the report, 81 per cent of respondents claim poor workmanship is the most common type of construction deficiency, causing plumbing leaks, electrical or mechanical problems, and cracks in foundation walls, among other issues. In addition, the study found that 35 per cent of those surveyed reported construction deficiencies negatively impacted a homeowner’s property value and their ability to re-sell the home.

The CAI says that for years, community associations have been blamed in state legislatures and municipalities by legislation and ordinances aimed at stripping associations’ ability to seek relief from damages due to legitimate deficiencies found in the construction of homes, units or common areas.

“There exists identifiable trends in the legislation,” said Dawn M. Bauman, CAI senior vice president, Government & Public Affairs, in a press release. “Most of what we see in the declaration or preamble of the bills cite the need for more affordable housing.”

Proponents of these bills say that trivial lawsuits filed by associations and the costs associated with them make building affordable condominiums too risky. The bills create additional obstacles that associations must face before filing a lawsuit or limiting the definition of a construction defect to only those that cause physical, bodily harm.

In the book Construction Defect Litigation, written by Ross Feinberg, Esq. and Ron Perl, Esq. and published by CAI, the authors remark that although homeowners must feel that all defects to the construction of their home is serious, from a practical standpoint, most issues do not require a lawsuit. The 2017 CAI study found that 44 per cent of claims were resolved outside of the courthouse, most being resolved with direct negotiation instead.

“The process for associations to recover damages from a building deficiency is far more complex than filing a lawsuit,” added Bauman. “Associations must determine whether the cost and time to pursue claims outweigh the repair costs.” The report found it took more than a year for nearly two-thirds of the communities to recover damages, and only one-third reported the damages paid were enough to cover the repair.

“Market forces are dictating whether condominiums are being built, not warranties,” continued Bauman. “Laws are present in the states that make associations weigh the breadth of filing a warranty claim before doing so. Reducing consumer protections by watering down the statutory warranties will not reduce purchase prices, but will increase the post-sale cost of home ownership.”

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