Duty to Investigate. Directors have a fiduciary duty to act in the best interest of the association and with such reasonable inquiry as an ordinary prudent person would use under similar circumstances. Therefore, if a board knows or suspects the development has construction defects the board has a duty to investigate. The law imposes a 10-year statute of repose. That means associations have a maximum of 10 years, unless the statute is tolled, to make claims against the builder for latent defects. (Code Civ. Proc. § 337.15.) More importantly, there are other shorter statutes running at the same time that will extinguish an association's rights. Boards should contact a construction defect attorney if their property is less than ten years old and they suspect defects. If they wait, they may lose the right to seek damages against the developer. In performing their duties, directors are entitled to rely on information and opinions from experts. Investigations can be performed by construction defect law firms using a forensic architect or general contractor. Many construction defect law firms will perform an initial evaluation at no cost to the association.
Pursuing Claims. Associations have authority to instigate claims against developers for construction defects. Homeowner directors can vote to pursue claims, even if the developer still has majority control of the board. (Civ. Code § 5986.) If the board decides to take action against the developer, it must follow prelitigation procedures found in the Davis-Stirling Act.
Duty to Disclose. The association is required to disclose a number of things to its members regarding defects, including damage resulting from the defects. Some of the disclosure requirements required by Civil Code § 6100:
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A general description of the defects that the association reasonably believes, as of the date of the disclosure, will be corrected or replaced.
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A good faith estimate, as of the date of the disclosure, of when the association believes that the defects identified in paragraph (1) will be corrected or replaced. The association may state that the estimate may be modified.
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The status of the claims for defects in the design or construction of the common interest development that were not identified in paragraph (1) whether expressed in a preliminary list of defects sent to each member of the association or otherwise claimed and disclosed to the members of the association.
Obtaining Records. Unless otherwise provided for in the CC&Rs, associations are responsible for repairing, replacing, or maintaining the common areas. To that end, boards should obtain obtain records from the developer as soon as possible after the developer relinquishes control of the association.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.