Managing Risk in Condominium Development: Statutory Warranties, Disclosures, and Construction Claims

Description

Condominiums and homeowners associations are unique in that the developer creates and funds an entity responsible for making claims against the developer. Both individual unit owners and the owners association have unique warranty rights that generally cannot be waived.

Today developers may invest in a condominium project because of market demand, economics (especially land costs), and the flexibility that the condominium form of ownership offers for mixed-use and complex projects. Although the mechanics of financing, designing, and constructing a condominium are the same as a multifamily rental or office building, the risks of liability are vastly higher. While the thought of doing a condominium development strikes fear in the hearts of some architects, general contractors, and developers, the risks can be managed by careful planning and execution, with appropriate attention to the unique facets of condominium development.

There are three main types of claims: (1) misrepresentation and fraud; (2) violating the condominium act disclosure provisions; and (3) statutory or contractual warranties. In turn, the statutory warranties come in at least two major forms: (1) Uniform Common Interest Ownership Act (UCIOA) (or Uniform Condominium Act) warranties derived from the Uniform Commercial Code provisions governing the sale of goods, and (2) structural defect warranties derived from state law governing defects in the sale of real estate.

Listen as our authoritative panel discusses the liabilities associated with condominium development and how to mitigate risk via compliance with disclosures and implied and express warranties. The panel will discuss best practices for all stakeholders in condominium development to address these risks.