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Featured Case Study: Canterra

Facts:


120 unit Condominium Association located in North Phoenix. Approximately, the buildings were constructed from 1997 to 1998, with the remaining units thereafter. For over three years, the Association Board of Directors negotiated in good faith with the Developer to make repairs to defective roofs, among other issues. During this time frame, the Association was repeatedly promised repairs, and some partial repairs were actually started. In exchange for these promises, the Board decided not to bring a formal claim for the construction defects that existed in the common areas. Finally, in June of 2005 it became clear that the builder would not live up to it's word and complete the repairs, the Board hired Construction Defect counsel to bring a formal claim and lawsuit against the developer.

Legal Analysis:


ARS 12-542 provides an Association 2 years from date of discovery to bring a claim for negligence. ARS 12-558 provides an Association with six years from date of discovery to bring a claim for breach of the Implied Warranty of Workmanship and Habitability for construction defects. ARS 12-552, the statute of repose, creates an eight year outside limit from the date of substantial completion of a residence in which to bring a construction defect claim. (note: ARS 12-552 (b) extends the eight year limit one year to nine years if the damage occurred in the eighth year or a latent defect was discovered in the eighth year.)

The defendant developer filed for summary judgment with respect to liability for defects and resultant damage in the buildings that were completed more than eight years from the date the formal construction defect claim was filed. The court granted the defendants motion. The Association argued the theory of equitable estoppel, which generally provides that a person may be precluded by his own acts or conduct, from asserting rights against another who has justifiably relied upon such conduct. Since the Association contended that it relied upon the affirmative statements of the developer that the defective roofs would be repaired, and did not bring a claim against the developer, that would have stopped both the running of the statutes of limitations, including the statute of repose. The Association took the position that the developer should not now be permitted to stand behind those same statutes to avoid liability for the very defects it created.

However, the court disagreed and refused to apply the doctrine of equitable estoppel, and barred the Association from bringing a claim for the older buildings, effectively, reducing the ultimate recovery in this case by over $2,000,000. Now the individual homeowners, who did not create the defects in the first place, are victimized a second time by believing the developer's promises and allowing them too much time to make repairs, will have to come out of pocket themselves for the repairs.

Recommendations based on the rulings:


First, if any buildings are close to eight years old from the date of substantial completion it is important to have a Construction Defect Attorney due a comprehensive statute of limitations analysis, including a visual inspection by a construction consultant. DCS will conduct such an investigation at no charge or commitment o the Association. Second, do not rely on the developer's promises, without formally protecting your Association's legal rights. Repairs offered are often band-aid in nature and the fact that they are being made or negotiated does nothing to stop the statute of limitations from running or the statute of repose from expiring. As you can see it can be a very costly mistake.
What Our Clients Say
"Diligent expertise in handling our defect case"
On behalf of the Board of Directors and homeowners of Morning Sun Condominium Owners Association I would like to express our sincere gratitude for your diligent expertise in handling our defect case.

- Nancy P. Luce – President

Verdicts & Settlements
"SK Ranch, Casa Grande, AZ $285,000.00"
Developer: Confidential
38 Single Family Homes
The homes experienced problems with the roof and window systems, as well as poor drainage.
Settlement/Judgment - $285,000.00
Duration - 13 months